Australia: Update on Online Contracts: How binding is a "click"? How binding is a reference to a set of terms?

Last Updated: 24 February 2017
Article by Tal Williams and Lucie Treguier

Australian case law tends to show that Australian courts apply general contract law principles to determine whether, and to what extent, a set of terms and conditions on the website is binding on the contractual parties.

Readers would be aware of "click wrap agreement" that are formed when a party clicks "I agree" on terms one website, and "browse wrap" agreements apply when there is a hyperlink or statement indicating the existence of terms and conditions. Indeed, it is not uncommon to find on a website a hyperlink which takes the user of the website to another page which contains terms and conditions that have not been previously drawn to his or her attention. The question is whether either, or both, create binding contracts at law.

Generally speaking, a term is considered as incorporated in an agreement if the parties consent to the term directly (by clicking I agree, actually signing, or sending confirmatory acceptance correspondence). Most of the time these are clear and there is no real dispute. In the case of clicking 'I agree' it is important that the party is actually taken to the page containing the terms to ensure that a binding contract is formed.

Browse wrap or click wrap agreements that do not occur after the terms have been viewed as more contentious and the facts of each case will be relevant to the court's considerations.

And the answer is not always straight forward as two recent cases illustrate. One Australian, one international.

In Surfstone Pty Ltd v Morgan Consulting Engineers Pty Ltd [2016] QCA 213, an architect was commissioned by the owners of the land (Surfstone) to design a warehouse building. The architect hired Morgan Consulting (Morgan) to perform engineering services. Morgan proposed a fee and included in the fee proposal a statement that indicated that the commission would be generally in accordance with the ACEA Guideline Terms of Agreement. The ACEA Guidelines were not attached to the Fee Proposal and not signed by the customer. Morgan did not provide a copy of the ACEA Guideline Terms of Agreement to Surfstone either. Relevantly, a clause was included in these terms limiting Morgan's liability to one year from the date of completion of the engineering services.

A defect became apparent five years after completion of the services and the procedure started nine years after the last invoice was submitted. The owners of the house claimed that Morgan was negligent in carrying out the work.

Morgans relied on the ACEA Terms (particularly clause 4.3), and argued that the ACEA Guideline terms excluded its liability. Surfstone submitted that there was no evidence to show that Morgan's had drawn the limiting term to their attention and accordingly that clause 4.3 was not incorporated into the contract.

Accordingly, one of the main questions was whether the ACEA Guideline Terms were incorporated in the fee proposal and thus binding on the parties.

Having regard to:

  1. the construction of the words of the proposal letter,
  2. what a reasonable person would understand as to the offer, and
  3. whether the term was commonly used in the industry,

the Queensland Court of Appeal agreed with the primary Judge and found that the ACEA Guideline Terms were incorporated in the fee proposal. Consequently, Surfstone had no right to sue in relation to the defect.

But a recent US development in this area, although not binding on Australian courts, can provide relevant guidance about the way that the incorporation of contractual terms may be litigated in the future.

In Meyer v Kalanick No 15 Civ.9796 (Uber) (2016), the online contract in issue included two contentious terms under which Uber riders waived their right to a jury trial and were submitted to an arbitration process. While the registration and payment fields were prominent, a smaller button was accompanied with the sentence, "By creating an Uber account, you agree to the terms of service" in smaller front. Further, the user could click on the "register" button without accepting the terms, or even opening the hyperlink to the terms and conditions. Even if users clicked on the hyperlink, they were unable to directly access the terms but had to follow a series of steps including several different new screens to access the terms.

An issue arose and Uber argued that Meyer agreed to arbitrate the dispute when he consented to the Uber's Terms of Services.

The main question was whether Uber reasonably disclosed the Terms of Service to the plaintiff and whether they were incorporated into the contract between the parties.

Taking into consideration the facts above and most importantly the multi-staged and complex process required to access the Terms, the United States District Court concluded that no enforceable agreement arose between the parties and rejected the notion to compel arbitration.

This case contrasts with the Surfstone case, and indicates a trend toward more thorough evaluation of the contractual acceptation process in the US. The reference to the 'highly legalistic language that no ordinary consumer could be expected to understand' also suggests that the judges seem to have carefully examined whether the consumers have a reasonable and realistic power to understand and negotiate the term, and further acknowledged the accepted reality of a real imbalance between the parties.

Another interpretation of the discrepancy between these two recent cases might be the difference between consumer and commercial contract. The contract in the former was a commercial contract between Surfstone Pty Ltd and Morgan Consulting – the judge's examination of whether the term was an industry standard term suggests that both parties may have been in a certain position to negotiate, or at least understand the term commonly used in the industry. The American case refers to a consumer contract.

For most certainty, if a parties wishes to bind a user to comply with particular terms and conditions, those terms should be clear, understandable and the user must have actually seen the terms and taken the positive step of clicking "I agree" after viewing the relevant page. Anything else will give rise to uncertainty and the court questioning whether there is sufficient evidence to support a finding that the user should be bound to the conditions set by the provider of services.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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