Editor’s Note: Deana A. Labriola is a member of the Technology and Business Practice Groups at Ward and Smith, P.A. where she focuses primarily on business matters related to technology-based companies.(*)

A valid and legally binding contract requires a "meeting of the minds" between the contracting parties, meaning both parties must agree to the exact same terms of the contract. In today’s increasingly cyber marketplace, many online retailers and other institutions utilize the web to contract with customers by using electronic agreements, known as "click-through agreements." A click-through agreement asks the user simply to click a button labeled "I agree" before buying a product, using software, or entering a website. Many times the user will click the button labeled "I agree" without contemplating the consequences of this simple action. This raises the question: has there been a legally sufficient meeting of the minds when a user clicks "I agree" so as to bind the user to the terms of the agreement?

Are users contractually bound after clicking "I agree"?

Courts generally have held that clicking "I agree" to terms and conditions on a website or other contractual arrangement via the web results in a binding contract if the agreement and its terms are structured with care. In fact, one court noted that it would invalidate these types of contracts only in cases of unfair bargaining power, contravention of public policy, or inconvenience to courts. This means that both users and business owners using the web to make sales need to take precautions to protect their respective interests.

Should users be contractually bound?

From a business owner’s perspective, using electronic contracting, or "click-through agreements," promotes efficiency in conducting business with end users. Click-through agreements allow businesses to sell directly and instantaneously to users while eliminating the need to hire, train, and pay sales personnel; to build or lease store or telephone call centers; or to engage in prolonged negotiation of contract terms. Similarly, users reap the benefits of electronic contracting because they are allowed to log into their computers and transact business online 24/7 with the simple click of a button without the need to interface with another person, leave their house, or even shower and get dressed. Today, by the use of click-through agreements, almost anything can be purchased or accomplished online at any time of the day or night from anywhere.

Consider, however, the potential problems that can arise through the use of click-through agreements instead of more traditional methods of negotiation and sale. Since a click-through agreement is so easy and convenient, it may not impose upon the user the importance and weight of the decision the user is making. For example, many of these agreements have forum selection clauses, requiring disputes to be resolved hundreds or thousands of miles away from the user’s home or business. These contracts also may include provisions that waive many rights that a user may have under the law and that require the use of the law of a business-friendly jurisdiction to settle any dispute. The biggest concern, however, is that there is no opportunity for the user to negotiate a click-through agreement, an important contract principle. Click-through agreements usually have only two options – accept or reject – with no room for bargaining a different result or different terms. Historically, similar factors have made courts much more inclined to let the naïve buyer out of a contract by finding that the seller should be prohibited from enforcing the contract due to the use of unfair bargaining power or misleading tactics to induce the buyer into ignoring the full import of the actual terms of the agreement.

While click-through agreements may appear to be slanted inevitably in favor of the business, there are steps that can be taken by a business to increase the likelihood that the agreement will be enforced by the courts because it is clear that the seller took steps to make the user aware of the terms to which the user was agreeing.

Best Practices

To minimize the risk that a click-through agreement will be deemed unenforceable, the following best practices should be used by businesses:

• Give the user adequate time to review the agreement. If a user is allowed too short a window to read, review, and scrutinize the terms of the agreement, this may increase the chance that the agreement will be deemed unenforceable.
• Emphasize important terms in bold or different color font, or highlight them in some other manner. A court will be more skeptical of any claim by the user that the business attempted to "hide" the objectionable terms and the user did not see them.
• Use font large enough so that the user can read the document with relative ease. Use of small print may lead a court to conclude that a business is trying to conceal egregious or unfairly burdensome terms.
• Maintain adequate records of all agreements made, including the date and time of the agreement. Most businesses utilizing click-through agreements should be able to do this with relative ease.
• Require the user to agree affirmatively by checking a box or clicking a button labeled "I agree." Permitting the user to simply scroll through or look at the document may weaken the likelihood the agreement will be enforced. A mere invitation to review the terms of an online agreement generally is not enough. Instead, provide a requirement that the user take affirmative steps to agree to the terms.
• Place the "I agree" box at the end of the agreement. This shows that the user, at a minimum, had to scroll through the agreement before agreeing.
• Ensure that the user will not be able to access the website, software, information, or other materials or services sold until the agreement has been accepted.
• Permit the user to go back and review the terms of the agreement at any time.
• Use clear words of acceptance and rejection. For example: "I agree," "I consent," and "I accept" or "I reject," "Not agreed," and "I decline."

Conclusion

More and more business is being conducted online and there is a growing need for businesses to utilize the efficiencies that click-through agreements offer. Technology companies can use the online forum to contract with users for a multitude of transactions in an efficient and cost-effective manner. However, such companies also must understand the legal implications of doing so. Some simple steps can be taken at the front end of creating an electronic agreement that will go a long way in strengthening the enforceability of the agreement down the road. As the world gets more technical and the types of products offered online become more significant in terms of money and life-style maintenance, following best practices in the click-through contracting world becomes ever more important.

© 2009, Ward and Smith, P.A.

(*): Katherine C. Stille, summer associate at Ward and Smith, P.A., contributed to the research and authorship of this article.

Ward and Smith, P.A. provides a multi-specialty approach to the representation of technology companies and their officers, directors, employees, and investors. Deana A. Labriola practices in the Technology and Business Practice Groups. Comments or questions may be sent to dl@wardandsmith.com.

This article is not intended to give, and should not be relied upon for, legal advice in any particular circumstance or fact situation. No action should be taken in reliance upon the information contained in this article without obtaining the advice of an attorney.