Legal systems of many nations have devoted more attention to the formation and execution of electronic contracts as a fast-paced expansion of the internet necessitated this means of contracting between various parties located at a great distance from one another[1]. Millions of Internet users sign these contracts oftentimes being without fully aware of what a particular contract entails. Business transactions, business-to-consumer transactions and finally, simply provision of a wide variety of information society services are covered by electronic contracts which have further facilitated the growth of commerce among nations[2].
An ever-growing use of electronic means of commerce has also led to the emergence of and prevalence of a new type of contract. A click-wrap agreement is the provision of terms of the contract digitally and the user agrees to these terms if he/she presses the “Yes” or “I agree” buttons[3].
Click-wrap agreements have created enforceable agreements in many instances and these agreements have been preferred for a variety of reasons. Firstly, click-wrap agreements enable companies to better inform their customers about the privacy policy of the company and the possible implications of the collection of the data[4]. Hence, as businesses are required to inform potential users about data protection policies, click-wrap agreements are a convenient way of doing so which are also accepted by users meaning that they confirm being aware of their responsibilities. Secondly, transparency is enhanced through the application of click-wrap agreements due to the fact that users are provided with comprehensive information on various company policies and this also boosts the case of vendors if they are challenged in court for enforceability[5]. Hence, reduced doubt with respect to acceptance is another motive for the widespread use of click-wrap agreements by companies.
In this article, electronic contracts and their types, effectiveness and fairness of click-wrap agreements, as well as the enforceability of click-wrap agreements in UK law will be discussed.
A contract is a legally binding agreement between two or more people. To elaborate, a contract is valid if there is an offer, the acceptance of an offer, consideration, legality of the agreement and the legal capacity of the involved parties to act[6].
Online contracts have risen in importance in light of the greater role of technology in every aspect of life. Online contracts (e-contracts) are a relatively new form of obtaining an agreement between parties through an electronic means of communication and it eliminates a need for intermediaries between the parties[7]. Initially, online contracts were viewed with doubt with respect to their legality and the possibility of enforcing them. These many concerns were mitigated considerably after the issuance of the United Nations Model Law on Electronic Commerce by the United Nations Commission on International Trade Law (UNCITRAL) in 1996. This was the first initiative in the direction of harmonizing global rules and regulations in the area of electronic commerce. Furthermore, the position and reliability of electronic contracts were further strengthened by the Model Law on Electronic Commerce and the United Nations Model Law on Electronic Signatures[8]. These two laws constituted the foundation of electronic commerce and boosted its prevalence. Despite the fact that electronic commerce has seemed feasible since then, there have been issues with regard to determining the rules with respect to assent, fairness of contracts and so on. Furthermore, consumer protection is yet another key issue in this sphere as electronic contracts might also cause some privacy and confidentiality issues for consumers.
Online contracts have been grouped in terms of their legal aspects. The main categories are shrink-wrap agreements, click-wrap agreements and browse-wrap agreements[9].
A shrink-wrap agreement is a type of contract which is usually included in the packaging of the products. This contract is not limited to electronic format and its terms are also printed in many instances and sent in packaging to the purchases. There is also a specified period of time within which the buyer can reject the terms. This period might be necessary because a buyer is often not aware of the existence of some terms as these terms and conditions are sent with the product[10]. In general, the usage of the product is considered an acceptance of the contract as well. These types of contracts usually include such terms as licenses, rights of use, fees and payments, clauses related to forums, warranties and limitation of liability. The main issue with shrink-wrap agreements is that these contracts cannot be read and reviewed by the users prior to receiving the product which also constitutes an act of acceptance. However, a period given for the return of the product would be an appealing factor for this problem. Furthermore, it should be noted that courts have been divergent in terms of accepting shrink-wrap agreements as enforceable. Hence, the enforceability of these contracts is unclear.
Click-wrap agreements are available online prior to the purchase or download of a particular product and service. Clicking on a button designated to express consent is deemed as the acceptance of the terms of the agreement. These types of agreements come either in the form where the user sees terms and conditions on the screen and can scroll down to read and acceptor in the form of a link to a separate page where the terms and conditions can be read and accepted to proceed[11]. Majority of court cases involving click-wrap agreements involved questioning the validity/enforceability of the terms of the contract[12]. Nevertheless, the key tenet of contract law in advanced countries has been assent which indicates the fact that the provider of a service has presented terms in a conspicuous manner and they were read and accepted by the recipient of the service. If the notice about the binding nature of the terms was presented in a conspicuous way, courts often assume the existence of assent because the recipient could not have obtained a service/product without clicking on a button which confirmed the acceptance of the terms[13]. Despite this, click-wrap agreements can have certain unfair terms which are addressed in courts in reference to relevant regulations and laws. If a term is considered unfair, part or whole of the contract might be deemed incomplete and void.
