What is a unilateral contract?
By definition, a unilateral contract, or one-sided contract is an agreement where only party one party, known as the offeror, makes a promise to another party, known as the offeree. Unlike a bilateral contract, where both parties sign an agreement, unilateral contracts are often standard. When the offeree (usually 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 (offerer) to accept a unilateral contract is by holding up their end of the bargain.
Common examples of a unilateral contract are website terms and conditions or privacy policies. In this type of agreement the company, or offeree is providing notice to a customer or user regarding their business practices, promising to uphold certain standards and, in turn asking the user to agree to those terms.
Clickwrap for unilateral contracts
Unlike bilateral contracts, where there is likely to be some negotiation or redlining, unilateral contracts are often delivered as a boilerplate or standardized agreements. For this reason, the most efficient delivery and acceptance method to use a clickwrap agreement.
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 the legal terms (that they probably didn’t read) and the order is fulfilled.
However, it’s not quite that simple. There’s more to capturing acceptance than just presenting terms. 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.
Best practices for legally binding unilateral contracts using clickwrap
- Knowledge: When it comes to a unilateral contract, knowledge is paramount. The business must be able to prove that the customer had knowledge of what they were accepting in order to have effectively accepted it. In most cases this means presenting the terms conspicuously so no doubt can be cast as to whether or not the customer should have have seen it.
- Intent: The offeror must also prove that the customer intended to accept the terms of the offer. While it’s still common practice place a phrase such as “by clicking this button or submitting this form I accept these terms” this type of intent is a gray area. A better practice is to ask the customer to click a separate checkbox, accepting the unilateral agreement separately from clicking a button to sign up or purchase.
Enter the concept of constructive knowledge. Constructive knowledge is knowledge that someone is legally assumed to have–regardless if they do or do not. 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.
- Access: The user must also be able to access the agreement and read it in its entirety. Whether they read it or not is less important than the presentation or accessibility of it.
- Fairness: 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. In a clickwrap agreement/unilateral contract the offeree has no bargaining power. What the business or 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.”
Which is why courts expect 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 you should 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.
- Notice of updates: Finally, from time to time, businesses will need to change terms or policies, and that’s completely fine, but they must share information with the customer when the unilateral contract/clickwrap agreement terms change in order for any new agreement terms to binding under the contract. Not only that, they must again capture consent of the new terms. How do you solve this problem? Make it clear that the buyer will be blindly clicking “I accept” to something new.
More than just terms - other uses for unilateral clickwrap contracts
While most companies use and think about clickwrap agreements for general website terms and conditions, any unilateral or standardized agreement can benefit from a clickwrap delivery method, replacing your typical PDF esignature tool.
Since clickwrap agreements prevent redlining and reduce time to sign these other agreements are ripe for digital transformation:
- Non-Disclosure Agreements
- Employee Offer Letters
- Affiliate or Partner Agreements
- End User License Agreements (or EULA’s)
- Master Subscription/Sales Agreement
- Service Level Agreements
- Sweepstakes Entries
Ready to learn more about expanding your use of clickwrap agreements in your business or department? Check out our comprehensive guide. Departments of the Future: 45 ways to use clickwrap.