The PactSafe Blog: Making business happen faster

Remember the good 'ole days of carefree clickwrapping?  

Slap a checkbox on a form, create a link to a set of legal terms, and POOF you have a contract! (Ok so it never worked that way, just ask TransUnion or GoGo.)

In the past, judges have thumped clickwrap agreements for poor design, confusing presentation, and other no-no's that could typically be avoided with a bit of forethought.  A recent federal court order shows that courts (and lawyers) are really starting to dig into how clickwraps work, and what goes on behind the scenes.

 A quick clickwrap refresher.

One way of forming a contract between a website (or more precisely, the owner of the website) and its users is the so-called clickwrap agreement, in which website users manifest their acceptance of the contract by clicking a button or checking a box that states "I agree" (or something similar) after being presented with the website legal agreement. Clickwrap agreements derive their name by analogy to old-school "shrinkwrap" agreements used to license tangible forms of software sold in shrink wrapped packages. Just as breaking the shrinkwrap seal and using the enclosed computer program after encountering notice of the existence of governing license terms has been deemed by some courts to constitute assent to those terms in the context of tangible software, clicking on a webpage's clickwrap button after receiving notice of the existence of license terms has genrally been held by courts to manifest an Internet user's acceptance of those terms. But, in practice, its never that easy to make sure a clickwrap is binding.

So what happened in the BMO Harris order?

The new case in question, Dillon v. BMO Harris Bank, et al., involves a bank trying to compel arbitration. To compel arbitration, the bank tried to rely on a provision contained in an online loan agreement. To prove the agreement was valid and accepted, the bank followed the somewhat common (and convoluted) procedure of submitting statements under oath describing the online application process, checked boxes, clicked buttons, and tried to confirm that the loan application and associated agreements required arbitration.

The court was not impressed:

“Clickwrap agreements … pose special risks of fraud and error. When one of the contracting parties has exclusive control of the electronic record, which is the case in many consumer online transactions, that party is in a position to produce a document that meets its current preferences and needs. Even absent fraud, there is risk of error in the production of a document from the bowels of an electronic record-keeping system, which may include agreements whose terms and electronic click-through procedures vary over time.”

WOW! OUCH!

And you know what...the court is right. Clickwrap record keeping is generally a mess across the board, so it was only a matter of time before some lawyers and judges wised up to this. Here the court concluded that clickwraps pose a special risk of fraud and/or error, especially here where there was no reliable evidence that the agreements were recorded and then subsequently retrieved in their original form without being altered.

The important takeaway - verifiable, tamper proof records are VITAL!

The key facts to ensuring you are recording the right elements of a customer accepting clickwrap terms include:

• Track an identifier (like email address) along with their IP or location that can help you easily identify the user if you needed to prove it.
• Track all major version changes of an agreement (including knowledge of what changed) - TIME STAMP EVERYTHING!
• Track all versions that a respondent has agreed to - TIME STAMP EVERYTHING!
• Make sure everything about your publishing and record keeping process is tamper proof.

Of course, there's an API for that!