Clickwrap Agreements: What You Need To Know

We often accept terms and conditions without reading them before accessing a website or downloading an app. While they seem informal, these agreements do hold legal value. They depict our consent to the company's terms of service, privacy policy, and refund policies. It helps protect the company from legal disputes and ensures we know our rights and obligations. These clickwrap agreements have become a common practice for businesses across various industries. Today’s blog post will discuss their legal status, benefits, and best practices.

What is a Clickwrap Agreement?

A clickwrap agreement is a type of online contract in which users must agree to the terms and conditions by clicking a button (such as "I agree" or "Accept"). These agreements enable businesses to obtain legal consent from users and protect their rights.

In clickwrap agreements, customers click the button instead of signing the contract. Businesses can get consent without interrupting the customer experience. Hence, they’re more prevalent in B2C than B2B transactions. They’re the leading choice in the e-commerce industry, SaaS companies, financial services, and online marketplaces. While convenient, do they have the same legal standing as contracts? Let’s find out!

Are clickwrap agreements legally binding?

The short answer is yes, clickwrap agreements are legally binding. When a user clicks "I agree" or checks a box to accept the terms and conditions, they enter into a contract with the other party. Just like a traditional written contract, clickwrap agreements are enforceable by law.

Several court cases have upheld the legality of clickwrap agreements, emphasizing the importance of users being aware of and consenting to the terms they are agreeing to. They’re valid as long as the users can access and review the terms before accepting them. Moreover, they must uphold the same enforceability criteria as any unilateral contract. Essentially, the legal standing of a clickwrap agreement depends on the following factors:

Term clarity: Before acceptance, the terms and conditions must be in writing and easily accessible to the users.

User consent: Users must actively consent to the terms by clicking a button or checking a box. Simply having the terms on a website without an explicit acceptance mechanism may not be sufficient.

Unconscionable Terms: Courts may not enforce clickwrap agreements if the terms are unfair or illegal. 

Why do Clickwrap Agreements matter?

Clickwrap agreements are crucial in establishing a legal relationship between users and businesses in the digital realm. Users' active agreement to the terms and conditions helps companies enforce their rights more successfully and guard against future legal challenges.

From a user perspective, clickwrap agreements help ensure transparency and clarity regarding the terms of service, privacy policies, and other important information. By making users acknowledge and agree to these terms, businesses can mitigate risks and foster trust with their customers.

1. Legal Protection

One of the primary benefits of clickwrap agreements is that they provide legal protection to businesses. Companies can mitigate the risk of disputes and legal challenges. They can easily demonstrate that users consented to the terms by clicking the agreement button.

2. Enhanced User Experience

Clickwrap agreements also contribute to a better user experience. They’re quick and easy while prominently presenting the terms and conditions. Thus, companies can ensure that users know their rights and obligations. Transparency can help build trust and credibility with customers.

3. Compliance with Regulations

In the era of data privacy and consumer protection laws such as GDPR and CCPA, clickwrap agreements can help ensure compliance. They can incorporate specific clauses related to data protection, consent, and other legal requirements in clickwrap agreements to demonstrate their commitment to following the law.

Are clickwrap and browsewrap agreements the same?

In a clickwrap agreement, users actively click on a checkbox or button to signify their acceptance of the terms and conditions of the website or app. By physically clicking "agree," users are expressing their express consent to be bound by the terms of the agreement.

Businesses and websites prefer clickwrap agreements because they take a direct and hassle-free approach to getting consent from users. On the other hand, browsewrap agreements are more passive. These agreements have a hyperlink at the bottom of a webpage without requiring users to acknowledge or agree to the terms. Instead, users are assumed to have agreed to the terms simply by using the website or service.

Browsewrap agreements are the top choice for websites with continuous user interaction, such as social media platforms or informational websites. Because users must take a specific action to indicate their agreement, clickwrap agreements provide better legal protection than browsewrap agreements.

What are the limitations of a clickwrap agreement?

Clickwrap agreements have become a common way for companies to obtain consent from users regarding their terms and conditions. They accelerate the conversion rates while protecting the companies from legal consequences. Although clickwrap agreements are practical and effective, companies should know their limitations.