Browse-wrap agreements do not seek consent or require action from users and the fact that the website is used by a visitor is considered the acceptance of the terms and conditions that are posted on the website. However, it is unclear whether the user has noticed these terms and conditions and agreed to them[14]. As the use of the website is simply taken as an acceptance of the terms, these types of contracts cannot be enforceable in many instances unless the website owner can produce concrete evidence that the user had actual knowledgeable information on the content and agreed to the terms.
The online contract formation process can be broken down into such elements as an invitation to treat, acceptance, consideration and incorporation of terms.
With respect to an invitation to treat, it must be distinguished from the offer. Invitation to treat is a concept that can be referred to cases in which a seller simply displays items for sale either in a physical store or online. However, this simple display is not considered an offer from a legal standpoint[15]. Instead, an invitation to treat is simply an expression of the desire of the seller to sell a particular product. An offer is existent only if a potential buyer expresses his/her interest in the product. In the context of electronic commerce, this might be reflected in the submission of an order for a particular product. Prior to an offer, the display of products on the website of a seller is an invitation to treat[16]. The second stage in online contract formation is the acceptance of an order. In order for a valid offer to be standing, there must be a confirmation of a receipt of an order. This acceptance must be communicated by the seller[17]. There is some degree of uncertainty with regard to the specific timing of the acceptance of the order. However, this can either be delineated in the terms and conditions. For example, the moment when the customer receives a receipt of confirmation can be considered as the acceptance of the order[18]. The role of consideration must also be highlighted. English law requires the existence of benefits for both parties and this condition is met in a sales contract because each party receives the particular benefit.
Click-wrap agreements
Click-wrap agreements have been widely used for electronic commercial activities. The validity of a contract under common law requires the existence of an offer, acceptance, consideration, and intention to create legal relations[19]. Thus, using digital signatures, contracts can be entered into by businesses and consumers in case the above-mentioned 4 elements exist.
The purpose of click-wrap agreements is to confirm that a user is ready to terms and conditions of a business offering a product and service. It is mandatory under these contracts that customers accept the terms if they want to proceed. Rejecting the terms and conditions would mean that parties cannot legally enter into a contract.
Some of the benefits of these agreements for businesses offering them have been discussed. First of all, click-wrap contracts provide businesses with a higher degree of certainty. For example, sellers can limit their financial liabilities and delineate remedies for the cases of a breach of a contract. The practicality of click-wrap agreements is yet another useful feature for businesses as these contracts since the format of these contracts enable sellers to streamline the signing of contracts with consumers. It is impractical to enter into a contract with each consumer in a separate fashion. Hence, the format of click-wrap contracts is highly efficient.
Effectiveness and fairness of the click-wrap process
Some suggestions have been made with respect to creating an effective click-wrap agreement.
Firstly, these agreements must be non-porous meaning that there must not be an alternative way of obtaining a product and service in question except for agreeing to the terms and conditions. A clear call to action is yet another critical aspect of an effective click-wrap agreement meaning that contracts must have an unambiguous call to take an action and either accept or reject the offer. The demonstration of this call to action, therefore, must be ambiguous[20]. Certification by a user is also crucial which demonstrates that the user has really read and accepted the terms and conditions. This statement eliminates any uncertainty with respect to the awareness of a user prior to accepting the contract terms and conditions. Furthermore, the terms of the contract should be visible and should not be presented in a vague manner. In other words, a call to action and the terms of the contract must be put closer to each other in order to avoid confusion. It is also suggested that the terms should be printable and downloadable so that the user can peruse them prior to the acceptance or rejection. Moreover, all the information required by law must be presented by the seller in terms which would potentially inform consumers about certain matters such as the limitation of a liability of a seller[21]. Hence, informing customers of the existence of certain provisions is necessary in order not to experience an issue with respect to enforceability. Compatibility and consistency should be ensured for effectiveness as well. Click-wrap process should be must be consistent across all platforms that customers might use such as mobile phones, laptops and so on. Furthermore, the same process should be repeated regardless of the operating system used on different platforms. Customer authentication is also a significant step in the process which enables sellers to verify the truthfulness of the credentials of users. Finally, evidence of the click-wrap process must be retained by a business in order to maintain evidence for later use.
