There is no question that businesses have stepped into the digital age. The rapid expansion of the use of the internet and e-commerce has led to a greater demand for electronic contracts worldwide. Electronic contracts are agreements created in a digital form via platforms such as online shopfronts, online auction sites, business to business infrastructures, and more! The Australian Consumer Law (ACL) oversees all consumer contracts. Keep reading to find out about the two main types of online contracts – click-wrap and browse-wrap agreements – and to learn about the unique issues associated with the use of electronic contracts.
The key feature of click-wrap agreements is that the terms and conditions (T&Cs) are located on the same page as the “I agree” button. Parties are usually required to scroll through the T&Cs and click a button before proceeding. These contracts are highly likely to be legally enforceable, however there are still a number of issues which may arise. Such problems may concern the timing of contract formation, whether the T&Cs contain clear rights for the business to refuse supply in certain situations, and whether the return and refund T&Cs comply with the ACL. Well-executed click-wrap agreements are the most secure form of online contract for businesses.
With Browse-Wrap agreements, the T&Cs are contained on a separate page to the “I Agree” button and can be accessed via a hyperlink. The purchaser is not usually required to view the T&Cs to proceed with the contract. In turn, businesses should take steps to make it clear that the T&Cs are intended to be wholly incorporated into the contract, such as by:
- Including an “I have read the terms and conditions” tick box.
- Requiring the customer to scroll through the T&Cs before proceeding.
- Bolding or highlighting important or potentially unreasonable terms of the contract.
Browse-wrap agreements place businesses in a weaker legal position to enforce their contracts due to a lesser degree of notice of the T&Cs. As such, these types of agreements are not usually recommended.
Capacity to Contract
To form a legally binding contract of any type, all parties must have the legal capacity to enter into a contract. This requirement excludes groups such as minors from entering into legally binding agreements. With electronic contracts, where parties are not dealing with each other face-to-face and transactions can be conducted anonymously and remotely, it may be difficult for businesses to assess the capacity of other parties. Therefore, businesses face higher risk of unenforceability of their electronic contracts. The anonymity of online transactions also increases the risk of fraudulent transactions and security issues. The Australian Guidelines for Electronic Commerce recommend that businesses take steps to verify the age and overall capacity of transacting parties to avoid any capacity issues arising.
Privity of Contract
The doctrine of privity of contract holds that only the parties to a contract are legally bound by it and entitled to enforce it. An online seller must be able to identify the party that they are dealing with to ensure the contract is enforceable. This may pose problems for electronic contracts in a number of situations. For example, in click-wrap agreements, there may be doubt as to the identity of the contracting parties where a computer that belongs to one party is accessed by another. If the contracting party is not the same party that accepted the T&Cs, this raises the issue of remoteness and exposes a business to the risk that their online contract is unenforceable.
Take Steps to Protect Yourself
Businesses involves with online contracts face a unique set of risks and challenges. As a business owner, it is important to take extra steps to ensure the security of your online transactions. First and foremost, it is important to be familiar with the law and your legal responsibilities.
Call us today to have your contracts reviewed and position your business for success!