Lack of Readability

One of the main drawbacks of clickwrap agreements is that they are often lengthy and filled with legal jargon that can be difficult for the average user to understand. Many users simply click "I agree" without actually reading the terms and conditions, which can lead to misunderstandings or disputes down the line. It can undermine the enforceability of the agreement.

Unilateral Modification

Businesses often reserve the right to modify the terms and conditions without notifying users. It can leave users vulnerable, as they may unknowingly agree to unfavorable or disadvantageous terms. In some cases, courts have found that unilateral modifications are unenforceable if they are unfair or unreasonable.

Accessibility and Consent

There is also a concern about the accessibility of clickwrap agreements, especially for users with disabilities who may have difficulty interacting with digital interfaces. In some cases, courts have ruled the agreements invalid if users don’t have a clear and accessible way to consent to the terms and conditions.

Lack of Negotiation

Unlike traditional contracts, where parties can discuss and negotiate the terms before signing, clickwrap agreements function on a "take it or leave it" basis. Users are typically not allowed to negotiate the terms of the agreement, which can lead to a lack of transparency and fairness.

Unbalanced Power Dynamics

Clickwrap agreements create unbalanced power dynamics between companies and users. Companies often have the upper hand in setting the terms and conditions, leaving users with little bargaining power. It can result in one-sided terms favoring the interests of the company over those of the user.

What are the best practices for Clickwrap agreements?

Clickwrap agreements have become common for businesses to secure user consent and establish legal obligations. However, with the rise of privacy regulations and consumer protection laws, it's more important than ever for companies to do their due diligence when implementing them. Here are the key considerations and best practices for creating clickwrap agreements that are legally binding, user-friendly, and compliant with the latest regulations.

1. Clear and Concise Language

One of the most crucial aspects of a clickwrap agreement is the language used within it. It's essential to keep the terms and conditions clear, concise, and easy to understand for the average user. Using complex legal jargon can lead to confusion and render the agreement unenforceable in court. Companies can ensure that users fully understand the terms by using plain language and avoiding ambiguity.

2. Unambiguous Consent Mechanism

The consent mechanism in a clickwrap agreement should be unambiguous and require clear affirmative action from the user, such as clicking a checkbox or a button that explicitly states "I Agree." It ensures that users are actively consenting to the terms and conditions and cannot claim ignorance or lack of awareness in the future.

3. Placement and Visibility

The placement and visibility of the clickwrap agreement are also crucial factors to consider. It should be prominently displayed on the website or app, so users cannot miss it. Placing the agreement near the point of action, such as during the signup process or before making a purchase, ensures that users see and acknowledge the terms before proceeding.

4. Audit Trails

Audit trails play a vital role in monitoring and tracking any changes made to clickwrap agreements. They provide a detailed history of all interactions related to the agreement, including when it was created, modified, and accepted. Arguments and legal challenges may arise from the inability to establish, through appropriate record-keeping, that a user accepted the terms. It proves that the user has consented to the terms and conditions laid out in the agreement. 

Conclusion

As we have discussed, clickwrap agreements are online contracts where the user must click a button or check a box to indicate their acceptance of the terms and conditions. Software licenses, terms of service agreements, and other online transactions often utilize these agreements. They are legally binding and have been upheld in court, making them a secure and efficient way to manage contracts in the digital age. 

Despite their convenience, companies should do their due diligence while creating and managing them to ensure they are effective and enforceable. Contract management solutions like Dock 365 can go a long way toward streamlining the process. Companies can create, store, and manage templates for clickwrap agreements to guarantee clear and concise language across the board.

Dock 365 allows businesses to store all their contracts in one central repository, making it easy to access and manage them. They can automate creating, sending, and tracking clickwrap agreements, saving time and reducing the risk of errors. The contract management platform’s reporting and analytics features can monitor contract performance and compliance metrics throughout the lifecycle.

In addition to adhering to pertinent legal standards (such as the CCPA and GDPR), Dock 365 offers Microsoft 365's advanced compliance capabilities and security features to safeguard sensitive data.