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With the rise and increasing popularity of online businesses, it's very easy to overlook important aspects such as back-end record storage. Businesses rely on contracts and agreements to protect themselves legally. At some point, we have all downloaded an app or made an online purchase that prompted us to “click” to gain access to a website or agree to the company’s terms and conditions.
Every day businesses find themselves in the awkward position of thinking they have all the legal requirements and necessary documentation in place in case they face litigation. However, much of this disappears into back-end storage where it is often impossible for the legal team to retrieve when necessary.
There must be a system in place that allows agreements to be tracked in marketplace apps in case they need to be retrieved for evidence in court. Companies often find out too late that by using a browsewrap, they aren't tracking acceptance data when they could have had this with clickwrap. Many legal teams make the mistake of thinking a checkbox is enough, but there are best practices for back-end record storage.
A Clickwrap Agreement is an agreement to which you manifest assent by clicking a box or checking a button that says "I Agree." One benefit of using clickwrap is that businesses can use it to quickly and seamlessly collect affirmative assent to their terms.
A comprehensive clickwrap solution creates a digital record of all customers or clients who have accepted the terms and conditions of any agreements. Your legal team can then use this information to put a stop to lawsuits before they begin, thus saving resources and time on potential litigation. The best clickwrap solutions also ensure back-end records are maintained and are easy to access if needed.
Legal teams need to stay on top of changes in both the industry and the law. It is difficult to maintain As a business owner, you need to stay on top of changing trends, particularly even if you have already implemented a digital agreement system.
Managing your online terms is more than working with your legal team to establish the terms and conditions. Your legal team will also need to keep up with new information and trends to ensure your terms and conditions evolve with the changes in the online marketplace. As new conditions arise and new customers are introduced to you, managing online terms is the only way to stay on top of changes and prevent any nasty surprises in the future.
Back end records are clickwrap acceptance data that has been tracked and stored by a company's legal or technical team. Maintenance of these records is crucial to enforcing your marketplace terms in court. Well-kept records prove who accepted your terms, when they accepted it, and which version of your terms were live when accepted.
What a lot of companies get wrong is providing individual records of acceptance. Tesla, for example, was unsuccessful in enforcing its terms in court because they were only able to produce “just some random document” that had no connection to the customer or transaction at issue, rather than individual records of acceptance. Your back-end records must be able to prove that a specific individual accepted your terms.
Another mistake many legal teams make is not maintaining version control updates. Over time, as regulations and industry standards change, so will the terms of service. In particular, as companies update their terms to include CCPA and GDPR requirements, they will need to push updates to users and collect their acceptance.
Without a proper system of doing this, it is difficult to maintain version control updates and therefore prove user acceptance to your terms.
The court are known to frown upon any self-maintained record of acceptance because of the easy opportunity for fraud that presents. In Dillon v. BMO Harris Bank, for example, the court declined to enforce BMO's terms because they couldn't be sure of the integrity of the records. The quote is too good not to share:
"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.”
As a result, part of the best practices of maintaining great back-end records is to let a third-party vendor do it for you.
For legal teams in marketplace businesses, the risk that comes with doing a high volume of business is ever-present. One way to ensure that you are prepared for the inevitability of litigation is to keep excellent back-end records. These records should be detailed and individualized, and accurately reflect version control updates. Otherwise, you're still doing it wrong.
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!