Lotus Law 101 – Online Contracts

By Darity Wesley

The thing that keeps a business ahead of the competition is excellence in execution. ~ Tom Peters

One of the tricky parts of conducting business in the online world is finding ways to enter into enforceable and binding contracts in cyberspace. This affects everyone selling goods or services as well as website owners and that’s pretty much everyone in business theses days.

As business people, we know that good contracts mean good business. Whether a purported online agreement constitutes a contract depends on whether assent has been obtained, either impliedly or expressly. We have all expressed consent to a number of unilateral Internet contracts when we have clicked the ‘I Agree’ buttons on software upgrades and other goodies we download. These agreements as commonly called click-through, clickwrap or click-to-accept agreements. Implied agreements are Terms of Use that are posted on a website but do not require express assent. These Terms of Use or ‘browsewrap’ agreements are unlikely to be held binding.

Internet contracts have their origin in ‘shrinkwrap’ license agreements, developed in the 1980s. They are preprinted unilateral contracts historically found inside the packaging of consumer software. They are designed to limit a software vendor’s liability. Today these licenses, known as End User License Agreements (EULAs), have become more sophisticated. Commonly an end user’s assent is based on more than merely tearing open the shrink wrap of a software disk and is often structured as a click-through agreement that pops up when uploading or downloading a product.

Click-through contracts have been upheld in both state and federal courts on condition that the user is conspicuously aware that they are clicking to accept to terms and conditions of a contract, not just to go to the next screen, enter a website or download a product.

Terms of Use are usually posted conspicuously on a website, often as a link on the bottom of each page or at least the home page. These terms are important to post to protect your intellectual property and limit any liability lurking on your website. Courts to date have generally been unwilling to infer assent unless there is objective evidence that the party knew the terms or received a demand letter or where a consumer was given repeated notice.

Here are three tips for crafting online contracts:

Notice– Post a clear and prominent notice that access to this website or service is subject to terms, preferably above the fold, on the homepage.
Printable– Unilateral contracts should be viewable in a readable font and printable to viewers prior to clicking through assent.
Agreement– Use language that overtly confirms agreement on click-through contracts. Something like “I have read and agreed to these Terms of Use” with a check box to click works well.

Online contracts are an important component of covering your assets. Your Lotus Lawyers are happy to help determine if you are in need of any additional coverage.

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The Lotus Law Center Article is for information-purposes only, not for the purpose of providing legal advice, and may not apply to your unique situation. The information on the Newsletter is not a substitute for advice from qualified counsel licensed in your state or jurisdiction. We do welcome your calls, letters and electronic mail. However, contacting us does not create an attorney-client relationship. Lotus Law Center has endeavored to comply with all applicable legal and ethical requirements in creating the Article.

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