Clickwraps

Four Tips for Reducing Clickwrap Litigation Risk

Tips for Reducing Clickwrap Litigation Risk-02

With the rise of clickwrap agreements comes the rise of clickwrap litigation risk. Especially for eCommerce businesses that process thousands of transactions daily, there are simply more opportunities for legal disputes to arise. However, clickwrap agreements can still be fully enforceable, and clickwrap litigation avoided, if best practices are followed.

Related Content: Are You Tracking Your Terms Properly?

The following are four ways to reducing clickwrap litigation risk:

Prioritize Recordkeeping to Enforce Clickwrap Agreements

Clickwrap agreements present unique advantages for businesses that require online contracts, such as eCommerce companies. A clickwrap agreement, by definition, is one where the user must affirmatively manifest acceptance of the contract terms by clicking a button or checking a box bearing the term “I agree.”

But even if the clickwrap agreement is well-drafted and legally airtight on its face, this is not the end of the story. The company will still need detailed records of acceptance for each individual user. These back-end records of acceptance are essential for enforcing the agreement.

The case of Dillon v. BMO Harris Bank demonstrates the dangers of lacking back-end records to support enforcement of your clickwrap agreement.

Dillon v. BMO Harris Bank

In Dillon, defendant Bay Cities Bank filed a motion to compel arbitration, based on arbitration provisions in the plaintiff’s online contracts with the lenders. The federal district court in North Carolina denied the motion, finding insufficient evidence that plaintiff and the lenders had mutually agreed to the arbitration provisions.

The contracts at issue were clickwrap agreements, which the court specifically noted “pose special risks of fraud and error.” The fraud risk arose from the fact that “one of the contracting parties has exclusive control of the electronic record.” The risk of error arose from  “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 varied over time.”

Related Content: 3 Reasons Homegrown Acceptance Tracking Isn't Sustainable

In denying the motion, the Dillon court specifically noted the lack of evidence of how the electronic documents were created, maintained or retrieved. There was no evidence that the documents were preserved without any alterations. Instead, the bank produced employee affidavits regarding the general customs and practices in the loan application process. This was not enough for the court.

Lessons from the BMO Harris Case for Clickwrap Litigation

The bank’s chances of enforcing the arbitration clause were sunk by sloppy and inadequate electronic back end recordkeeping. When it comes time to enforce a clickwrap agreement, affidavits about custom and practice just won’t cut it.

Instead, enforce clickwrap agreements with the help of back-end records that prove acceptance for each individual user. These records should include the following information:

  • Identifier: You should be able to identify the contracting party by name, email, or other information.
  • Time: You should be able to verify the exact time and date the user agreed to the clickwrap contract.
  • Version: You need to verify the exact version of the contract agreed to, especially where there have been updates over time.

A third party clickwrap software provider can perform all of these functions. That way, your company will not have to be consumed with acceptance tracking. And the legal department will not have to be consumed with obtaining unhelpful employee affidavits in the event of clickwrap litigation.

Optimize Screen Design for Your Clickwrap Agreement

Proper screen design is essential to enforce clickwrap agreements. A court must be satisfied that the user was put on adequate notice that they are effectively signing a contract. This means the contract terms must be conspicuously presented to the user.

Some best practices to enforce clickwrap with optimal screen design are as follows:

Conspicuous Hyperlink

The hyperlink to accept a clickwrap agreement should stand out, contrasting strongly with the background. If the hyperlink blends in, the user could argue they did not receive adequate notice.

Close Proximity

The hyperlink, agreement language, and acceptance buttons should all be in close proximity on the screen. It must be clear all these elements relate to each other, and that the button-check or box-click will lead to contract acceptance.

Screenshots

What is some great evidence to showcase your high-quality screen design? High-quality screenshots to display what the user’s screen looked like at time of sign-up or check-out. This entails more recordkeeping, of course - for which a third party provider may be ideal.

Related Content: How to Design and Present Enforceable Online Terms

Give the Legal Team Control Over Legal Terms

Without a doubt, the terms and conditions of a company’s clickwrap agreements MUST be controlled by the legal department. The challenges are the high volume of transactions and the need to update agreements over time. Although legal software will be essential to keep up, how does the legal team still keep control over the legal terms?

The right legal technology will give Legal insight into how the contract terms and conditions are actually implemented. Legal needs assurance that updated versions of the contracts are live on the point-of-sale websites and that the correct versions are correctly linked. The right software - and the right software provider - can give Legal these assurances, so Legal is maintaining the company’s legal protections.

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Get User Consent for Updated Terms of Service

If you intend to legally bind a customer by terms of service, you will need customer consent to updated terms. This means the business must notify customers of any modifications to their clickwrap agreement. Then the customer must provide consent to the modifications in the same way they entered into the original contract - a click of a button, or checking off a box, that clearly indicates their agreement. And of course, the company needs the back-end records to prove this happened.

These are just a few of the ins and outs of avoiding clickwrap litigation in the modern world of digital commerce. To see how your company’s online contracts measure up, take our Clickwrap Litigation 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!

clickwrap litigation trends 2021 report


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