The fairness of electronic contracts has been one of the primary concerns with respect to consumer protection. Unfair contract terms and certain conditions imposed on consumers in non-negotiated contracts are commonplace[22]. Some of the possible instances where unfair click-wrap agreements can be imposed are discussed below.
Firstly, many licensors specify in their electronic contracts that the terms of the contract can be changed in the future. This practice raised a question with regard to the fairness of contracts as one of the parties unilaterally changes the terms of the contract. To demonstrate, Apple’s terms for the use of iTunes Music Store are one of the most encountered on the planet and it has the following terms:
“iTunes reserves the right, at any time and from time to time, to update, revise, supplement and otherwise modify this Agreement and to impose new or additional rules, policies, terms or conditions on your use of the Service”
Additionally, substantial changes might be enforced by the vendor of software in many cases through updates to an existing operating system and other key software items[23]. As the users often depend on the vendor for the provision of this software to a substantial extent and there is no viable alternative to switch to, then consumers have to accept the update and by accepting a new version of the software, they also automatically agree to the New Terms and Conditions introduced by the firm. Although this does not always entails controversy, the inclusion of unfair terms in the new contract is possible and the user would have not choice but to accept it[24].
Another area where possible unfair contracts might be encountered is the case when vendors change the rules with regards to the usage of the content of their services without changing the contract itself. This has been deemed as unfair if the supplier unilaterally changes the characteristics of the product/service.
The EU Directive on Unfair Contract Terms adopted in the early 1990s (amended on 27 November 2019) urges EU nations to observe the compliance of their companies with the terms of the Directive in order to protect consumer rights[25]. The Directive also ensures that citizens of the EU countries do not lose their protection if the company selects a non-member country as its base of operations. The UK has selected a regulatory path in this issue and the Office of Fair Trading issued its Unfair Terms and has engaged in the investigation of complaints filed against companies. The Office has ordered amendments to thousands of contracts as a result of the investigation of the complaints. The US legal system, however, is arbitrary in this respect and there is no uniform general law addressing the fairness of contracts. Instead, individual courts are given discretion in deciding what is unfair and fair in regard to non-negotiated contracts.
Enforceability of click-wrap agreements in the UK law
The situation with regard to the enforceability of click-wrap agreements in the UK is inconclusive and cases addressed in the UK do not enable one to draw a certain conclusion with respect to the issue. Certain regulatory documents, however, affect the decisions on the validity and enforceability of click-wrap agreements. The membership of the UK to the EU thus far has been influential with regard to the impact of the EU regulatory framework on UK law. The EU Distance-Selling Directive[26] and E-Commerce Directive[27] impact the formation of electronic contracts and their enforceability in the UK as well. The E-Commerce Directive explicitly emphasizes that
“Member States shall ensure that their legal system allows for contracts to be concluded by electronic means. Member States shall in particular ensure that the legal requirements applicable to the contractual process neither create obstacles for the use of electronic contracts nor result in such contracts being deprived of legal effectiveness and validity on account of their having been made by electronic means”.
To begin with, this statement ensures that agreements are not invalid just for being electronic. The Electronic Commerce (EC Directive) Regulations are the main regulatory framework for the regulation of click-wrap agreements and it states the enforceability conditions of click-wrap contracts[28]. Article 9 states that prior to the receipt of an order from the user, the service provider must provide the user/recipient with the service comprehensible and unambiguous manner, inter alia, various technical phases that need to be completed for the contract to be deemed complete[29].
The UK’s e-commerce regulation came into force in 2002 and it incorporated the EU’s Electronic Commerce Directive 2000 into the UK law. The EU EC Directive was passed in 2000 in order to harmonize the rules of electronic trade across the continent and boost business confidence. The UK’s e-commerce regulation covers virtually the activities of all commercial websites. To elaborate, the regulations encompass information society services and these services are defined as “any service normally provided for remuneration at a distance, by means of electronic equipment for the processing (including digital compression) and storage of data, at the individual request of a recipient of the service”[30]
According to the UK e-commerce regulation, for online contracts to be enforceable, it is required that a service provider by the time an order is placed shall provide a recipient in a clear, comprehensible and unambiguous manner with the following information.
