Online Contract Terms and Conditions

Clickwrap and Other Types of Online Contracts: Four Principles to Follow In Creating a Legally Enforceable Electronic Agreement

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.”[1] 

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.

When written well, online contracts – including terms of service agreements and terms of use agreements – combine the security and formality of a contract with the efficiency that modern life demands. Electronic contract formats include browsewrap, clickwrap, scrollwrap and sign-in wrap agreements.

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

Take-it-or-leave-it wrap agreements have been around for decades. In 1991, the Supreme Court of the United States enforced terms located on the back of a cruise line ticket.[2]  In 1996, the Seventh Circuit Court of Appeals enforced a “shrinkwrap” agreement where the terms of use for the software appeared on a computer screen when using software before allowing the user to proceed.[3]

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.,[4] 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.

However, in Major v. McCallister et al.,[5]  a user accessed a website with free referrals to construction contractors. This user clicked through a number of screens before she eventually encountered space to enter her contact information, followed by a “Submit for Matching Pros” button. Next to the button was a blue hyperlink to the website terms and a notice that “By Submitting You Agree to the Terms of Use.” The user proceeded to click the Submit Button.

The Southern District of Missouri Court of Appeals identified this agreement as a browsewrap agreement because the user was not required to “click” to accept the terms. However, because the website included a hyperlink to the terms and notice that by clicking on submit the user had notice of the terms, the terms were enforceable, and she was required to comply with the Terms of Use.

Like browsewrap agreements, sign-in wrap agreements have also been deemed unenforceable for insufficient notice. In a 2006 case, Nicosia v.,[6] there was a hyperlink to Amazon’s terms on the order page. Below the “review your order” button, there was text confirming that “by placing your order, you agree to’s privacy notice and conditions of use” with hyperlinks to the terms. This language was not bold or conspicuous, but instead part of a cluttered order page.  Further, the Nicosia court was critical of the fact that to proceed with an order, a user clicked a “Place Your Order” button that was not directly adjacent to the text that the user was agreeing to terms of use or the link to the terms of use.

By contrast, in the 2012 case, Fetja v. Facebook[7], 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.[8]  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.”[9] 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

Courts almost universally uphold clickwrap agreements where a user has affirmatively assented to terms of an agreement through some affirmative action. Therefore, whether you include a check box as part of a registration form (with the terms themselves hyperlinked), you require a user to scroll through terms followed by clicking or checking an “I agree” box, or you include a check box as a pop up before proceeding to a webpage or app, the presence of something that requires action by the consumer acknowledging agreement significantly increases the likelihood that a court will enforce the terms of the business contract or terms of use.

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.[10]

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.

For example, in the 2017 case Meyer v. Uber Technologies, Inc.,[11] Uber was able to pull records establishing both the dates and methods by which a user registered for Uber and agreed to the Uber Terms of Service.  Therefore, there was conclusive evidence that the user clicked a button marked REGISTER with text advising him that by creating an Uber account, he agreed to the terms of service and privacy policy as hyperlinked to the screen. Because of this evidence, the user could not dispute he was on the registration page and he affirmatively clicked the Register button.

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.

[1] Riley v. California, 573 U.S. 373, 385 (2014).

[2] Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585 (1991).

[3] ProCD Inc. v. Zeidenberg et al., 86. F.3d 1447 (7th Cir. 1996).

[4] Specht v. Netscape Communications Corp.,306 F.3d 17 (2nd Cir. 2002).

[5] Major v. McCallister et al., 302 S.W. 3d 227 (S.D.MO App. 2009).

[6] Nicosia v., 834 F.3d 220, 238 (2nd Cir. 2006).

[7] Fetja v. Facebook, 841 F.Supp. 2d 829, 840 (S.D.N.Y 2012).     

[8] 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.)

[9] Exceptional Urgent Care Center, I, Inc v. Protomed Medical Management Corp.  2009 WL 1370818 (M.D. Fl. May 14, 2009).

[10] Meyer v. Uber Technologies, Inv., 868 F.3d 66, 77-78 (2nd Cir. 2017).

[11] Id.