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Clickwrap agreements are the new frontier in online contracting, combining speed and efficiency with a high degree of legal effectiveness. However, there are several pitfalls that can result in a clickwrap agreement being less enforceable than it should be. This can result in the company not being able to take full advantage of the legal protections contained in their contracts.
Content Download: Clickwrap Litigation Trends: 2021 Report
Below are four keys for your legal department to maximize the legal enforceability of your company’s clickwrap agreements.
Clickwrap agreements are a fully enforceable form of online contracts, particularly when there are robust back-end records. The strength of clickwraps is most apparent from a side-by-side comparison with the other common types of online contracts: browsewrap agreements and sign-in-wrap agreements.
Browsewrap: The user is deemed to accept the contract simply by using the website. The notice is generally located somewhere on the screen, along with a link to the contract terms and conditions. Since there is no affirmative assent to the terms by the user, these agreements are legally weak and rarely enforced.
Sign-in Wrap: For these agreements, the user is deemed to accept the contract by signing into the website. They employ a dual-purpose button, where the user is notified that they are accepting the terms of the contract when they click the button to log in, sign in, or register.
Clickwrap: Clickwrap requires the user to click a single-purpose button or checkbox, where the only purpose of the button is to agree to contract terms and conditions, with language clearly stating “I agree” or words to that effect.
While clickwrap requires the strongest form of user consent to its terms, it will still be difficult to enforce without adequate back-end records of acceptance.
Related Content: Best Practices for Clickwrap Enforceability
In order for a company’s clickwrap agreement to be enforceable, the legal department should ensure that back-end records of acceptance are in place. These back-end records should clearly show three things:
The failure to have these back-end records in place could spell doom for clickwrap enforceability. For example, in Nager v. Tesla, Tesla was unable to enforce its arbitration agreement against two car buyers who alleged Tesla sold them a damaged vehicle. The federal court specifically noted that Tesla “has not offered any business record that establishes plaintiffs clicked through and electronically accepted the Agreement.” Their lack of back-end records prevented them from enforcing their Terms.
Another important consideration for clickwrap enforceability is to optimize screen design and be able to produce screenshots to prove it. The screen should be relatively uncluttered, and the hyperlink should stand out from the background. Also, the hyperlink, acceptance language, and acceptance buttons should be in close proximity on the screen.
In addition, the user should have the opportunity to review the terms and conditions before accepting. With clickwrap, this can be accomplished in several ways:
Related Content: How Has The Pandemic Impacted the Clickwrap Industry?
No matter what records a company has to prove an online contract, it is absolutely imperative that those records be produced in time to meet court deadlines. A legal team should ensure they can accomplish this task, or that they contract with a third-party provider who can do so.
In Barrows v. Brinker, the corporation doing business as Chili’s Grill & Bar filed a motion to dismiss a lawsuit by two employees, based on arbitration agreements they allegedly signed when they were hired. The defendant even submitted the actual arbitration agreement signed in one of the plaintiff’s own hand. The problem? The agreement was submitted with the defendant’s reply brief, instead of with the original motion. Although the court gave the defendant leave to renew the motion, they lost their chance for an immediate dismissal.
There may be circumstances where the company has control of the environment where the user signs the agreement, such as when “onboarding” new hires. In these cases, the company must make certain that the signer has the opportunity to review the contract completely.
In Gilgar v. Public Storage, Public Storage moved to dismiss an employment complaint by a former sales agent, based on the arbitration agreement she signed upon being hired. The court found the plaintiff did not electronically consent to arbitration and denied the motion. The court specifically noted that, during the plaintiff’s orientation, she was told to “quickly scan through” the documents so she could attend the meeting for new hires. She was also expressly told she would “not have time to read” all the documents.
These are crucial to ensuring clickwrap enforceability. To learn more about increasing the enforceability of clickwrap agreements, download our report, Clickwrap Litigation Trends: 2021 Report.