Online Contracts in United States
This article on, “Online Contracts in United States” by Antariksh Anant puts across that the global technological developments have resulted in rapid growth in the online industry and business and E-contracts are becoming more common as the online industry grows. Such a profitable business necessitates the establishment of regulatory legal terms to safeguard the interests of all parties… Read More »
This article on, “Online Contracts in United States” by Antariksh Anant puts across that the global technological developments have resulted in rapid growth in the online industry and business and E-contracts are becoming more common as the online industry grows.
Such a profitable business necessitates the establishment of regulatory legal terms to safeguard the interests of all parties involved.
Introduction to Online Contracts in United States
The internet operates as an agent without a conscience and establishes agreements between the parties. Online agreements such as Browse Wrap Agreements, Scroll Wrap Agreements, and Click Wrap Agreements are the agreements we’ve all come across and agreed to their terms at least once.
When you click “I agree” you are assenting to those terms and subjecting yourself to those contractual terms online. We see such e-contracts daily and have approved many e-contracts without even reading their terms and conditions since they are sometimes long, and the language used is slightly complicated.
We were never aware of the legal complications it had. Let’s find out if these internet contracts are enforced in the same way as paper contracts in the courts. If so, does it differ from case to case? can a person be subjected to the terms of such a contract?
The Enforceability of Online Agreements
Many critics are completely against online contracts saying that the terms of online contracts appear to be contracts but do not lead to the actual agreement and that they are false (pseudo) terms. Corporations are burying people in stuff they will never read, let alone understand.
This is troublesome since contracting is about mutually agreeing on language[1]. It is not about one party assuming a slew of risks that the other party puts on them since they are unlikely to read the final document.
However, rather than outright prohibiting online agreements, the courts evaluated a few criteria such as “whether a reasonably prudent offeree would be on notice of the term at issue” and “whether the contents of the agreement were “reasonably conveyed” to the user.”
For similar reasons, in Berkson v. Gogo LLC, the court established three principles for an online contract to be enforceable: First, the website must be designed in such a way that a “reasonably prudent user” is placed on “inquiry notice” of the website’s conditions of use.
Second, the website’s design and content must encourage users to investigate the keywords “clearly available through hyperlink age.” Third, when the link to the agreement is “hidden at the bottom of a webpage or stashed away in inaccessible areas of the website,” the agreement will not be enforced[2].
Later in Berkson v. Gogo LLC the court analysed these contracts and classified online terms into four types according to whether the user is forced to click a box or button to express assent to the terms:
- browse-wrap
- clickwrap
- scroll wrap
- sign-in wrap
Browse wrap
Browse wrap refers to instances in which a website displays a notification stating that the user agrees to the site’s terms and conditions simply by using the site, with no express agreement required. These sorts of agreements are usually only enforced against “knowledgeable accessors” such as companies, rather than against people[3].
Although they are only enforced against companies, they cannot be regarded as a genuine contract in my perspective since they presume your assent to the terms simply by accessing the site and expect the user to be bound to the terms without their awareness.
Clickwrap
Clickwrap agreements “require a user to affirmatively click a box on the website confirming awareness of an agreement to the terms of service before he or she is permitted to access the website further. Cookies are an accurate representation of these kinds of agreements.
Scroll wrap
Scroll wrap agreements are similar to clickwrap agreements in a way as both the agreements require the user to affirmatively acknowledge and agree to the site’s terms and conditions before allowing further use, but they go one step further by demanding the user to physically scroll through those terms and conditions before clicking “I agree”.
These agreements are comparably better since they require the user to scroll down, but this does not necessarily imply that they are reading the terms.
Sign in Wrap
Sign-in wrap agreements inform a site’s user of the presence and application of the site’s conditions of use as they go through the sign-in or login process. These agreements are generally enforced only when a court decides that the user received adequate notice and access to the conditions of use[4].
Courts in the United States have addressed the above-mentioned online agreements and determined that sign-in wrap Agreements, scroll wrap and Click-Wrap Agreements are enforceable as long as the broad principles outlined in the Berkson case are not violated. Whereas browse-wrap agreements are not enforceable against individuals.
Do They Hold the Same Weightage as Written contracts?
In Dillon v. BMO Harris Bank, James Dillon, the plaintiff applied online for loans from two payday lenders, USFastCash and VIN Capital. Based on the online agreements between Dillon and the payday loan lenders, Bay Cities filed a motion to compel arbitration.
