Clickwrap agreements are a simple and streamlined method of presenting legal terms. From an eCommerce or SaaS perspective, presenting legal terms as a clickwrap agreement during a customer’s purchase flow makes perfect sense. Customers fill their shopping cart, proceed to checkout, click to agree to legal terms (that they probably didn’t read) and the order is fulfilled.
However, it’s not quite that simple. Too often we see businesses setting forth terms that get shot down in court because they forget to consider one small thing–a clickwrap agreement is a unilateral contract!
Businesses must set forth their terms in a manner that is in alignment with generally established rules for a unilateral contract.
What is a unilateral contract?
When a customer accepts a unilateral contract, they are asking the other party to perform (i.e. do what they are promising to do under the contract) In fact, the only way for a non-signing party to accept a unilateral contract is by fully performing. For example, “performing” under a set of eCommerce legal terms would mean actually delivering whatever it is the customer ordered. When it comes to clickwrap and unilateral contracts, there are a few important things to know:
- Knowledge: When it comes to a unilateral contract, knowledge is paramount. In our example, the eCommerce customer must have knowledge of what they are accepting in order to have effectively accepted it.
- Intent: The customer has to have intended to accept the terms of the offer.
How can you ensure that those who click “accept” actually know what they are accepting and intend to accept it?
Enter the concept of constructive knowledge.
Constructive knowledge is knowledge that someone is legally assumed to have–regardless if they do or do not.
How does that help our eCommerce seller? When an eCommerce shopper clicks “I agree” they now have, under the law, constructive knowledge of what they agreed to whether they read your terms or not.
So why do companies lose cases when they have constructive knowledge, and when the parties exercise their intent to be bound when they complete the purchase?
The issue is power, specifically bargaining power and information.
- Bargaining power: In a clickwrap agreement/unilateral contract there is no bargaining power. What our eCommerce seller offers is what the buyer must accept.
This lack of bargaining power is part of what leads to many to mindlessly click, “I accept.”
Since a buyer lacks bargaining power, has constructive knowledge, and intent is practically a given, agreements must be at least reasonably fair. The stronger party (seller) cannot take advantage of the submitting party (buyer). If you’re asking for title of the customer’s homestead buried in line 5 of section 7 of your terms of service, that’s probably going to be a problem for you to enforce. Is that an extreme example? Sure! But abide by a general rule of protecting what’s necessary to limit the business’s risk profile without getting greedy on what you can take from your customers with terms to keep concerns at bay.
Finally, our eCommerce seller must share information with the buyer when the unilateral contract/clickwrap agreement terms change.
- Information: When the seller has to change the terms (offer), they must inform the buyer that they need to accept new terms.
It cannot be a surprise to the buyer that the offer has changed. This is when tiny text changes and updates can get our eCommerce seller into big trouble.
How do you solve this problem? Make it clear that the buyer will be blindly clicking “I accept” to something new.
In summary, first, be fair. You’ve got the power, but need to use it wisely. Second, when you want to make updates to the terms of the agreement be sure to let all your faithful shoppers know.
Need more help? Ask PactSafe! We know that this is tricky, and luckily we enjoy a good challenge.