- A series of different technical steps are needed to conclude the contract
- If the completed contract will be filed somewhere by the service provider and if this contract will be accessible later
- Technical means possible for rectifying the identified input errors by the time an order is placed
- Possible languages in which the contract can be concluded
A service provider shall also inform the recipients of services on applicable codes of conduct and how consumers can familiarize themselves with these codes electronically. Moreover, the regulation (UK E-Commerce Directive) also requires the service provider to present terms and conditions in such a manner that these terms and conditions can be downloaded and stored by the recipient of the service.
In addition, EC Regulation UK 2002 specifies that no matter whether the service provider is engaged in e-commerce or not should provide a minimum of the following information[31].
-The name of the service provider must be presented to a service recipient in an easily accessible manner
-The geographic address of the service provider must be provided to service recipients
-The details of the provider of a service so that it can be reached effectively and directly in case the service recipient needs to contact. The fact that many companies simply use the Contact Us form for enabling consumers to communicate with them in case of need is not sufficient and the email and telephone number of the service provider must be presented as well[32].
-The details of the register or registration number must be presented to the recipients
-The details of a pertinent supervisory authority and relevant supervision mechanism should be presented as well
-The details of any professional body and institution membership should be conveyed to consumers as well
-A VAT number should be available as well even though the firm might not be the provider of e-commerce transactions
-A price for a service/product must be clear and unambiguous and demonstrated on the website.
One of the key issues in electronic contracts is the confirmation of an order and placing an order in this respect refers to the following[33]. Firstly, a service provider shall acknowledge a receipt of an order without undue delay and make technical means available to service recipients so that they can determine and correct the errors. For the purpose of this contract, the order and acknowledgement of a receipt are deemed as received when the parties to whom they have been sent can access them[34].
The E-Commerce Directive of the UK also elaborates on the possibility of rescinding the contract. This part of the regulation specifies that if a person has entered into a contract to which these regulations apply and he/she has not been provided means by a service provider to identify and correct the errors, then he/she is eligible to rescind the contract. Furthermore, a failure of a provider of services to comply with regulations can be a basis for a service recipient to seek an order from any court which has jurisdiction over the contract[35].
In accordance with the UK e-commerce regulation, the order might be in a different form than a contractual offer.
This regulation does not only cover buying and selling online and can be extended to other commercial activities according to the Department of Trade and Industry. To demonstrate, despite the fact that a Google search is not any commercial activity (buying or selling), it was ruled to be an information society service by the Court of Justice of the European Union (CJEU) in Google France SARL, Google Inc v Louis Vuitton Malletier SA and others[36] (2010). In another case, the UK High Court applied to CJEU in 2009 for the purpose of clarification with respect to the question of whether e-Bay was an information society service provider as an online sales platform and the answer was affirmative.
The EU Directive was applicable to the EEA states including the UK. The UK EC Directive was built on the EU Directive 2000 but the E-Commerce Directive of the EU is to be invalid for the country due to the UK’s departure from the EU[37]. The UK government has warned businesses to start their preparation and seek legal advice in case they will encounter substantial changes. At present, EEA-member countries can operate in any other member country under the e-commerce Directive. Nevertheless, as the UK is soon to be a non-member country, businesses are required to be compliant with the local regulations of each member country where they would have business activities[38]. As guidance, these rules might be applicable to such areas as online information, online advertising, online shopping and online contracting (information society services). The transition period will be ongoing until 31 December 2020 by which companies must ensure their compliance with relevant regulations in each member country[39].
Some interesting cases for the enforceability of click-wrap contracts might also be related to circumstances when an SMS text is used for providing information on products/services to recipients. As SMS messages are restricted to a maximum of 160 characters, it is often impractical to provide all the required information in these messages[40]. Department of Trade and Investment (DTI) Guidance on the Regulations acknowledges the technical limitations of the messages and has recommended using other means to provide the required information. For instance, this might be the inclusion of the required information on the website of company. Hence, by including an URL of a website in the text message, it is possible to meet the requirements of the provision of the required information. Nonetheless, the issue remains as to whether this will be sufficient for the enforceability of a contract. It has been found that DTI’s recommendations play a role of guidance for firms and they are not binding.
The enforceability of click-wrap agreements can be questioned in courts and courts decide in accordance with the key principles of contract law specified above and a wide range of terms and requirements presented in various regulations and directives as discussed above. A particular example of a court case where the enforceability of a click-wrap contract was challenged is presented next.
