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When it comes to digital contracts, one agreement is the cornerstone of your online business: your terms. And if they don’t hold up in court, the transactions taking place on your platform won’t matter. So, how can you balance legally enforceable terms with maintaining as smooth and responsive a customer experience as possible?
You guessed it. Clickwrap agreements. When done right, they aren’t only the fastest way to collect acceptance for your online terms, they’re also one of the most effective ways to establish an enforceable, visible trail of user acceptance records pertaining to any digital contract. No wonder businesses are increasingly using clickwrap across their registration, login, and checkout process flows!
Take the Clickwrap Litigation Self-Assessment to see how your agreements will hold up in court
Contracts have been around as long as written language itself. And, while the digital equivalent has only seen a few decades pass, this comparably short period has seen tremendous progress as digital transformation and technology redefine the legal definition of what constitutes an acceptable signature.
Specht v. Netscape1 in 2002 is widely regarded as the case that produced our modern understanding of clickwrap and its legally enforceable best practices. Since then, we’ve found that clickwrap litigation increased 626% between 2002 and 2018 – as well as an additional 15% rise in clickwrap-related cases through 2019.
As more businesses embrace online agreements and implement clickwrap solutions to present their terms, you can expect these rates to continue to rise as these companies defend the legal enforceability of their digital contracts. And, as a result, expect courts to become more sophisticated in their assessment of these agreements as they become more widely used.
Because clickwrap agreements force online shoppers to affirmatively agree to your terms, it should be no surprise that they’ve been more successful in terms of legal enforceability than alternatives such as browsewraps and the clickwrap-browsewrap hybrid known as sign-in-wrap.
When we looked at the numbers last year, clickwrap agreements hold up in court as legally secure contracts 80% of the time. By comparison, sign-in-wrap rates were 65% and browsewrap fared even worse.
But don’t take our word for it. Here are two real-world examples that prove precisely why clickwrap is your most legally safe online agreement option:
Last year, courts resolved individual and class-action complaints from plaintiff Suzanne Tanis after clickwrap agreements help Southwest Airlines produce a back-end record with details sufficient enough to prove that she had agreed to the company’s online terms.
Specifically, the record that was created at the time of contract acceptance, included the employee’s name, identification number, and date at which the contract was executed.
Thanks to registration that included a clickwrap agreement process, JetSmarter was able to enforce the arbitration clause in its online contract because it was able to produce a detailed back-end record of acceptance that the company’s Chief Technology Officer developed.
What did these two cases have in common? They both featured clickwrap solutions that were able to prove the customer “actively assented” by providing specific details about the employees, users, dates, and times involved. But there are a variety of elements that can make your clickwrap agreements enforceable.
Chart showing success rate for clickwrap and sign-in-wraps in 2019 vs 2020
While not all courts operate identically, clickwrap agreements are assessed to answer three primary questions:
This piece of evidence can be a written statement or sworn testimony from key personnel familiar with the organization’s contract acceptance process. According to our research, 67% of clickwrap-related cases in 2019 produced affidavits or declarations that described precisely how customers agreed to the company’s terms. In 69% of these cases, companies produced high-quality affidavits or declarations and successfully enforced their terms.
Overall, we find this evidence to be more successful when the person providing it has pertinent knowledge of the system being described and/or is in a role that familiarizes them with the contract acceptance process.
For example, consider Egan v. Live Nation Worldwide. This case enforced Live Nation’s arbitration clause because its VP of Product Management walked the court through the organization’s account setup process; described the screen, buttons, and hyperlinks displayed to each user; and proved that it was impossible to complete transactions on the site without agreeing to the company’s terms and conditions first.
Back-end records are another type of evidence you can use to legally enforce clickwrap agreements. These records contain data capture at the time of contract acceptance such as who accepted the agreement, when it was accepted, and which version of the agreement was live at the time. In 24% of cases over the last 12 months, companies were able to produce these records. In 65% of these cases, producing robust back-end records result in the successful enforcement of contract terms.
Back-end records are most successfully used when they showcase specificity and a high level of detail – i.e. that a specific user signed a specific agreement at a specific time. In the case of Holley v. Bitesquad.com, the back-end records provided by Bitesquad included sufficient detail to prove that the plaintiff accepted the agreement because the record consisted of an audit trail that included “the email address to which the employment packet is sent and the times at which it is sent, viewed, and signed by the employee.”
The final type of evidence we recommend is screenshots, which are images that display what a device screen looked like at the time of signup or checkout. In 29% of cases last year, companies produced screenshots to display user notice and acceptance of terms. Businesses in 61% of these cases were able to depict a solid enough design and layout of the screen to successfully enforce their terms.
It’s important to know that courts usually rule in favor of a business if a contract’s terms are presented on a page designed to provide actual or inquiry notice to a user. If, however, the screen design doesn’t do that, courts can be swayed the other direction.
Consider the case of Epps-Stowers v. Uber Technologies, which detailed the sequence of screens a user sees when creating an Uber account. At a certain step in the process, an alert pops up to explain that the user is entering into a contract via the registration workflow – making it possible for the company to execute its terms in a legal manner.
Without a clickwrap agreement, it can be difficult to track this level of detail across every transaction. Many fail to maintain accurate and specific records, opening up the organization to potential liabilities when they try to enforce their terms in court. See where you stand with our Clickwrap Litigation Self-Assessment.
Update: We have released the 2021 report of clickwrap litigation trends with more up to date best practices and case rulings from the last year. Our Clickwrap Litigation Trends: 2021 Report also analyzes the impact of the pandemic and the boon of eCommerce on the trends we see. Download your copy!