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Click wrap agreements and its legality

Suphla Singh

Introduction


  1. What is Clickwrap Agreement

    A Clickwrap Agreement  is a type of digital agreement where users must actively click on a box or button, such as "I accept," "I agree," or similar, before they can download content, make a purchase, or use a website. These agreements are one-sided and include standardized terms and conditions that users agree to before accessing websites or products. Such agreements  are commonly utilized when there is a need for multiple users to sign the same standard agreement. Typical content that can be covered in Clickwrap Agreement includes terms and conditions, user policies, privacy policy, and End-User License Agreements (EULAs).


  2. Importance of Clickwrap Agreement The significance of clickwrap agreements cannot be overstated. These agreements function as the legal framework that solidifies the relationship between businesses and their users, clearly delineating the rights and obligations of each party. In the absence of clickwrap agreements, online businesses would be vulnerable to legal disputes, misinterpretations, and potential breaches of contract.


  3. Why use Clickwrap Agreements

    Integrated Accessibility: Clickwrap agreements are seamlessly embedded in websites and available for download, making them readily accessible to users. Streamlined Mass Contracting: Companies can efficiently create agreements with multiple users simultaneously, avoiding prolonged negotiation processes. Adaptability:Companies can retain electronic signatures and incorporate additional clauses without needing to consult users in advance. Broad Applicability:Clickwrap agreements are not confined to software contexts; they are suitable for various other contractual situations, such as employment contracts etc.

  4. Clickwrap vs. Browsewrap Agreements A clickwrap agreement is a contractual arrangement that mandates the user to actively click on a button or link to consent to the terms. This method is commonly employed by companies to ensure that users explicitly acknowledge and agree to the terms of service prior to utilizing a product or service.Meanwhile, a browsewrap agreement differs in that it is established through the user’s interaction with a website but does not necessitate any specific action, such as clicking a button, to signify agreement to the terms.


Clickwrap Agreement in India

In India, clickwrap agreements are recognized as enforceable if they meet all the conditions laid out for a valid contract under Section 10 of the Indian Contract Act. Meanwhile, Section 10A of the Information Technology Act, 2000 in India validates clickwrap as a legally binding method to enter into contracts. It ensures that contracts executed electronically, including through clickwrap agreements, are enforceable without any denial solely on the basis of being electronic. To substantiate this, in the case of Trimex International FZE v. Vedanta Aluminium Limited (2010) 3 SCC 1 (India), the Supreme Court affirmed the validity of contracts formed through email as legitimate online agreements.

Judicial Precedents for Clickwrap Agreement

Enforceability of Clickwrap Agreement 

  • A notable case on this issue was Feldman v. Google, Inc., 513 F.Supp.2d 229 (E.D.Pa. 2007). In this case, the enforceability of Clickwrap Contracts was upheld, with the court emphasizing the necessity of providing "reasonable notice of the terms and manifested assent to the contract." The court ruled that purchasing the "Adwords" program from Google required agreeing to the terms and conditions presented in the Clickwrap Contract.


  • In Specht v. Netscape, 306 F.3d 17 (2d Cir. 2002), the court emphasized that the enforceability of online contracts, including Clickwrap Contracts, depends not only on the presence of a tick box or "I Agree" button but also on the clarity and conspicuousness of the terms presented. It is crucial that users are made aware of the terms and that the action of clicking the box or button clearly signifies their agreement to those terms, rather than to some other unrelated action. This case highlighted the importance of ensuring that users are adequately informed and aware of what they are agreeing to when interacting with digital contracts


Unreasonable or Unconscionable Bargain

  • In the case  Ddit(lt) Mumbai v. Gujarat Pipavav Port Ltd. 2017 SCC ONLINE ITAT 2058 The Income Tax tribunal of Mumbai ruled that unconscionable or unreasonable terms in mass contracts such as Shrinkwrap and Clickwrap agreements render them unenforceable even when it contains all the elements of a valid contract.


  • One of the notable and earlier cases of validity of clickwrap agreement took place in 1998 in Hotmail Corporation v. Van Money Pie Inc., 1998 WL 388389 (N.D.Cal.) where the court of California held that the act of clicking "I agree" at the end of the terms and conditions establishes the enforceability of Clickwrap Contracts.The same school of thought was also followed in the case of Groff v. America Online, Inc File No. C. A. No. PC 97-033, Steven J. Caspi, et al v. Microsoft Network LLC Et al 732 A.2d 528 (1999)  and lan Systems, Inc v. Netscout services  Level corp 183 F.Supp.2d 328. 


