Drafting Website Contracts

08 Nov 2016

Online contracts are valid and enforceable if they are clickwrap, browsewrap or modified clickwrap contracts.[1] Although these headings refer to consumer consent to online terms under various provisions of the Uniform Commercial Code (US), they provide a convenient description of online contracts that have been held valid and enforceable in jurisdictions outside of the United States. Clickwrap contracts contain visible terms assented to by clicking a virtual icon. Browsewrap contracts are often terms of website use notified by hyperlink and assented to by using the website with constructive knowledge that use is subject to terms. Modified clickwrap contracts give notice of terms by hyperlink assented to by clicking a virtual icon.

In Specht v Netscape Communications the Second Circuit held that a clickwrap agreement is valid if there is unambiguous manifestation of assent by clicking a virtual icon, and reasonably conspicuous notice of the terms.[2] Terms are reasonably conspicuous if they are displayed in reasonably sized text in a scroll box.[3] It is sufficient for only some lines to be immediately visible if the consumer has the time and the ability to scroll through the terms.[4] It is not necessary to highlight onerous terms, such as choice of law, choice of forum, class action waiver or compulsory arbitration clauses, as long as the terms are not buried in fine print.[5] These principles are not confined to the United States. Superior courts in both Australia and Canada have held clickwrap contracts to be valid and have enforced their terms.[6]

Initially, courts were reluctant to hold that browsewrap contracts were valid. In Pollstar v Gigmania Ltd[7]for instance, a United States District Court held that users of a website were not on sufficient notice when they were alerted by small grey print, not underlined and against a grey background, that use of the site was subject to terms. However, in 2005, United States appellate courts began to accept that hyperlinks could put consumers on notice of terms.[8] A decision of the Supreme Court of Canada in Dell Computer Corp v Union des Consommateurs and Olivier Dumoulin[9]held that a hyperlinked document is incorporated by reference if the hyperlink is “functional and clearly visible” and sized and positioned consistently with industry standards. Later decisions in both Canada and Ireland have upheld the validity of browsewrap contracts where information was “scraped” from websites contrary to the terms of use of the websites notified by hyperlink.[10]

Modified clickwrap contracts, combining aspects of both clickwrap and browsewrap contracts, have only recently begun to emerge. In Fteja v Facebook [11], a potential user of Facebook had to click a virtual icon over a message stating that by clicking he was agreeing to the Terms of Service. The underlined phrase was a hyperlink to the terms. The reference to the terms of service appearing immediately below the virtual icon suggested a clickwrap analysis. But the terms being only accessible via hyperlink and the user not being compelled to examine the terms before clicking, indicated a browsewrap analysis. The District Court for the Southern District of New York held that Fteja was bound because he was informed not only of the consequences of his click, but also where to find out more about the consequences.

Proper drafting of a valid online contract will depend on the commercial purpose for which the website is intended. A website for the sale of particular goods or services should conform to the clickwrap format. Ideally, it should not be possible for the consumer to click assent without having to either scroll through the terms, or progress through a series of windows containing the terms. A website intended to promote commerce by attracting casual users should conform to the browsewrap format, which trades off certainty of contractual formation for aesthetic appeal and ease of use of the website. Hyperlinks should be functional, clearly visible and conventionally sized and positioned. A website offering online services, including the download of intellectual property, in competition with many other sites offering similar services and downloads, may consider conforming to the modified clickwrap format. This format offers certainty of assent, combined with ease of use of the website making it more attractive for consumers. However, a trade off remains between the commercial appeal of the website and the possibility that onerous terms may not have been sufficiently notified by the hyperlink to be incorporated into the contract.

[1] Most “shrinkwrap” contracts are not electronic contracts.

[2] 306 F 3d 17 (2002) Sotomayor J, the author of the judgment, is now an Associate Justice of the Supreme Court

[3] Caspi v Microsoft Network LLC 732 A 2d 528 (1999)

[4] Novak d/b/a Pets Warehouse et al v Overture Services Inc 309 F Supp 2d 446 (2004)

[5]Forrest v Verizon Communications Inc 805 A 2d 1007 (2002)

[6] Kanitz v Rogers Cable Inc (2002) 21 BLR (3d) 104

[7] 170 F.Supp. 2d 974 (2000)

[8] Aral v Earthlink Inc, 134 Cal App 4th 544 (2005); Hubbert v. Dell Corp N.E.2d, 2005 WL 1968774

[9] (2007) 284 DLR 4th 577

[10]Century 21 Canada Limited Partnership v Rogers Communications Inc(2012) 338 DLR (4th) 32; Ryanair Ltd v Billigfluege.deGMBHm [2010] IL Pr 22. Although Ryanair used the language of clickwrap contracts, it was clearly considering a browsewrap contract.

[11] 841 F Supp 2d 829 (2012).