Member Article

Anybody who has ordered their Christmas shopping online or installed software will have encountered so-called 'clickwrap' agreements.

With clickwrap, before being able to complete the order or install the software, you must indicate acceptance of the service provider's terms and conditions – with a simple click on the I agree button – before being able to proceed. This is the stark choice of “take it or leave it” for the digital age.

The two examples I have given of the use of clickwrap are consumer-related. However, businesses are now increasingly confronted by clickwrap agreements. A good example of where such agreements come into play is with Software as a Service (see Ryan O'Sullivan's article on ‘SaaS').

Whilst clickwrap agreements are commonplace, they present a potential legal pitfall for businesses. In this article, I discuss how businesses and their advisors can sidestep the clickwrap trap.

Clickwrap and the battle of the forms

The concept of clickwrap has affect on the so-called ‘battle of the forms', something often encountered as part of contract negotiations.

Two of the key aspects of a legally binding contract are offer and acceptance of that offer. In the battle of the forms, each side makes conflicting offers. These offers typically consist of each side sending its preferred terms – which could consist of terms & conditions or pricing (or both) – to the other side. Each side attempts to be the last to send their terms so that theirs are the terms that are accepted and therefore apply to the contract.

For software and online services, the use of clickwrap agreements adds a new level of complexity as to what terms apply to the contract for the software or service in question. This is illustrated by the seminal American case of I.Lan v. Netscout Service Level Corp (Massachusetts, 2002).

Netscout was engaged by I.Lan to develop some software. I.Lan sent a purchase order for software from Netscout, which specified that certain terms would apply to the contract. Netscout then sent the software, but with a clickwrap agreement appearing on install, which provided for different contract terms.

When I.Lan tried to enforce its rights under the purchase order, Netscout refused and cited the clickwrap agreement. The court held Netscout correct in their argument that the clickwrap agreement was the last set of terms to be sent, and therefore applied to the contract. The court found that clickwrap contracts are enforceable so long as the user is actually asked to agree the terms and the terms are accessible on that page.

Whilst English case law on clickwrap agreements is unfortunately thin on the ground, there seems little doubt that were an I.Lan-type case to come to court here, an equivalent result would be arrived at. Indeed, in 2001 the Law Commission stated that clicking on a website button can be enough to show consent to an agreement.

Avoiding the clickwrap trap

The I.Lan case illustrates the key issue for businesses presented by clickwrap agreements: negotiating specific contract terms for software or a service, only to find that the supplier is asserting that you are bound by a clickwrap agreement in place of those terms. With procurement and legal functions separate from the actual users of the software/service, and with the use of third party IT contractors to install/maintain software and IT services, the clickwrap trap could take many businesses by surprise.

Even where the business's advisors are aware of the clickwrap agreement, and have reviewed its terms, those terms may not be acceptable and the “take it or leave” nature of clickwrap may not be acceptable to the business. This would be the case where you are contracting for SaaS that is high-cost, or for a function that is critical to the business. In this situation, you will want to negotiate acceptable terms with the service provider and to be confident that those terms govern the contract rather than the clickwrap terms.

 

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