Recent Court Decisions Shed Light On Enforceability Of Electronic Contracts In The U.S.

• Published date: 11 August 2022
• Subject Matter: Corporate/Commercial Law, Corporate and Company Law, Contracts and Commercial Law
• Law Firm: Goodwin Procter LLP
• Author: Mr Riley Lovendale and Kevin Lam

Introduction

A number of U.S. state and federal courts have recently considered whether the manner in which companies presented to their users a variety of electronic contracts (e.g., terms of service) was sufficient to form an enforceable contract with the website or app user.¹ While there are no bright-line rules, the general consensus is that so-called "browsewrap" agreements are unenforceable, "sign-in wrap" agreements fall into a gray area in which courts carefully analyze the manner in which the contractual terms were presented to determine enforceability, and both "clickwrap" and "scrollwrap" agreements are generally enforceable. In any case, care must be taken to ensure that even the types of acceptance methods found generally enforceable are implemented in a way that increases the likelihood the agreement will actually be found enforceable if challenged.

Each of these courts evaluated what is commonly referred to as a "sign-in wrap" agreement, and in each case the court held that the manner in which the applicable terms were presented to the user or the manner in which the user assented to them was not sufficient to form an enforceable contract. In this alert, we provide (1) an overview of what courts are considering when determining whether an electronic contract presented to users is enforceable and (2) practical guidance to assist you in considering whether your company's electronic contracts, the manner in which they (and future amendments to them) are presented to users, and the methods by which you obtain user assent to your electronic contracts should be updated in order to increase the likelihood of enforceability.

Background on Electronic Contracts

No matter the jurisdiction, in order to have an enforceable contract the mutual assent or consent of the parties to the terms of the agreement is essential. This is no less true with electronic contracts, such as website terms of use or the terms and conditions of an app. Because users of websites and apps typically do not receive a physical copy of the contractual terms relating to their use of such sites and apps, courts typically analyze whether the user has engaged in conduct that manifests their acceptance of the applicable terms. The company must show that the contractual terms were presented to the user in a manner that made it apparent the user was assenting to those terms when doing something on the site or app like checking a box or clicking a button.

The courts in each of the recent decisions discussed, to varying degrees, the following commonly used classifications of electronic contracts:

• "Browsewrap" agreements The applicable terms are disclosed only through a hyperlink (often in the footer of a website), and the user assents to the terms by merely browsing the site or using the app. No clicking or other action is required to accept the terms.
• "Sign-in wrap" agreements The website or app includes a textual notice that indicates a user is required to agree to certain terms before accessing the site or service. However, the user is not required to review those terms or to expressly manifest their assent to those terms by checking a box. Rather the user is asked to click something else like a sign-in or registration button, and notice of the terms is presented near that button.
• "Clickwrap" agreements: The user accepts the applicable terms by checking a box that states that the user agrees to the terms before the user can continue using the site or app or complete the applicable user flow.
• "Scrollwrap" agreements The user is presented with the entire set of terms upfront and must physically...