Click-Wrap: Do You Sign All of Your Contracts Blindly, or Just the Online Ones?

We all have been to a website where we have been asked to agree to some form of terms and conditions, or privacy agreement, and without giving it a second thought, or reading what was in the agreement just clicked that small box or button that says, “I agree”.

What is a Click-wrap agreement?

It is essentially one of several types of electronic agreement that is used with online products. A Click-wrap is an electronic agreement by which a user is directed to a separate window to read and indicate their acceptance of the agreement terms by clicking an “I agree” button or check box. In doing this they acknowledge that they accept the contractual terms stipulated in the agreement. There are three ways that business will normally display these on their website as shown below:

  1. a hyperlink to the Terms in the Click-wrap Agreement;
  2. to include a scroll box in the Click-wrap Agreement; or
  3. placing the Click-wrap Agreement in the Website Footer.

The legal view in Australia

In Australia, the law provides that if a party fails or neglects to read the legal instrument which they sign, by signing such agreement by clicking “I agree” is seen to have attached a signature to the contract. This ordinarily conveys a representation that the person who has signed has either read and approved the contents of the agreement or is willing to take the chance of being bound by that agreement.

Australian case law has not yet dealt specifically with the enforceability of a Click-wrap contract, however, in Smyth v Thomas [2007] NSWSC 844, the Court held that agreements that were entered into using the eCommerce website eBay were legally binding. In that case the defendant had offered to sell a WWII plane on eBay and the plaintiff made the minimum offer of $150,000. The Court held that both the defendant and the plaintiff had accepted eBay’s terms and conditions by clicking on the “accept” button, therefore, establishing it as a valid contract.

It is important that business owners construct their website in a way that provides reasonable notice prior to the formation of such a contract, to satisfy the rule in Thornton v Shoe Lane Parking [1971] 2 QB 163 (Thornton). This means that business owners should take all the necessary steps to ensure the arrangement of the terms and conditions and that the “I agree” button express an intention for the terms and conditions to be wholly incorporated into the contract formed with the user.

In Thornton it was shown that even if you did not read the terms and conditions, that they could be incorporated into a contract by reference if they are “standard”. If the terms are seen to be unusual or onerous and not something you would expect to be included in a standard contract, then particular attention must be drawn to those terms.

The application of Australia's unfair contract regime to standard form contracts was recently reinforced in the Federal Court's decision in Australian Competition and Consumer Commission v Servcorp Limited [2018] FCA 1044 (Servcorp).

In this case, the Federal Court found 12 contractual terms in three standard form contracts used by Servcorp to be unfair and therefore void pursuant to s 23 of the Australian Consumer Law. The Court provided useful guidance for those creating standard form contracts on what constitutes an unfair contract term.

In the case of Surfstone Pty Ltd v Morgan Consulting Engineers Pty Ltd [2016] 2 Qd R 194, which dealt with incorporating terms by reference, here it dealt with whether a clause is sufficient to incorporate terms found elsewhere, which it depended on the language used and the ordinary rules of contractual construction. If any condition incorporated by reference was seen to be so unusual that it would not reasonably be expected in the relevant type of agreement, then the party relying on that condition must give notice of it. This will also depend on the type of industry the agreement is created for such as between commercial entities, or that involving consumers.

More recently, in a Federal Court decision in the case of Dialogue Consulting Pty Ltd v Instagram Inc [2020] FCA 1846, Justice Beach, noted that as with binding contracts, a failure to read a Click-wrap by not scrolling through the terms and conditions and simply just clicking the “I agree” button does not excuse its compliance or enforceability.

Lavan Comment

If you are looking to incorporate, or already currently use a Click-wrap within your website and you are unsure of how your online agreements stack up, we recommended that you review your terms and conditions, or privacy agreements to ensure that they are still legally binding. If you have any question regarding this, please do not hesitate to contact Iain Freeman, Partner in Lavan’s Litigation and Dispute Resolution Team.

Disclaimer – the information contained in this publication does not constitute legal advice and should not be relied upon as such. You should seek legal advice in relation to any particular matter you may have before relying or acting on this information. The Lavan team are here to assist.