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How enforceable are those online “Ts & Cs” we all accept?

3 March 2018

We have all done it. You might be purchasing a product online or downloading software for your computer. You come to the end of your online purchase or download, and, without a second thought, you click a box to say you accept the terms and conditions (“Ts & Cs”) of the particular website without reading them first. But, just how enforceable are those Ts & Cs you just blindly accepted?

Whenever you click “I accept” to a website’s Ts & Cs, you are entering into an online contract known as a “clickwrap” agreement. Alternatively, you may not have even been required to take any affirmative action to accept the Ts & Cs. A website may only provide a hyperlink to its Ts & Cs or simply just post them somewhere on the website – this is known as a “browse-wrap” agreement.

The New Zealand courts have not yet addressed the enforceability of online contracts, and although the Contract and Commercial Law Act 2017 facilitates the use of technology in commercial transactions, the Act does not state how or when an online contract is formed. This has left some uncertainty about the potential enforceability of clickwrap or browse-wrap agreements. However, two recent court cases in the United States have addressed this issue.  Although these cases are not binding on New Zealand courts, they may provide some guidance on how these types of agreements will be treated in New Zealand.

Both cases involved a browse-wrap agreement. In the first case, a website had placed a hyperlink to its Ts & Cs on the bottom corner of each page of the website and right next to a button the customer had to click before completing the online purchase. The online sale in question fell through due to insufficient stock, at which point the website attempted to enforce its Ts & Cs against the would-be customer. No affirmative action, which may indicate acceptance of the terms and conditions, was required of the customer before the purchase was completed. The court ruled that the website’s Ts & Cs were not enforceable because the website had not provided adequate notice of them to the customer. The court stated "where a website makes its terms of use available via a conspicuous hyperlink on every page of the website… even close proximity of the hyperlink to relevant buttons users must click on - without more - is insufficient to give rise to constructive notice."

In the second case, the United States District Court (“Court”) refused to enforce Uber’s online terms of service due to the manner in which the terms were presented on Uber’s smartphone app. A hyperlink to Uber’s terms was provided on Uber’s registration page with the words "By creating an Uber account, you agree to the terms of service" next to it. However, the hyperlink and accompanying words were considered to be “barely legible” by the Court as they were in significantly smaller font to the rest of the app. The Court held that the existence of Uber’s terms were not adequately brought to the attention of the user, and, therefore, it could not be said that the user had ever agreed to them. Again, it was the lack of notice given to the user of the website’s Ts and Cs which ultimately led to them being unenforceable.    

Both cases highlight the fact that the basic requirements for a contract (for example “acceptance”) are not diminished just because the contract is formed online. However, neither case shed any light on what may constitute adequate notice of a website’s Ts & Cs. 

Although both browse-wrap agreements were unenforceable in the United States cases, each agreement, whether browse-wrap or clickwrap, will be assessed on a case-by-case basis. Enforceability will be determined by whether  the basic elements of contract formation are present, including whether a party has been given sufficient notice of the Ts & Cs. As the United States’ courts have shown, it will be hard to enforce an online contract when one party has not been given a proper opportunity to read and consider the Ts & Cs of the contract before accepting it. 

It may be argued that clickwrap agreements are more likely to have the requisite notice because a user is required to take some form of positive action indicating acceptance of the Ts & Cs. However, it will still very much be a case-by-case determination. We suggest best practice is to treat each type of online agreement you enter into as binding and to ensure you have read and understood all online terms and conditions before continuing any further in an online transaction. 

Please note that the Fair trading Act 1986 was not discussed in this article and that the unfair contract terms provisions in that Act may also affect the enforceability of online contracts.

Source: InBrief Autumn 2018

InBrief Autumn 2018

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