by Traverse Legal, reviewed by Enrico Schaefer - March 31, 2008 - Why Website Agreements are Important
Ecommerce Contract Drafting is an Art:
Drafing an ecommerce contract is one of the most important things any web company will do. An ecommerce contract governs your relationship with your website visitors and customers. A poorly drafted ecommerce contract might leave you exposed to unnecessary liablity and set website visitor expectations which are contrary to your business model. Worse, a poorly drafted ecommerce contract might not be enforced by a court if the matter should go to litigation.
Although issues raised by ecommerce contracts formed on the Internet are affected by traditional contract principles, these contracts often present new and challenging issues. One such issues is the enforceability of "clickwrap" and, its closely related software counterpart, "shrinkwrap" agreements.
A clickwrap agreement (also known as a "clickthrough" agreement or clickwrap license) is a common type of online agreement driven by technology and the Internet. The ecommerce contracts present themselves as part of an "I Agree"check box on a web form, on-line software download, installation process of many software packages or in other circumstances where agreement is sought using electronic media. The name "clickwrap" came from the use of "shrink wrap contracts" in boxed software purchases, which "contain a notice that by tearing open the shrinkwrap, the user assents to the software terms enclosed within".
Click-wrap is the online, electronic equivalent of the shrink-wrap method which allows users to read the terms of the agreement before accepting them. This was presented in the ProCD v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996), shrinkwrap case.
The content and form of clickwrap agreements vary widely. Most clickwrap agreements or ecommerce contracts require the end user to manifest his or her assent by clicking an "ok" or "agree" button on a dialog box or pop-up window. A user indicates rejection by clicking cancel or closing the window. Upon rejection, the user can no longer use or purchase the product or service on the web. Classically, such a take-it-or-leave-it contract was described as a "contract of adhesion, which is a contract that lacks bargaining power, forcing one party to be favored over the other". The terms of service or license do not always appear on the same online webpage or window, but they are always accessible before acceptance. If the terms of service are not visible, online contract attorneys have found the notice requirement to be lacking.
* Feldman v. Google, Inc., No. 06-2540, 2007 WL 966011 (E.D. Pa. Mar. 29, 2007) (upholding forum-selection clause in ecommerce contract)
* In re RealNetworks, Inc. Privacy Litigation, No. No. 00-1366, 2000 WL 631341 (D. Ill. May 8, 2000) (upholding an arbitration clause in an ecommerce contract)
* Hotmail Corp. v. Van$ Money Pie, No. 98-20064, 1998 WL 388389 (N.D. Cal. Apr. 16, 1998) (granting preliminary injunction for alleged breach of ecommerce contract for violating the terms of service by using a Hotmail account to send spam or pornography). The court said that clicking the clickwrap button after notice gave consent.
* I. Lan Sys., Inc. v. Netscout Serv. Level Corp., 183 F. Supp. 2d 328, 336 (D. Mass. 2002) (upholding a clickwrap agreement on two grounds: first, clickwrap is simply "Money now, terms later" contract formation; second, the court found that the "additional terms" of the clickwrap license was not material under UCC (§207(2)(b)).
* Bragg v. Linden Research, Inc., 487 F.Supp.2d 593 (E.D. Pa. 2007) found certain aspects of the Second Life clickwrap agreement and ecommerce contract "unconscionable, and therefore unenforceable."
As a founding partner of Traverse Legal, PLC, he has more than thirty years of experience as an attorney for both established companies and emerging start-ups. His extensive experience includes navigating technology law matters and complex litigation throughout the United States.
This page has been written, edited, and reviewed by a team of legal writers following our comprehensive editorial guidelines. This page was approved by attorney Enrico Schaefer, who has more than 20 years of legal experience as a practicing Business, IP, and Technology Law litigation attorney.
