Many users download new software, and without a moment’s hesitation when that little box ‘Terms and Conditions’ pops up, click “accept”, rather than scrolling through those terms and conditions. These types of licences where a user can indicate acceptance of the licence terms by clicking an “accept” button are called “clickwrap” licences. Nowadays, they are one of the most common agreements that you enter into, but how binding are they?
eBay and the World War II plane
Australian case law has not yet dealt specifically with the enforceability of a clickwrap contract. However, in Smythe v Thomas  NSWSC 844, the Court held that agreements entered into using eBay were legally binding. The defendant had offered to sell a WWII plane on eBay and the plaintiff made the minimum offer of $150,000. The defendant refused to sell the plane on the basis that there was no binding contract. The Court held that both the plaintiff and the defendant had accepted eBay’s terms by clicking an “accept” button and there was a valid contract. Those terms included the requirement to complete the contract.
Failure to read the terms is not a get out of jail free card
In the US decision of DeJohn v TV Corp International, in response to the plaintiff’s argument that the clickwrap agreement was not enforceable because he did not read the terms, the judge stated that “failure to read a contract is not a get out of jail free card”. In this case, the plaintiff was required to click on a button to say that he had read and agreed to the terms. The actual text of the terms was provided in a hyperlink above the button, which would open the terms in a new screen. The court found that this provided the plaintiff with sufficient opportunity to read the terms to which he was agreeing.
Despite only part of the agreement being visible at a time, it was deemed in another US case Forrest v Verizon Communications Inc that an agreement, which appeared in a scroll box and required the user to click “accept” was adequate notice of the contractual terms. Even if the user did not scroll through the terms before clicking “accept”, it was emphasised that a party will still be bound by them.
At first instance and on appeal in Specht v Netscape, the US courts found that to be effective, terms of online contracts should clearly notify the party to be bound by the terms, either:
- requiring the party to scroll through the terms before accepting; or
- at a minimum, clearly presenting the terms or a link to them on the webpage where the acceptance mechanism resides.
US courts have applied the reasoning of ‘ticket cases’ to find that clickwrap contracts form an enforceable contract similar to the automated process of accepting a ticket from a parking machine, which is enough to establish a contract.
Australian ‘ticket’ cases, including Thornton v Shoe Lane Parking Ltd, teach us that even if you have not read terms, they can be incorporated into a contract by reference if they are considered to be ‘standard’. On the other hand, unusual or onerous terms that you would not expect to be included will not form part of the contract, unless particular attention has been drawn to them.
Applying this to clickwrap agreements in Australia, there remains some doubt as to whether online contracts are sufficiently uniform or familiar to render terms ‘standard’. It would seem that terms by reference alone, such as those in the DeJohn case above involving a hyperlink to terms located elsewhere, may not be sufficient to be binding, especially if unusual terms are included.
What to include in a clickwrap agreement
If you are drafting a clickwrap agreement, be mindful of the following:
- Require the user to scroll through all the terms and conditions before being able to proceed – this creates adequacy of opportunity given to users to read the terms.
- Implement an ‘active step’, which requires the user to take a positive action by clicking “accept” or “I accept the terms and conditions” or “I agree”. Note: Be careful with the wording – buttons like “continue” may not be indicative of acceptance of the terms and may not result in a binding agreement.
- An additional positive action can be included, by requiring the user to tick an “I have read and understood the terms and conditions” box.
- A warning should be included in the agreement, with words to the effect that by clicking “accept”, the user will be deemed to have read and accepted the terms and conditions.
Clickwrap agreements are likely to be valid and binding in Australia, provided that enough notice and opportunity to read the terms and conditions has been given to the user, and the user has taken a positive step, such as clicking “agree” to consent to the agreement.
Tony Conaghan | Partner | +61 7 3338 7502 | firstname.lastname@example.org
Claire Harding | Graduate Lawyer | +61 7 3338 7932 | email@example.com