Understanding Clickwrap Agreements: Best Practices, Enforcement, And International Perspectives

Posted On - 22 January, 2024 • By - King Stubb & Kasiva

Introduction

In today’s digital landscape, the interaction between users and online platforms often involves the acceptance of Clickwrap Contracts. Whether it’s during software installation, online banking login, or any other online registration process, users regularly find themselves engaging in these agreements. This article aims to delve into the concept of Clickwrap Contracts, their salient features, the importance they hold for companies, their enforceability in various jurisdictions, and best practices for designing them.

What are Clickwrap Contracts?

A Clickwrap Contract is a form of digital agreement between a user and a company. Users are required to actively click on a box or button, such as “I accept,” “I agree,” “Ok,” or similar, before they can download content, make a purchase, or use a website. These contracts are unilateral and consist of standard terms and conditions that multiple users agree upon before accessing websites or products. Clickwrap Contracts commonly cover terms and conditions, usage policies, privacy terms, and End-User License Agreements (EULAs).

Salient Features of Clickwrap Contracts

Unilateral Contracts: Clickwrap Contracts are unilateral, containing standardized terms agreed upon by multiple users before using websites or products.

Unique Identification: Recognizable buttons such as “I accept,” “I agree,” “Ok,” or “I consent” are used to signify user consent.

Scope: Clickwrap Contracts typically cover terms and conditions, usage policies, privacy terms, or End-User License Agreements (EULAs).

Opt-out Option: Users can choose not to agree by clicking on options like “Cancel,” “I disagree,” or by closing the site.

Importance of Clickwrap Contracts

Clickwrap Contracts play a crucial role for companies in the digital age, particularly in Business-to-Consumer (B2C) interactions. They offer several benefits:

  • Embedded Accessibility: Clickwrap Contracts are embedded into websites and are downloadable, making them easily accessible for users.
  • Efficiency in Mass Contracts: Companies can establish contracts with multiple users simultaneously without extensive negotiations.
  • Flexibility: Companies can save electronic signatures and add additional clauses without prior user consultation.
  • Versatility: Clickwrap Contracts are not limited to software programs; they can be employed in various contract scenarios, including employer-employee relationships.

Enforceability of Clickwrap Contracts

The enforceability of Clickwrap Contracts has been a subject of legal scrutiny. Key cases have set parameters for their enforceability:

International Perspective

  • Feldman v. Google, Inc.[1]

This case upheld the enforceability of Clickwrap Contracts, emphasizing the importance of providing “reasonable notice of the terms and manifested assent of the Contract.” The court held that purchasing the “Adwords” program required agreement to the terms and conditions.

  • Specht v. Netscape Communications Corporation[2]

This case ruled that Clickwrap Contracts are enforceable only when clearly and conspicuously posted on the website.

  • Bragg v Linden Research, Inc.[3]

The court held that although the design of the Contract was proper, Linden Research exploited unequal bargaining power by crafting oppressive, unconscionable terms.

  • Hotmail Corporation v. Van Money Pie[4]

The court in this case determined that clicking “I agree” at the end of the terms and conditions led to the enforceability of Clickwrap Contracts.

Indian Scenario

  • LIC India V. Consumer Education and Research Centre[5]

The Supreme Court of India, in this case, highlighted the need to strike down unfair or unreasonable contracts, especially when parties have unequal bargaining power.

  • Trimex International FZE v. Vedanta Aluminium Limited[6]

The court upheld that terms discussed over email constituted a valid contract and were enforceable.

  • Ddit(lt) Mumbai v. Gujarat Pipavav Port ltd[7]

The Income Tax tribunal held that unconscionable or unreasonable bargains in mass contracts like Shrinkwrap and Clickwrap make them unenforceable.

In India, Clickwrap Contracts aren’t explicitly covered under the Indian Contract Act, 1872, but they gain recognition through the Information Technology Act, 2000. While international cases outline their enforceability, Indian laws are yet to explicitly address Clickwrap Contracts.

Best Practices for Designing Clickwrap Contracts

To ensure the enforceability and user understanding of Clickwrap Contracts, the following best practices are recommended:

  • Active User Consent: Users should actively click on “I agree,” “Ok,” or similar buttons. Pre-checked boxes should be avoided to ensure active consent.
  • Screen Design: Design the screen layout to be simple, uncluttered, and easily understandable. Avoid contrasting colors and ensure the entire screen is visible at once.
  • Notice of Terms: Provide clear and reasonable notice of terms before the termination of services. Terms such as Terms and Conditions, Privacy Policy, and User Contracts should be written in user-friendly language.
  • User Comprehension: Ensure that Clickwrap Contracts are easily understood by laymen, and encourage users to read the Terms of Service (TOS).
  • Revised Conditions: If terms are revised, ensure users agree to the updated terms to keep them informed.
  • Highlight Specific Consent: Clearly distinguish terms requiring specific consent, such as the use of personal information for marketing purposes.
  • Documentation: Maintain records of when consent was obtained and on which version of the contract. Proper documentation is crucial for enforceability.

Conclusion

Clickwrap Contracts have become an integral part of digital interactions, providing an efficient means for companies to establish agreements with users. While international cases demonstrate their enforceability, Indian laws are yet to explicitly recognize Clickwrap Contracts. Best practices in designing these contracts emphasize active user consent, user-friendly design, clear notice of terms, and proper documentation.

As the use of Clickwrap Contracts continues to grow, it is essential for legal frameworks to evolve and adapt, providing clear guidelines and statutory support. This will not only validate these contracts but also protect users from potential exploitation due to unequal bargaining power. Clickwrap, Shrinkwrap, and Browsewrap contracts represent the future of digital agreements, and with proper legal support, they can enhance efficiency while ensuring fairness and transparency in online interactions.

[1] 513 F. Supp. 2d 229 (E.D. Pa. 2007)

[2] 306 F.3d 17 (2d Cir. 2002)

[3] 487 F. Supp. 2d 593 (E.D. Pa. 2007)

[4] 1998 WL 388389 (N.D.Cal.)

[5] 1995 AIR 1811

[6] (2010) 3 SCC 1

[7] 2017 SCC ONLINE ITAT 2058

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