U.S. Supreme Court Chief Justice John Roberts once characterized modern cell phones as “such a pervasive and insistent part of daily life that a proverbial visitor from Mars might conclude they were an important feature of human anatomy.”
With the transformation of our society from handshakes and paper to electronics, and from clunky computers to handheld super computers, a wrap agreement is a staple for contract formation in the 21st century.
These electronic agreements allow a business to require a consumer to agree to contractual terms of service prior to doing business. They alleviate the need for endless file cabinets of paper and wet-ink signatures. While wrap agreements are enticing, both business owners and consumers are often left asking, “are these agreements enforceable?” The short answer is “it depends.”
Four Types of Wrap Agreements
Understanding the various types of wrap agreements is the first step to understanding electronic contract formation. Here are the four main types:
- Browsewrap agreements are website or mobile app notices that indicate that by accessing or using the services of a website or application, the user agrees to be bound to the terms of service of the website or app.
- Clickwrap agreements require a user to explicitly assent to terms and conditions before being allowed access or to proceed with a transaction, generally through the use of a checkbox to indicate assent.
- Scrollwrap agreements take the click-wrap agreement one step further, requiring a consumer to scroll through terms and conditions as part of the design, generally followed by an “I agree” button that a user must click before proceeding.
- Sign-in wrap agreements are yet another way to accomplish electronic contract formation, as they require users to sign-in to use an internet product or service and the sign-in screen states the acceptance of the terms of service with a link to those terms.
The Evolution of the Wrap Agreement in the U.S. Courts
In reviewing these groundbreaking cases from the 1990’s, as well as the evolving case law of the last two decades, courts focus on the consumer’s notice that he or she is agreeing to terms when determining enforceability. This inquiry can pose a problem for the enforceability of browsewrap agreements depending on how an agreement is presented.
The passive nature of a browsewrap agreement has been attacked for its failure to put a reasonable consumer on notice. For example, in the 2002 case, Specht v. Netscape Communications Corp., the Second Circuit held that requiring a user to scroll down the website to find the hyperlink to the browsewrap license agreement was insufficient notice of the agreement.
By contrast, in the 2012 case, Fetja v. Facebook, the Southern District of New York upheld a sign-in wrap agreement in which text directly below the “sign up” button indicated that clicking the button meant agreeing to Facebook’s terms of service.
Courts seem to be more predictable in their willingness to enforce clickwrap agreements versus other types of wrap agreements because clickwrap agreements not only provide notice to the consumer, but they require the consumer to acknowledge and agree to the terms before proceeding to purchase the product or service.
The U.S. District Court for the District of Oregon has suggested that clickwrap agreements are generally enforceable absent a showing of fraud. The U.S. District Court for the Middle District of Florida went one step further, stating, “there is also no dispute over the validity of clickwrap agreements.” Likewise, scrollwrap agreements have been deemed a type of clickwrap agreement and are generally enforceable as they require not only an acknowledgement of the terms, but they also require that the user scroll through the actual terms before being allowed to proceed with the transaction.
The “I Didn’t Read It” Defense
If a transaction has gone south and a business tries to enforce a contract term contained within its agreement, be it electronic or otherwise, a response of “I didn’t know that term was there” is almost certain to follow. In fact, even Chief Justice Roberts admitted at a college appearance in 2010 that he does not read user agreements before he accesses websites.
However, contract terms, even those not reviewed, are enforceable under the “duty to read” doctrine. Under this doctrine, a party to a contract is presumed to have read the agreement and is therefore held responsible for the terms of a contract, whether the terms are actually read or not. Said another way, the “I didn’t read it” defense fails.
Four Principles in Creating a Legally Enforceable Clickwrap Agreement
Based on the way the courts have historically looked at wrap agreements and the growing acceptance of a clickwrap agreement as “generally enforceable,” a clickwrap agreement seems to be the best bet for the legal enforcement of a business’ contractual terms. This leads to the next question: What should the clickwrap agreement look like?
1. Require the User to Affirmatively Confirm Agreement
Further, make sure that if you have an “I agree” button, the notice of the terms and conditions is directly adjacent to the button itself, or as one court eloquently put it “spatially coupled with the mechanisms for manifesting assent.”
2. Make the Terms Conspicuous
When enforcing contractual terms, courts want to know that all parties were aware they were entering into an agreement and had an opportunity to review the terms. The more hidden the terms, the more you risk a court determination that the user did not have notice of the terms. On the other hand, when the terms appear on a pop-up screen, they cannot be missed. When a business chooses to hyperlink terms to the clickwrap agreement, the hyperlink should be bold, blue and underlined, indicating to a “reasonably prudent smartphone user” that the information may be found on another webpage.
3. Keep the Interface Uncluttered
In addition to conspicuous terms, courts have also found that agreements should appear on an uncluttered screen, i.e. keep your screen simple and clean. This takes away the defense that a user overlooked the terms or there was “hidden print.” The entire screen should be visible without a need to scroll beyond what is immediately visible on the “landing page” to find notice of the terms. If the terms are accessible through a hyperlink, there should not be multiple other hyperlinks present on the same screen.
4. Keep Records of All Clickwrap Agreements
The presence of a clickwrap agreement requiring a user to agree to terms before accessing a webpage is powerful evidence of an enforceable agreement. However, records linking the specific user’s agreement to the terms are even better.
Accordingly, requiring a registration and a specific check mark box affirming the terms, coupled with records relating to such a registration, would appear to be “best practices” in terms of electronic contract formation.
Proctor Brant and Online Contracts
Proctor Brant attorneys are experienced in enforcing wrap contract terms. In fact, we recently handled a case between two digital businesses in which our client pursued payment from a vendor based on the terms of our client’s clickwrap agreement. Our client, similar to Uber in the case above, had records of the vendor’s registration and affirmative agreement to the Terms of Service. Accordingly, we were able to establish conclusively that the vendor had agreed to the contractual terms, which included terms of payment. The vendor had no defense to its breach of the agreement, and settlement was eventually reached on the amount owed.
At Proctor Brant, we can help you create terms of service suited to your specific needs or analyze your current wrap agreements and enhance the likelihood that your agreements will be upheld, if necessary. We can also help you to enforce the terms of your agreements, whether electronic or otherwise. Feel free to contact me or any of the other attorneys at Proctor Brant to discuss your situation.
 Riley v. California, 573 U.S. 373, 385 (2014).
 Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585 (1991).
 ProCD Inc. v. Zeidenberg et al., 86. F.3d 1447 (7th Cir. 1996).
 Specht v. Netscape Communications Corp.,306 F.3d 17 (2nd Cir. 2002).
 Major v. McCallister et al., 302 S.W. 3d 227 (S.D.MO App. 2009).
 Nicosia v. Amazon.com, 834 F.3d 220, 238 (2nd Cir. 2006).
 Fetja v. Facebook, 841 F.Supp. 2d 829, 840 (S.D.N.Y 2012).
 Beard v. Paypal Inc. 2010 WL 654390 (D. Oregon Feb. 19, 2010) (In 2010, Paypal sought to enforce the terms of its user agreement that required a user to affirmatively accept the terms of the agreement by checking on the appropriate box on a registration webpage.)
 Exceptional Urgent Care Center, I, Inc v. Protomed Medical Management Corp. 2009 WL 1370818 (M.D. Fl. May 14, 2009).
 Meyer v. Uber Technologies, Inv., 868 F.3d 66, 77-78 (2nd Cir. 2017).