If you’ve ever clicked on, “I Accept,” “Yes” or “I Agree” on a Web site, and in the split second thereafter, wondered if maybe you should have read all that fine print first, you are among the many who have taken part in electronic contracting.
You may be wondering whether a click is really as valid as a signature. The answer is often yes. Two recent laws have removed many of the impediments to making online contracts legally binding: E-SIGN, The federal Electronic Signatures in Global and National Commerce Act, and UETA, The Uniform Electronic Transactions Act. Ohio is one of 28 states that have adopted some form of this Uniform Law.
These laws state, in general, that electronic signatures are as good as paper signatures. But they do not change the centuries-old doctrines governing contract formation — we still need an offer, an acceptance and consideration. The parties also must have intended to make a contract.
The new laws simply provide a basis for the parties to agree to do business by electronic methods. The old principles still apply, and often require a review of the surrounding facts to divine the parties’ expectations, but now that’s being done in the online environment.
So how do you know if your click-through agreement is valid? It’s not always easy, as Netscape discovered in the decision Specht v. Netscape Communications Corp. Netscape had offered free software on its Web site and provided an online contract for a user to consent to certain terms.
The court found a lack of proper assent to the online transaction because users were not required to indicate assent to contract terms prior to downloading the free software. The contract link itself was located under the button to download, allowing users to get the software without reading or agreeing to the terms.
Because it was possible to get the software without assenting to the agreement, the court ruled the terms of the Netscape agreement were not binding, specifically the terms requiring arbitration of claims. Simply put: the order in which events occur can be very important when determining the enforceability of an online contract.
Based on a review of court opinions, E-SIGN and UETA, a picture is emerging of the disputes regarding the validity of online contracts. What these authorities suggest is that the determination of the existence of a legally binding agreement is often a fact-intensive analysis. Nonetheless, certain strategies can reduce the uncertainty.
* Give customers the chance to review contract legal terms before committing to a purchase.
* Give customers a display of the economic terms of the order prior to purchase.
* Give customers an opportunity to correct any errors in the economic terms.
* Require customers to assent to the terms.
* Give customers a final chance to reject or confirm the transaction.
* Confirm the transaction prior to delivery, typically by a separate e-mail.
* Maintain transaction records to prove assent and the terms of the agreement.
Would an online transaction that does not do all of the above fail to result in a binding agreement? No, not in all cases. But depending on the circumstances, there easily could be a misunderstanding between the parties as to the legal or economic terms.
It’s not surprising that there’s confusion on this subject — the idea of conducting business electronically is relatively new. But just as a verbal contract can be legally binding, so can an electronic one.
If your organization is looking to use electronic contracts as part of its regular business, consult your lawyer beforehand about the details of the process and its content. Anker Bell is an attorney with Vorys, Sater, Seymour and Pease LLP. Reach Bell at Vorys, Sater, Seymour and Pease, (614) 464-6400 or www.vssp.com.
