Binding Agreements Made With The Click Of A Mouse

With the recent explosion of e-commerce has come the necessary question of how businesses can enforce contracts entered into over the Internet. An enforceable contract consists of an exchange of mutual promises. There must be an offer, an acceptance and valid consideration to support the mutual promises. Typically, parties entering into commercial contracts have done so by executing written agreements signed by each party. Barring any defects, the signed document is both authentic and enforceable.

The introduction of electronic contracting using the Internet has brought into question the authenticity and enforceability of contracts entered into without the traditional writing. Moreover, the use of electronic contracting as a business tool is relatively new, and the laws that govern the practice are only beginning to take shape. There is recent case law, however, that begins to give businesses some guidance as to what types of electronic contracts, and contract terms, will be enforced.

Shortly before wrestling with the electronic contract issue, courts addressed the validity of license agreements, known as "shrink-wrap" contracts, that often accompany computer software products. A shrink-wrap agreement is one in which a license agreement is formed when the consumer opens the package and has access to the terms and conditions even though the consumer does not sign an agreement. The purchaser manifests assent to the "accept or return" terms of the shrink-wrap contract by using the software. The result, according to the courts, is an enforceable contract. Courts have extended the shrink-wrap rationale to "click-wrap" agreements where a user "clicks" to agree to proposed terms displayed at the offering party's Web site. The courts have held that the user's electronic assent to the terms results in a binding and enforceable agreement.

Courts are also beginning to rule on the enforceability of specific terms associated with electronic contracts. For example, in one recent case, the plaintiff in a personal injury suit was bound by terms on the defendant hotel's Web site where the plaintiff had made reservations on-line. The court concluded that the Web site on which the plaintiff made the hotel reservations contained a valid forum selection clause that explicitly stated that the customer agreed to have all disputes settled in Nevada courts. The court enforced the clause and declined to hear the plaintiff's case in New Jersey.

Similarly, courts have held that on-line contract terms are unenforceable based on the same theories applied for years to written agreements. For example, in a case decided in 1998, the defendant argued that a forum selection clause in its on-line contract made all disputes subject to California law. The court held, however, that the cited contract provision was unenforceable because the clause was inconspicuously buried in the contract where neither the plaintiff nor any reasonable person would have noticed it.

Although contract law specific to e-commerce transactions is just now beginning to be reported, it appears that courts will generally enforce click-wrap agreements as long as the accompanying terms adhere to the traditional contract principals regarding validity and enforceability. Most important, the contract terms should be in a conspicuous position on the Web site where users are most likely to read them. If a business is selling goods or services on its Web site, the business should consider putting the contract in a pop-up screen and requiring the user to "click" at the end to "Agree" to complete the transaction. Furthermore, businesses should not bury important clauses, such as warranty disclaimers or limitations of liability, within multiple pages of on-line text. Such terms should be made conspicuous by being printed in all capital letters or boldface type.

The good news for businesses appears to be that as long as the electronic contract terms are obvious to users and are not overreaching or unconscionable, it is likely that today's courts will enforce them.

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