United States: Securing Assent: The Internet Twist Of Electronic Contracts

If any area of the law could be shielded from the all-consuming influence of the Internet, it ought to be the age-old law of contracts. Nothing about the Internet changes basic elements of contract law, like requirements of offer, acceptance, and consideration. 

But one crucial bit of evidence about making contracts electronically seems to bedevil courts: When and how does a user agree to a contract electronically? This crucial element of contract formation — manifestation of assent — is the Internet twist for contract making.

The Business Law Basics

Lots of contracts occur every day, with few formalities. When you order a hamburger for lunch, you are agreeing to pay the prescribed price, and the restaurant is agreeing to provide you the burger. The transaction is probably over before you realize you've been a party to a contract. Most transactions in daily life proceed like this.

Other contracts are attended to with a mixture of solemnity and formality. A real estate closing may be conducted at a special time and place, with all the parties brought together to sign the documents, and notaries to authenticate the signatures. You'll see similar attention to signatures and authentication in lending agreements, legal settlements, and major corporate transactions. 

The difference between the relatively informal everyday contracts and the formal ones that are signed in writing is a critical element of contract law that lay people often overlook or misunderstand. Popular sayings like "get it in writing," or "oral contract" seem to presume that an agreement is less valid, or less enforceable if it is not in writing.

But in fact most contracts don't have to be in writing. In the long course of Anglo-American law, contracts moved to writing (a process known as textualization) only relatively recently. Oral contracts aren't an aberration or mistake; they're the foundation of our contract law.

Even now, a formal written document signed by the parties is rarely necessary; in fact, much commerce would grind to a halt if a written contract were required. In many situations, a contract may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of a contract. 

Thus, writing and signature are only required in particular situations. State laws (called "statutes of frauds") determine which contracts must be signed and in writing, and in most states only six categories of contracts need to be memorialized in a writing, signed by the party to be charged:

  • Contracts for marriage
  • Contracts that cannot be performed within one year
  • Contracts for the transfer of an interest in land
  • Contracts by the executor of a will
  • Contracts for the sale of goods totalling $500 or more
  • Contracts of suretyship

Law students often remember these categories using the mnemonic "MY LEGS": Marriage, contracts for more than one Year, Land, Executor (or Estate), Goods ($500 or more), Surety.

That's why signatures are required for real estate contracts, but not hamburger orders (unless, perhaps, you are ravenous and order $500 worth of burgers).  In the vast majority of cases, the key to contract formation is whether there has been a "manifestation of assent" by written or spoken words between the parties or by other action (or even by failure to act).

For those cases where a writing and a signature are required, the next questions are, "What is a writing?" and "What is a signature?" In each case, it may not be what you think.

To satisfy the statute of frauds, you don't need a formally written contract. Even a scrap of paper could qualify, so long as it contained the essential terms of the deal. The signature can be as simple as a party's initials, his or her printed name, or even a stamp or reference to the names tied to a description of the deal. 

The Internet Law Twist

If contracts are so simple and flexible in the bricks-and-mortar world, you'd think that contract principles should be readily adaptable to the online world. And indeed lawmakers have taken care to smooth the application of contract principles to the Internet.

Most states have enacted some form of the Uniform Electronic Transactions Act (UETA). UETA provides for recognition of electronic records and signatures. With only a few exceptions (such as wills and trusts), if a contract requires a writing and written signature, an electronic record and signature will work. For the few states that haven't enacted UETA, a federal law, Electronic Signatures in Global and National Commerce Act (E-SIGN) provides the same result, though it has more exceptions.

Under either UETA or E-SIGN, all parties must consent to use of electronic records and signatures. That's a bit of a Catch-22, since parties that deal with one another electronically rarely explicitly agree to electronic dealings — and if they do so electronically, how is that consent enforceable? But in most electronic courses of dealings, the consent of the parties is apparent, and consent is rarely contested.

The concept of an electronic signature confuses many people. Some think of electronic signatures as a graphic representation of their written signature — what might be called a facsimile signature. Others think of electronic signatures as complex exchanges of encrypted computer files — what is often called a digital signature. An electronic signature can be either of these, or more.

Just as, for example, initials or the imprint of a rubber stamp may qualify as a signature on paper, your initials or name at the bottom of your email can also qualify. Even an email signature automatically added to the text when you hit "send" can qualify as a signature (so watch those emails more carefully — any one of them can create a contract). Your name on a text message or instant message may qualify as well. 

And perhaps most importantly, a signature doesn't even need to include your name or initials. The purpose of the signature requirement of the statute of frauds was simply to clearly establish your assent. If that can be done in other ways, a traditional signature is not required. The ubiquitous "click-through" pages on Internet sites is a prime example.

Under UETA and E-SIGN, a signature is defined as "an electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record." Courts have interpreted that language to mean that the click of a button online can replace an actual signature. 

And that brings us to the crucial legal twist for online contracting: What kind of electronic dealings demonstrate a "manifestation of assent" to make a contract? For online contracts, courts must determine what electronic activity constitutes proof of an agreement (and, for deals subject to the statute of frauds, whether the "writing" and "signature" requirements have been met).

Courts often examine initially whether the user showed assent through some kind of "click-through." This can involve electronically checking a graphic of some kind, clicking on "I agree," or clicking on a direction to enter an order where that click-through button makes it clear that doing so subjects the buyer to the seller's terms. 

In some cases, particularly where the statute of frauds does not require a signature, contracts can be created without a click-through, if, in the circumstances, the user had reasonable notice of the terms to which he or she was subject. In many cases, for example, a website user is found to have reasonable notice of website terms that are can be readily accessed through links on the website.  

Unfortunately, as Eric Goldman, a law professor who follows this area closely has noted, some court decisions have cast "a hazy fog of anarchy" over the nomenclature and classifications of online assent. 

For example, one important case classified a common situation, where the buyer is clearly warned at the time of ordering that the order will be subject to the seller's terms, as an arguably inferior "browse-wrap" (equivalent to simply browsing the web site or opening the box containing a software CD) and not a classic and effective "click-through" (requiring some affirmative "click" to indicate assent) — a distinction that is hard to understand. 

The importance of assent

Parties doing business electronically probably should disregard these legal labels and focus simply on getting clear evidence of the buyer's assent. An affirmative click, especially on a button labeled "I agree," or otherwise unequivocally consenting to the seller's terms, is usually best. If a check box or order button is used, the language surrounding it should be clear as to its meaning and significance. 

Getting clear assent in real time, however, isn't always enough. You also may need to prove at a later date that consent occurred. Your ordering software should record customer activity, such as the click-through consents. And you should retain records of your past website forms and contract terms, so that you can recreate those that were in place at the time of any contested transaction. 

Finally, in some cases even the user's proven consent to your terms of sale won't save those terms. In many cases, consumers attack certain contract terms as "unconscionable," essentially meaning that they were so grossly unfair that courts should not enforce them. These claims are often made with respect to indemnity, warranty-waiver, and arbitration provisions. Though unconscionability isn't a unique online issue, some courts seem especially concerned about ordinary online consumers getting caught up in such unexpected and severe terms given our natural impatience with wading through dense legalese (how many of us have actually read each word of an iTunes license?). 

Ultimately, assent is the big Internet twist for contract-making. If you are doing business on the Internet, take care to obtain clear assent from the parties with whom you are dealing, and preserve good evidence of that assent. 

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions