Forming Contracts Online

20 December 2001

When you've surfed the Web, you've probably noticed that some Web pages have a link at the bottom of the page labeled something like "Terms and Conditions." If you've ever really been bored, you might have even clicked on the link to investigate. If you did, you probably found a contract that purported to govern your use of the site. Could a contract you didn't sign and that you didn't even have to read possibly be a real contract?

It turns out that this is actually an important and somewhat open question. It's important because if you own a Web site, the classic advice is that you must - absolutely must - have terms and conditions for website use. After all, it's your opportunity to have a completely one-sided agreement protecting your interests. However, how do you insure that the contract you put on your site will hold up in court if you need it.


Let's start with the one-sided issue. Simply put, you can get away with one-sided because--well, let's face it--nobody reads these agreements.

So, when I write these agreements for clients, I like to include provisions like no warranties on uptime or the accuracy of the information presented. Another is that if you sue us, you have to do it in our local court not yours. I'll also include a "Limitation of Liability," which when reduced to its essence says, "No matter what we do and no matter how bad it is, we owe you nothing or very little."

A Real Contract?

There are two common ways Web sites attempt to form contracts with users. They are "clickwrap" and "browsewrap."

Clickwrap is when you're forced to affirmatively click on a button that says something like "I Accept" after you've been given the chance to read the Terms and Conditions of Web site Use Agreement. If you don't click "I Accept," the Web site won't let you in.

You also see clickwrap when you install software. As you begin to install the software, a license pops up and you have to click "I Accept" before you can continue with the installation. Of course, you don't read it, print it, contemplate nor think about it, and then you click "I Accept." (When they come to pick up your first born the next day, you might give some thought to that agreement you didn't read.)

Although even this point is not 100 percent clear, I think that it's fair to say that a clickwrap agreement is almost certainly a binding contract. Pretty much everything on the legal landscape is pointing toward valid, and public policy would seem to favor their validity. If you're properly guided by your tech lawyer, you should be able to post a valid and enforceable agreement on your Web site.

The more problematic issue is "browsewrap." Courts seem less comfortable with the idea that an agreement "hidden" behind a little teeny tiny link at the bottom of a Web page can be a binding contract.

In a case decided a few months ago involving Netscape, the court took a negative view on browsewrap by saying that, "The case law on software licensing has not eroded the importance of assent in contract formation. Mutual assent is the bedrock of any agreement to which the law will give force."

Translated into English, the court said that you couldn't say that anybody has agreed to anything because there's a link at the bottom of a page inviting somebody to read an agreement.

So, if clickwrap probably works and browsewrap is more problematical, why not just use clickwrap? I think that the answer lies in marketing and good business practices.

If you have a Web site that exposes your company to low legal risk, it would be a case of the "legal" tail wagging the "business" dog to inconvenience your Web site users with a clickwrap agreement. Legal considerations should not always override good business.

It's the nature of some Web sites that if you force users to go through a registration process and click "I Accept" before they can enter the site that you will lose an unacceptable number of visitors. This is when you must consider using browsewrap rather than clickwrap.

Making Browsewrap Work

Although there is no certain way to insure that a browsewrap will be enforceable if you ever need it in a courtroom, here are some ways to enhance the likelihood that you will be able to convince a court to enforce your browsewrap agreement.

First, make that "Terms and Conditions" link CONSPICUOUS and make it say: "These terms and conditions govern your use of this site. You must click here before proceeding."

If your site has multiple panes, you might consider putting this link in a persistent window that won't come and go as a surfer surfs.

In your agreement, be sure that you clearly state that by merely viewing your site, the Web surfer agrees to be bound by this agreement.

If you take these steps, you're on the right path to enforceability.

Mark Grossman's "TechLaw" column appears in numerous publications. Mark Grossman has extensive experience as a speaker as well. If you would like him to speak before your group or corporate meeting, please call (305) 443-8180 for information.

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