Clickwrap Enforceability & the Build vs Buy Dilemma

In the digital landscape, clickwrap agreements have become a common method for indicating agreement to a set of terms. Whether you're signing up for social media platforms, purchasing software, or downloading mobile apps, chances are you've encountered a clickwrap agreement. But are these agreements legally binding? And what challenges do they pose in terms of enforceability? In this comprehensive guide, we will explore the nature of clickwrap agreements, their legal standing, and the challenges they present.

Understanding Clickwrap Agreements

Clickwrap agreements are online contracts that users are required to accept before accessing certain digital services. These agreements typically consist of terms and conditions, privacy policies, and other legal provisions that users must agree to by clicking an "I Agree" button or a similar affirmative action. They serve as a legally binding contract between the service provider and the user, outlining the rights, responsibilities, and limitations of both parties.

The enforceability of clickwrap agreements stems from foundational e-signature laws such as the Uniform Electronic Transactions Act (UETA) and the Electronic Signatures in Global and National Commerce Act (ESIGN). These laws provide strong support for the legality of clickwrap agreements in the United States. Many international jurisdictions also recognize the enforceability of clickwrap agreements, although some countries may have specific preferences for certain types of electronic signatures.

Key Elements of Clickwrap Agreements

To ensure the legal validity and enforceability of clickwrap agreements, certain key elements must be present:

1. Mutual Assent

For a clickwrap agreement to be legally binding, there must be a clear "meeting of the minds" between the parties involved. This means that both the service provider and the user must intend to be bound by the terms of the agreement. Courts often evaluate the design, language, and overall presentation of the agreement to determine whether mutual assent has been established.

2. Clear and Unambiguous Language

Clickwrap agreements must use clear and understandable language to ensure that users can comprehend the terms they are agreeing to. Ambiguous or misleading language can undermine the enforceability of the agreement. It is important to present the terms in a structured format, highlighting critical provisions that substantially affect users' rights.

3. Affirmative Action

Users must actively indicate their acceptance of the clickwrap agreement through an affirmative action, such as clicking an "I Agree" button or checking a box. Courts often examine the design and labeling of the acceptance button to ensure that it clearly signifies the user's consent to the terms.

Overall, the more conspicuous the method of assent, the better. For this reason, ToughClicks recommends forced-scroll containers as the strongest acceptance method.

4. Recordkeeping

Service providers are typically required to maintain records of clickwrap agreements. These records should include the date and time of acceptance, the IP address of the user, and any additional information provided during the acceptance process. Maintaining a verifiable audit trail is crucial for proving the existence and terms of the agreement in any legal proceeding.

We’ll elaborate further, but it’s this 4th point that in-house teams have serious trouble with. Simply put, engineers have higher & better uses than building out niche legal infrastructure. They link terms to a checkbox and move on. While this UI is fine, it’s the record of acceptance that’s the most important piece.

Challenges in Clickwrap Enforceability

While clickwrap agreements have a strong legal standing, there are challenges that can arise in terms of their enforceability. These challenges include:

1. Poor Screen Design

Courts may scrutinize the design of clickwrap agreements to determine if users were unaware that a particular action on their part served as consent to the agreement. Factors such as the color and style of hyperlinks, the presentation of the agreement, and the proximity of agreement components can impact the enforceability of clickwrap agreements.

Third party systems typically offer SDKs that control the display method. This allows them to document the UI associated with a user acceptance. For example, documenting a checkbox or a scrollable container, whether or not the user was forced to scroll, etc.

2. Lack of Notice

Clickwrap agreements must provide reasonable notice to users regarding the terms they are accepting. The agreement should be presented in a way that is clear and easy to read on any device. Critical provisions should appear in the first few paragraphs, be highlighted and/or bolded, and users should have an opportunity to view the agreement before giving their assent.

Increasingly, teams call out the most critical terms in their own, individual agreements. For example, having users explicitly agree to arbitration provisions & class action waivers separately from the TOS acceptance.

3. Pre-checking Acceptance Box

Some businesses pre-check the acceptance box for their users, which is generally considered bad practice and may be banned in certain jurisdictions. Best practice dictates that users should manually tick the acceptance box themselves to demonstrate their affirmative action and consent to the contract.

4. Poor Version Control

Clickwrap agreements often undergo modifications over time. It is essential to maintain proper version control to ensure that users are consenting to the most up-to-date terms. Service providers should obtain users' consent each time the terms of the agreement are modified to ensure the enforceability of the clickwrap agreement. 

It is critical to document each user’s acceptance of the new version. Many teams forget that this is actually the acceptance of a new contract. Thus, a new contract record is needed.

Regarding clauses such as “user agrees to any & all future updates…”, courts generally do not hold these applicable to material terms updates. IE - you can’t send email notice that you’ve added a class action waiver and be covered under that clause. You’ll need to present these new terms to the user upon log-in and capture affirmative assent.

5. Integrity of Records

Courts may question the integrity of records created by in-house systems, which is a key reason many teams opt for third-party clickwrap systems. In-house systems may lack the necessary features and safeguards to ensure the accuracy and verifiability of clickwrap records. Third-party clickwrap systems often provide robust recordkeeping capabilities, increasing the chances of enforceability.

Best Practices for Clickwrap Agreements

To maximize the enforceability of clickwrap agreements, it is important to follow best practices. These include:

1. Design and Presentation

Ensure that the clickwrap agreement is noticeable and clearly visible to users. Use clear and concise language, avoiding complex legal jargon. Present the terms in a scrollable interface or provide a direct link to the agreement for users to review before accepting.

2. Affirmative Action

Require users to take explicit actions to indicate their acceptance, such as clicking an "I Agree" button or checking a box. This demonstrates their active consent to the terms of the agreement.

3. Recordkeeping

Maintain a complete and verifiable audit trail of clickwrap agreements, including relevant details such as the date and time of acceptance, the IP address of the user, and any additional information provided during the acceptance process. This recordkeeping helps establish the existence and terms of the agreement in case of any legal disputes.

4. Compliance with Applicable Laws

Ensure that clickwrap agreements comply with relevant laws and regulations, such as privacy laws and consumer protection laws. Incorporate provisions that protect the rights of both the service provider and the user.

5. User-Friendly Interface

Design the clickwrap agreement interface to be user-friendly and easily accessible. Use clear labeling and formatting to guide users through the acceptance process and ensure that they have a clear understanding of the terms they are agreeing to.

By adhering to these best practices, organizations can enhance the enforceability of their clickwrap agreements and minimize the risk of legal challenges.

Conclusion

Clickwrap agreements are a widely used method for establishing legally binding contracts in the digital age. When properly implemented and maintained, clickwrap agreements can be highly effective, particularly for online transactions and applications. However, challenges in terms of enforceability exist, such as poor screen design, lack of notice, and the integrity of records. By following best practices and utilizing third-party clickwrap systems, organizations can increase the enforceability of their clickwrap agreements and protect their interests while providing a clear understanding of the terms to users.