The enforceability of click-wrap agreements can be questioned in some cases where the role of a hosting service provider is uncertain. One of these cases was L’Oreal v eBay[41] in which the UK High Court was left to determine whether eBay as a host of services played an active role in the sale of counterfeit goods via its website. The Court took into account such factors as the extent of control the website providing services (host service) had over data regarding illegal activities or if the host has provided assistance to promote the sales of illegal goods and services. Thus, this case played a role of a precedent in terms of demonstrating whether a website can be considered to have sufficient information with respect to illegal activities before allowing it to rely on host defence. Hence, it is assumed that a website providing a platform for online services should be diligent in its operations and have control over activities that happen on its platform. In other words, despite the fact that there is no obligation to actively monitor the content of the website as a host, the website should not be passive in this regard and do its best to determine illegal content and remove it.
To summarize, click-wrap agreements have become one of the most effective means for businesses to convey their terms to consumers. These contracts enable providers of services to communicate terms and conditions on a standardized basis without negotiating with each recipient of these services. However, despite their immense popularity and prevalence in electronic commerce, the enforceability of click-wrap agreements has been called into question in various cases. The enforceability of click-wrap agreements has been found to be high in the UK, and click-wrap contracts have been ruled to be enforceable if there is a reasonable notice by the providers of a service and if the recipient accepted the terms by clicking on “I Agree” or “Yes” buttons. Unless there is a reason to believe that the notice of terms for the user was not presented in a conspicuous way or there are certain unfair terms in the contract, click-wrap agreements have been enforceable.
Citation
[1] Robert Bradgate and Fidelma White, Commercial Law (Oxford University Press, 2012)
[2] Nicholas Ryder, Margareth Griffith and Lachmi Singh, Commercial Law. Principles and Policy, (Cambridge University Press, 2012)
[3] Id
[4] Stephen Errol Blythe, An E-Commerce Law for the World: The Model Electronic Transactions Act: The Model Electronic Transactions Act (Xlibris Corporation, 2012)
[5] Id
[6] Id
[7] Miller, R. & Jentz, G., Business Law Today: The Essentials. London (Cengage Learning, 2007)
[8] UN, “UNCITRAL Model Law on Electronic Signatures” https://uncitral.un.org/en/texts/ecommerce/modellaw/electronic_signatures#:~:text=The%20Model%20Law%20on%20Electronic,electronic%20and%20hand%2Dwritten%20signatures (UN, 2001) Accessed 15 October 2020
[9] Id
[10] Hedley, S., 2006. The Law of Electronic Commerce and the Internet in the UK and Ireland. London: Psychology Press.
[11] Id
[12] Nathan Davis, Presumed Assent: The Judicial Acceptance of Clickwrap (Berkeley Tech, 2007)
[13] Id
[14] Reed, C., 2004. Internet Law: Text and Cases. Cambridge: Cambridge University Press.
[15] Id
[16] Smith, G., Internet Law and Regulation (Sweet & Maxwell, 2007)
[17] Robert A. Hillman and Jeffrey J. Rachlinski, Standard-Form Contracting in the Electronic Age (N.Y.U.L. REV, 2002)
[18] Id
[19] Id
[20] Robert A. Hillman and Jeffrey J. Rachlinski, Standard-Form Contracting in the Electronic Age (N.Y.U.L. REV, 2002)
[21] Robert Bradgate and Fidelma White, Commercial Law (Oxford University Press, 2012)
[22] Robert L Oakley, Fairness in Electronic Contracting: Minimum Standards for Non-Negotiated Contracts, 42 Hous. L. Rev. 1041 (2005-2006)
[23] Hedley, S. The Law of Electronic Commerce and the Internet in the UK and Ireland (Psychology Press, 2006)
[24] Id
[25] The Unfair Contract Terms Directive (93/13/EEC)
[26] The EU Distance-Selling Directive
[27] E-commerce Directive
[28] Id
[29] Id
[30] Id
[31] Id
[32] Id
[33] Id
[34] Id
[35] Id
[36] Google France SARL and Google Inc. v Louis Vuitton Malletier SA (C-236/08)
[37] E-commerce Directive
[38] Craig Giles and Will Deller “Digital business in the United Kingdom: overview” (01-Jun-2020) < https://uk.practicallaw.thomsonreuters.com/7-618-4909?transitionType=Default&contextData=(sc.Default)> Accessed 12 October 2020
[39] Id
[40] The Electronic Commerce (EC Directive) Regulations 2002
[41] L’Oreal v eBay C-324/09
The articles on the LAWELS platform are not, nor are they intended to be legal advice. You should consult a lawyer for individual advice or assessment regarding your own situation. The article only reflects the views of the author.