Last updated on 01 July 2022 by Jaclyn Kilani (Legal writer at TermsFeed)
Internet contracts and online agreements are every bit as legally binding as the paper variety if processed correctly. If you're trying to decide on the most airtight and secure methods for offering online contracts, privacy, and terms agreements to your customers, clickwrap agreements are undeniably the way to go.
However, not all clickwrap agreements are created equal. Read on for a summary of best practices and legal guidelines for creating solid online clickwrap agreements.
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In contrast, a clickwrap agreement is a contract that requires the user to actively click a checkbox or button in order to provide their affirmation, acceptance, or consent.
Of the two methods, clickwrap is considered more legally binding and is by far the better option.
This is because when the customer clicks to accept the agreement, you will have an indisputable record that they were given reasonable opportunity to read the agreement and took a decisive action to agree to it.
Most nations do not have specific laws that require clickwrap agreements (with the exception of the EU, which we will go into a little later), but legal precedent suggests that these are the best option for businesses who wish to create binding online contracts with customers.
Case in point, when customer Brett Long sued Proflowers.com for misrepresenting its products, the business tried to compel arbitration according to its online T&C, which was publicly posted and linked to throughout the website. Long argued that he had never clicked to accept the T&C and so was not legally required to abide by it. The court agreed and ruled in favor of Long.
As you can see, the United States may not have federal laws in place in regard to clickwrap agreements, but precedent indicates that a clickwrap contract is legally binding when presented correctly. Below we've included some best practices that will help to ensure that your clickwrap agreements are clear, easy-to-understand, and valid in a court of law.
In order to make the most of clickwrap agreements and ensure their efficacy, there are certain scenarios in which they are most commonly used, such as:
For the most part, anytime you collect personal information or enter into a business relationship or contract with a user, you should request their agreement to your terms and privacy procedures.
It is important that any contracts or agreements you wish to establish with your customers be conspicuous - even obvious - when the customer agrees to them. If a user can argue that the agreement is hard-to-see or hidden, then it may not be upheld even if the user clicks to agree to it.
Notice that the agreement language is placed in close proximity to the purchase button. This is crucial in order to avoid claims that the user "didn't see the agreement terms." Note how each policy and agreement is also linked conspicuously so users know they can click each link to learn more if they wish to.
If users of your website or mobile application cannot easily understand the language of the agreement they are entering into, the contract could be deemed invalid. Make sure any wording used in relation to contracts and agreements is as simple and clear as possible, explaining exactly what users are agreeing to upon click.
Microsoft provides a good example of a clear and intelligible clickwrap agreement:
This sentence is written as simply as possible. It would be difficult for any customer to claim that they misunderstood what they were agreeing to upon clicking the 'Next' button.
In other words, make sure direct links to all documents are provided to users at the time you ask for agreement and that those links are easy-to-spot.
In order to avoid potential legal or privacy disputes, make sure acceptance with your legal agreements is mandatory for all users who wish to use your service. This should be clearly stated in close proximity to the acceptance or agreement button.
Although the previous examples will also work to achieve mandatory agreement, another way to ensure acceptance to is to require the user to actually tick a checkbox before they can proceed,
SeedInvest's registration form is a good example of an agreement checkbox that a user must actively click in order to proceed:
The grey "Join" button isn't able to be clicked until the checkbox is clicked.
Although it is not illegal in the United States to pre-tick an agreement checkbox, it is not considered a best practice. In order to maintain an honest, transparent relationship with customers, make sure all clickwrap checkboxes are left blank. It is recommended that users must actively tick the checkbox in order to enter into an agreement.
Here's an example of multiple checkboxes in the GitLab signup form that are left empty so a user can choose which boxes to check:
Consent and terms agreements won't mean much if you don't have a good system of recordkeeping. As long as a customer keeps an active account with your business, you should have an easy-to-access record of all agreements and contracts that the customer has accepted. This will also include acceptance of terms for transactions, purchases, etc.
It is ideal to renew the contract agreement at every new purchase or transaction to make absolutely sure that each transaction is covered by your legal terms.
Amazon achieves this with a simple "you agree" statement and agreement links added right below the 'Place your order' button. This is shown every single time a user places an order:
It is important to request renewed acceptance whenever your agreements are updated or changed.
For example, when Airbnb updates its Terms of Service, they require each member to agree to those terms before they can access their account:
In regard to updated contract terms, make sure you keep clear records of exactly which version of your contracts each customer has agreed to. You'll need to know which version of each contract they are subject to, since only those versions of contracts that they have actively accepted may be upheld in case of a dispute.
In the European Union, there are regulations in place that affect how clickwrap agreements work - namely, the General Data Protection Regulation (GDPR).
If your business collects any personal data whatsoever from EU-based consumers (this includes geolocation data or IP addresses), then your clickwrap agreements will need to comply with GDPR requirements.
Here are a few examples of companies who do this well.
As you can see, this method of requesting consent is intelligible, informed, specific, unambiguous, and freely given with an affirmative click. The checkbox is not pre-ticked when the user accesses the form, so the user must actively tick the checkbox before they can submit personal information.
By using a clickwrap agreement and following the best practices above, you can increase your legal security when entering into contracts and agreements with online customers.
This article is not a substitute for professional legal advice. This article does not create an attorney-client relationship, nor is it a solicitation to offer legal advice.
01 July 2022