Electronic acceptance of contracts
 

Alarm companies are exploring ways to have their subscribers sign contracts
electronically, on line. Here is a memorandum prepared by an associate in
my office, Shari Stein.
We recommend the "click through" approach if you are going to do on line
contracts.

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Assent to the terms of a contract may be evidenced “by a signature, a
handshake, or a click of a computer mouse transmitted across the invisible
ether of the Internet.” Specht v. Netscape Communications Corp., 150 F.
Supp. 2d 585, 587 (S.D.N.Y. 2001). Any sign, symbol, action, or even
willful inaction may create a contract, so long as it is unequivocally
referable to the promise. Id.

“Click-wrap” Agreements
Essentially, under a click-wrap arrangement, potential licensees are
presented with the proposed license terms and forced to expressly and
unambiguously manifest either assent or rejection prior to being given
access to the product. Register.Com, Inc. v. Verio, Inc., 356 F. 3d 393 (2d
Cir. 2004). Jurisprudence tends to support the position that “click-wrap”
contracts that satisfy the essential elements of a contract will be
enforceable.
In ESLWorldwide.Com, Inc. v. Interland, Inc., 2006 U.S. Dist. LEXIS 41935
(S.D.N.Y. 2006), an integral part of the dispute was over whether a choice
of law and forum selection clause, provided for in a “click-wrap” contract,
was enforceable. The Court, discussing the presumption that forum selection
clauses are valid and enforceable, noted that “this presumption generally
extends to forum selection clauses contained in so-called “click-wrap”
contracts, that is, contracts to which a user manifests his or her assent
by clicking on an icon.” Id. at *5. In ESLWorldwide.Com, Id., the Court
found it significant that the website was organized so that without having
clicked “Accept,” users would not have been allowed to access certain other
sections of the site, and that the text above the “Accept” icon clearly
stated that by clicking “Accept,” a user is bound to the Terms of Service,
and that such terms were easily accessed by clicking on an accompanying
link.
In Caspi v. Microsoft Network L.L.C., 732 A.2d 528 (N.J. Super. Ct. App.
Div. 1999), the Court held that the contract was valid where a user was
able to select either the “I accept” or “I Don’t Agree” button without the
user being required to read all the terms and conditions, since the user
could not have access to the service without having made a selection.
Similarly, Courts in various other jurisdictions that have had the occasion
to consider click-wrap contracts have held them to be valid and
enforceable. See, e.g., Hughes v. McMenamon, 204 F. Supp. 2d 178, 181-82
(D. Mass. 2002); In re RealNetworks, Inc. Privacy Litigation, 2000 U.S.
Dist. LEXIS 6584 (N.D. Ill. May 8, 2000); Hotmail Corp. v. Van Money Pie,
Inc., 1998 U.S. Dist. LEXIS 10729 (N.D. Cal. April 16, 1998).
Note that it is important to remember that the rules of contract law are
still applicable to these agreements. A court in any particular case
depending on the facts could hold that a “click-wrap” agreement is void, or
a particular provision be struck, if it finds that the agreement or
provision breached any of the established rules of contract law.

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“Browse-wrap” Agreements
“Browse-wrap” agreements, in contrast to “click-wrap” agreements, do not
require the active consent of the user. Typically, notice of a license
agreement will appear on a webpage, and clicking on the notice links the
user to a separate web page containing the full text of the license
agreement which allegedly binds any user of the information on the site.
Specht v. Netscape Commnications Corp., 150 F. Supp. 2d at 594. However,
the user is not required to click on an icond expressing assent to the
license, or even to view its terms, before proceeding to use the
information on the site. Id.
In the United States, although there are some cases that suggest that some
“browse-wrap” agreements will be enforceable, the enforcement of these
agreements has been inconsistent. It appears that designing a “click-wrap”
agreement in conformity with traditional contract principles is the most
prudent way to provide online contracts.