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5 Steps for Increasing the Enforceability of Online Agreements

Posted by Deborah Stehr on November 16, 2020 at 5:01 PM

Online terms of useOnline agreements, often referred to as “Terms of Use” or “Terms of Service,” have increasingly become standard practice for most companies doing business through a website. Although these agreements are designed to insulate companies from liability with respect to customers and users, not all online agreements are created equal. In fact, even the most detailed agreements can fail to protect companies from liability if the provisions are found to be unenforceable. A recently published white paper on the enforceability of online agreements actually found a direct correlation between form and enforceability[1].

Basic Forms of Online Agreements
Online agreements are typically written in one of three forms: (1) clickwrap, (2) sign-in-wrap, and (3) browsewrap. A “clickwrap” agreement requires the user to take an affirmative step in order to consent to the terms of the agreement, such as by clicking a “single-purpose” button[2] or checking a box pursuant to which the user affirmatively states, “I agree to these terms.” A “sign-in-wrap” agreement employs a dual-purpose button that requires the user to click a button in performance of a task that is unrelated to the online agreement (e.g., registering or signing in), followed by a notice which states that by continuing and checking the box, the user is also binding themselves to the website’s terms of use. Finally, “browsewrap” agreements do not require any kind of affirmative action by the user; instead, companies simply post language on their website to notify users that use of their website is subject to the site’s terms and conditions.

Form Matters
Not surprisingly, the courts are more likely to enforce online agreements which require the user to take specific, affirmative steps in order to agree with a website’s terms. In the above-mentioned white paper, clickwrap agreements were found to have the highest overall enforceability success rate in court (80%), followed by sign-in-wrap agreements with a rate of 65%. Browsewrap agreements were rarely, if ever, enforceable. These litigation trends demonstrate the shortfalls of online agreements where the user is either asked to perform other tasks in addition to consenting to terms of use or not required to affirmatively agree to anything at all.

In addition to the form of a company’s online agreement, the likelihood of enforceability is also buoyed by evidence of consumer assent, which might include individualized, back-end records of user acceptance, declarations or affidavits from senior employees with technology backgrounds, or, at the very least, proof that the company’s terms of use are presented conspicuously and clearly on the website. Companies lacking such proof are at a greater risk of being unable to enforce their online agreements.

Best Practices for Preparing Enforceable Online Agreements
Most companies invest substantial resources in both creating and updating their websites, as well as in the online agreements which govern user experience. To ensure these terms of use are enforceable against their users, businesses should consider adopting the following best practices:

  1. Choose clickwrap over other forms of online agreement. When the user is required to click a button or check a box for the sole purpose of agreeing to website terms and conditions, the likelihood of enforceability greatly increases.

  2. Provide conspicuous notice of contract terms through the use of easily-identified links, distinguishable fonts/colors and other presentation-friendly features so that users are encouraged to review the terms.

  3. Use clear, easy to understand language in online agreements and avoid technical terms when possible, especially with respect to important provisions like cancellation and payment.

  4. Obtain user consent again in the event the terms of the online agreement are modified. Unilateral changes with no notice are generally not enforceable against users.

  5. Develop and maintain a system for tracking user acceptance, which can be produced as evidence of user consent in the event of litigation.

As digital business practices continue to grow, it is increasingly important that companies take steps to ensure they are protected against potential claims brought by customers/users of their websites. If you would like help drafting or updating terms of use, please contact Deborah Stehr at 917-855-6302 or dstehr@outsidegc.com.

 

Deborah Stehr is a member of our New York-area team and brings over 25 years of transactional and technology experience with a particular focus on the consumer goods industry. Deborah has considerable experience in structuring both domestic and international arrangements for the manufacture, supply, distribution and sale of goods, as well as in protecting and monetizing brands and intellectual property throughout the product life cycle.

 

[1] “Clickthrough Litigation Trends, 2020 Report” by PactSafe

[2] The term ‘single-purpose’ is derived from the fact that the user is agreeing to a single specific thing – the terms of the on-line agreement - when clicking the box.

 

Topics: online agreements, online terms of use, terms of use

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