The court inquired as to “whether the lenders communicated the arbitration clauses in the offered documents to Mr. Dillon throughout the online loan process” and “whether the offered documents correctly represent the conditions to which Dillon and the lenders mutually agreed.”
The screenshots of the USFastCash webpage, which were attached to Muir’s declaration, were examined by the court. (Muir is an employee with a profound understanding of USFastCash’s online loan application procedure, as well as the details about applicants who consented to an arbitration clause in their application, loan note, and disclosure[5]).
The declaration, according to the court, did not include Dillon’s name, personal information, or pertinent dates. Bay Cities also presented what it claimed was the loan agreement as evidence, but the court ruled that this, too, failed to establish that Dillon consented to an arbitration clause.
According to the court, “click-wrap contracts like the one at issue here entail special risks of fraud and mistake.” When doing online transactions, one of the parties has complete access to the electronic record, which allows it to falsely change the document.
The court held that there was no agreement to arbitrate between Dillon and VIN Capital for pretty much the same reasons, including the witness’s lack of knowledge of the lender’s online record generation and preservation processes.
The court stated that a click does not have the same weight as a signature on a page, noting that “there is no evidence that the document was created accurately or maintained without alteration, nor does the document contain a physical signature, which is often circumstantial evidence of agreement.[6]”
Communication of the Terms
Communication is at the foundation for every agreement that subsequently becomes a contract; it expresses our desire, whether in the form of an offer or acceptance. There can be no offer if there is no communication. Is it the same with online contracts, in which consumers commit to anything without knowing the conditions of what they’re agreeing to?
Adwar Casting Co., Ltd. v. Star Gems Inc[7]. Adware accused Star Gems of infringing on Adwar’s copyrighted jewelry designs, photos of which were placed on Adwar’s website. The court found that Adwar’s terms and conditions, which could only be accessed by clicking buttons at the bottom of each page, browsed gable since they did not involve any deliberate action from site users.
In view of this categorization, the Court concluded that the jurisdiction consent clause could not be enforced against the Defendants since the user’s attention was not directed to it, either by a font change or a mechanism such as “***.”
Therefore, there is a need to provide adequate notice of the conditions when it comes to online communication. When building a website, service providers should think about incorporating some sort of affirmative assent, such as clickwrap, scroll wrap, or sign-in wrap.
Modification of Clauses
Companies who are developing or upgrading their websites should highlight the terms and rules that affect the rights of users. Courts tend to need more strong notice for modifications than they do for formation in online modification instances.
In TradeComet, LLC v. Google, Inc[8]., TradeComet was obliged to agree to click-wrap conditions to become a member of the Google AdWords program. A year later, Google amended the forum selection provision, and AdWords members were asked to click their agreement to the change.
Although Google retained the right to change the terms and stated in its terms that usage of the services after the change would indicate acceptance, TradeComet was needed to click through to the new agreement and signal approval to it. The court determined that the terms were conveyed to and accepted by TradeComet in a reasonable manner.
Courts have consistently accepted click-wrap terms, even when they are lengthy and presented in a form that discourages reading.
Similarly, courts are sceptical of browse-wrap presentations but sustain them when it seems that the link presenting the terms was shown in a way that indicates the contractual character of the conditions[9]. Courts appear to be more likely to find both notice and assent when the change is offered in a click-wrap manner.
Reference
[1] Kar R, and Radin M, ‘Pseudo Contract And Shared Meaning Analysis’ (Harvard law review association, 2019), Available Here
[2] Berkson v. Gogo LLC, 97 F.Supp.3d 359 (E.D.N.Y. 2015).
[3] Berkson v. Gogo LLC, 97 F.Supp.3d 359 (E.D.N.Y. 2015).
[4] Monahan P, ‘Does I Agree Really Mean ‘I Agree’ (Powley&Gibson, 2018), Available Here
[5] Kim, N. (2016). Online Contracting. The Business Lawyer, 72(1), 243-254., Available Here
[6] Dillon v. BMO Harris Bank, N.A No. 1:13-CV-897, 2016 WL 1175193
[7] Adwar Casting Co., Ltd. v. Star Gems Inc. et al, 2018 WL 5084826 (E.D.N.Y. October 18, 2018)
[8] TradeComet LLC v. Google, Inc., 693 F. Supp. 2d 370 (S.D.N.Y. 2010), aff’d, 435 Fed. App’x 31(2d Cir. 2011)
[9] Moringiello, J., & Ottaviani, J. (2016). Online Contracts: We May Modify These Terms at Any Time, Right? Business Law Today, 1-4. Available Here
