Creating a Contract for Online Sales
As the pandemic shuttered so many brick-and-mortar stores, businesses were forced to pivot and sell items online to stay afloat. With e-commerce, there are a variety of legal issues that businesses should be aware of. One important aspect is ensuring that the business’s online store has clear terms and conditions to govern the sale and purchase of the goods and services. The terms and conditions are the contract between the company and the consumer purchasing the goods. They not only help to outline expectations for the consumer, but they also provide protections for the business.
- Key Terms
Each set of terms and conditions will be unique to the business and its needs, but below is a brief list of common provisions:
- Order acceptance
- Shipping terms
- Return and refund
- Product warranty
In addition, the terms and conditions will include various boilerplate language typically seen in a contract. Notably, businesses will often seek to include provisions limiting the company’s liability for issues relating to its products/services, as well as outlining the methods for resolving disputes, such as forum selection, choice of law, and arbitration.
Class action lawsuits can be extremely costly, and to try to avoid that potential risk, businesses sometimes include class action waivers and mandatory arbitration provisions. Whether such provisions (as well as the full terms in general) are enforceable requires a more fulsome analysis, but obtaining appropriate assent to the terms is one aspect, which is discussed below.
- Assent to the Terms
Businesses and lawyers can spend a significant amount of time ensuring that the terms and conditions are perfect and cover all manner of potential issues—but if the terms are not enforceable against the consumer, then that time is largely wasted.
One key issue with online contracts is that they are unilateral contracts. In other words, consumers cannot negotiate or revise the agreement—it’s take it or leave it. Due to this, courts have sometimes held that, because they lack the necessary element of mutual assent, e-commerce terms constitute an unenforceable contract of adhesion. To increase the likelihood that the terms are not tossed aside, businesses should ensure that the consumer has enough opportunity to review the terms as well as manifest their acceptance. The three main forms of acceptance are (1) browser wrap; (2) clickwrap; and (3) scroll wrap.
- Browser wrap
For browser wrap terms, a consumer is deemed to have accepted the terms merely by using the website. In other words, the business provides notice of the terms, but does not obtain any form of affirmative action to assent. Courts have been reluctant to rule that this form of passive assent is enforceable, particularly for provisions where the consumer is giving up significant rights.
Unlike browser terms, clickwrap terms require an affirmative action from the consumer. For example, a business may require that the consumer click an “I Accept” button or check a box next to language indicating that they have read and agree to the terms. If using a checkbox, it is important that the box not be pre-checked, and the consumer should not be able to place an order without providing the required assent. Courts are more likely to find that manifesting assent by using clickwrap terms creates an enforceable contract.
- Scroll wrap
Finally, scroll wrap terms go one step further than clickwrap and require the user to scroll through the entire terms and conditions and then click “I accept” or something similar. Adding this extra step will further demonstrate that the consumer has manifested assent to the terms, which will make courts more likely to deem that an agreement has been created.
- Next Steps
Which method for demonstrating acceptance a business chooses depends on its circumstances and risk tolerance. Browser wrap terms have the highest risk of not being enforceable. On the other hand, online sellers often choose clickwrap terms over scroll wrap terms due to the inconvenience of scroll wrap. Businesses should weigh the potential added protection of using scroll wrap terms versus the potential impact on traffic and sales due to the added step.
If you have more questions relating to online terms and conditions, or e-commerce in general, contact Bernstein Shur’s Media and Marketing Practice Group.