Which type of online contract should you use?

We’ve all been there…the pop-up appears on your computer screen and says you must accept these terms and conditions to continue, you quickly click “I accept” and then click the button labelled “next”. It is so common that you do not even consider what you have agreed to.

Modern commerce has led to modern techniques for agreements. As a consumer, I wonder if I have entered into a binding contract? Has there been an offer and acceptance?

Worse, as a business owner using these agreements to trade, have I got the protections I expect? As with every good legal question, the answer is “it depends”.

Broadly, there are three techniques of presenting online contracts. “Clickwrap” which has a digital prompt forcing the consumer to view the terms (often a hyperlink to the terms), coupled with an active acknowledgement agreeing to the terms (usually, an “I agree” tick box or button) and generally a separate click that moves the consumer on from that page.

“Sign-in wrap” is similar, however it is without an unambiguous acknowledgement agreeing to the terms. Often, it will be expressed as registering to a service or creating an account.

“Browsewrap” has no positive agreement or registration, instead somewhere on the website will be a link to the terms. By using the website the consumer is taken to have agreed to the terms.

Clearly, there are three different thresholds of acceptance of terms, Australian common law has very little case law to shed light on what method will be binding.

In the US, there is more case law and the “Clickwrap” method is considered the safest option. Courts have generally ruled clickwrap agreements to be enforceable contracts.

However, where these clickwrap agreements are used in Australia, the agreement must still conform with the current Australian laws in terms of consumer protections (unfair contract terms etc). As with traditional contracting methods, it is understood that onerous clauses and some exclusion clauses will require more obvious notice to the consumer. This can be a trap with electronic agreements.

So, which should you use? Our recommendation for unambiguous electronic contract formation is to use a pop-up screen that:

  • forces the consumer to view the terms,
  • a button that must be clicked saying “I accept the terms”, and
  • another action by the consumer to move the consumer onto another screen.

Anything less than the above may require the court to look at the structure of the page, taking into account details such as the prominence and accessibility of the terms (i.e. position and design of any hyperlink), the acknowledgement button/action and the nature of the transaction.