Digital Transformation of In App Legal Agreements

Digital Transformation of In App Legal Agreements-09

Legal agreements have come a long way, and they’re not done evolving

Digital transformation is everywhere, driving rapid innovation in all facets of business at unprecedented rates. In order to facilitate this perpetual change, legal agreements must constantly evolve alongside the companies they protect, adapting to new products, new channels, and new technologies.

Like all types of change, the digital transformation of legal agreements has largely been driven by need. The result is a series of seismic shifts in how software distributors present terms to their users, each of which can be pinned to a specific legal or functional demand.

And, as is also inherent with ongoing change, legal agreements are far from complete in their evolutionary process. In fact, the journey will never truly end while digital transformation exists.

Download: Clickwrap Litigation Trends: 2020 Report

Digital Transformation of Legal Agreements: A History

As long as there has been software, there have been legal agreements. Terms and conditions are important as they create a legal barrier to protect software developers in the event of a lawsuit. Legal terms typically outline how users can interact with the app, which responsibilities the developer does and doesn’t have, and how any potential disputes should be addressed.

Of course, terms and conditions can’t just be unilaterally issued by the developer; each user needs to agree to them, too. Over the years, the way that companies present their terms and collect acceptance from users has evolved in response to emerging technologies and court rulings. This has led to three major phases of in-app agreements: shrinkwrap, browsewrap, and clickwrap.

The Early Years: Shrinkwrap Agreements

It’s hard to remember a time when apps couldn’t just be downloaded from the internet in a matter of seconds. Back in those days, buying software meant physically purchasing a CD that often came packaged in a box. Developers would print the terms of use on the outside of the box so that they could be read through the shrinkwrap packaging, and so the shrinkwrap agreement was born.

The core concept behind a shrinkwrap agreement was that by opening the packaging and using the software it contained, the user was agreeing to the terms laid out by the developer. While this may have been an appropriate solution for the time, it quickly became obsolete when software distribution moved online. Without a way to physically print their terms, developers needed to come up with a new solution.

Related: 3 Contract Acceptance Methods Defined and Compared

Adapting to Online Channels: Browsewrap Agreements

The next phase to emerge in the digital transformation of legal agreements was browsewrap. This type of agreement is most commonly used by websites and indicates to a user that they give assent to the terms and conditions simply by browsing. The disclosure is usually made at the bottom of the site with a hyperlink to the terms of use.

Unfortunately, browsewrap agreements are legally problematic. In our own research of court cases going back to 2003, we found that browsewrap agreements only held up 13% of the time. Since the user doesn’t have to take any action to indicate acceptance, many don’t even know the terms exist – especially when they’re buried at the bottom of the page. As companies began to face the costly effects of browsewrap failures, a need emerged for an acceptance method that would require the user to become an active participant.

Download: Clickwrap vs. Browsewrap: What You Need to Know to Protect Your Terms

A Step in the Right Direction: Sign-in-wrap Agreements

A hybrid of clickwrap and browsewrap agreements, sign-in-wrap agreements involve notifying a user that by clicking the button that signs them into an app or website, they’re agreeing to the terms of use. This is a step in the right direction as it requires the user to take action, and they can easily opt out by simply not signing in.

However, the sign-in-wrap solution is less than perfect. For one, the action being taken doesn’t indicate affirmative assent. Plus, according to our data, the legal success of sign-in-wrap agreements is more likely to hinge on the page design than other agreement methods.

Today’s Digital Solution: Clickwrap Agreements

Currently, the most widely accepted solution for enforcing in-app legal terms is through clickwrap agreements. With this type of agreement, the user is required to complete an action indicating assent, such as clicking a checkbox that says “I agree”.

Related: Three Types of Online Agreements in Clickthrough Litigation

Clickwrap agreements have so far been shown to stand up to litigation, although there are a few caveats. For example, the page should be designed to prominently feature the agreement, and users should only be able to accept if they’ve actually read the terms. When these conditions are met, clickwrap agreements are the best way to ensure enforceability without compromising user experience.

The Future of Online Terms Management

The digital transformation of legal agreements is far from over, and companies need terms that can rapidly evolve to meet demand. At PactSafe, we’re always ready for change with clickwrap agreements that scale alongside you, no matter what the future holds.

Learn how transforming your in-app agreements can enable self-service experiences in our eBook, The Digital Transformation of In App Legal 

Digital transformation of in-app legal agreements ebook download

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