Validity of a Clickwrap Agreement 

  • In the case of Groff v. America Online, Inc File No. C. A. No. PC 97-033, the court affirmed the validity of a click-wrap agreement between America Online, Inc. ("AOL") and one of its customers. The ruling emphasized the court's confidence in recognizing both the plaintiff and defendant as parties to a legally binding agreement.


  • Indian judicial authorities have not yet provided a definitive stance on the legal status of clickwrap agreements. Historically, contracts with severe imbalances in bargaining power were considered unconscionable, as seen in the Central Inland Water Corp v. Brojo Nath case.[1986] 2 S.C.R. 278, According to the principles from that case, such mass contracts might be deemed invalid. However, this is not necessarily the case.


  • In a 2017 ruling by the Income Tax Tribunal in DDIT (IT) 3(1), Mumbai vs Gujarat Pipavav Port Ltd., the enforceability of clickwrap agreements was questioned. Although the case primarily addressed copyright infringement, the Tribunal raised concerns about the validity of clickwrap agreements.



Some extracts of judgment is pertinent to the look at : 

Suppose, in case of a company, a product is purchased by the staff of the company, for its use in regular course of work or business of the company and an employee of the company while installing the software on the computer in the office of the company clicks the button or the icon ‘I agree’ and thereafter such an employee or any other employee of the company violates any condition of the license agreement, can such license agreement be enforced against the company or the Directors of the company can be held liable for any such infringement, especially when they are not signatories to such an agreement and nor they have authorized any employee of the company to sign any agreement on behalf of the company and even no name of the company is even written in such type of agreement and even it is also not known as to who actually clicked the button ‘I agree.’ Under these circumstances, the enforceability of such a license is highly doubtful.”“So far as the legal enforceability of such Licence Agreements is concerned, in spite of the fact that it may fulfill all the requirements of a valid contract, such an agreement may not be enforceable, if, its stipulations conflict with the law governed in the country where such licenses are intended to be enforced, or if it is an unconscionable or unreasonable bargain.

In summary, while clickwrap agreements might meet the general requirements for a valid contract, issues arise if:

- The contract contravention with the law of the land, or 

- The terms represent an unreasonable bargain.


The Tribunal noted that even though users frequently do not read the extensive and detailed terms of such contracts, this does not necessarily impact their validity, provided the terms are not unconscionable. Although this perspective does not fully resolve the legal status of clickwrap agreements, it provides some insight into how judicial bodies view online contracts.


Equitable bargaining power in the Clickwrap Agreement

  • The Supreme Court of India  in the case of LIC India V. Consumer Education and Research Center 1995 (5) SCC 482 considered its role in intervening in contracts, especially when there is a significant disparity in bargaining power between the parties involved. The Supreme Court's decision established that if a contract resembles an adhesion contract and the parties do not have equal bargaining power, the Court has the authority to invalidate the contract if it is deemed unfair or unreasonable. This judicial action aligns with Article 14 of the Indian Constitution, which ensures equality before the law and equal protection of the laws to all citizens within India's territory.


Data Privacy vis-a- vis Clickwrap Agreement

Consumers often end up consenting without careful consideration due to the requirement to navigate through numerous documents or forms. By the time they finish this process, they can feel fatigued and may consent simply to expedite the process and move on. This scenario is exacerbated when users are required to give consent multiple times in a routine manner throughout the day. This phenomenon is commonly referred to as "clickwrap consent," where individuals provide consent after experiencing fatigue from repeatedly granting consent or undergoing a lengthy consent process.


According to Section 43-A  of the Information Technology Act, 2008, obtaining "contractual consent" is essential for ensuring "reasonable security" in concluding a contract. For example, when an employer obtains a valid employment agreement that includes provisions for disclosing and processing personal information, it constitutes valid consent that supersedes privacy obligations. Regardless of the organization's size, obtaining consent cannot be overlooked. Therefore, unless there are specific legal exceptions (such as in employer-employee relationships), clickwrap consent will be closely scrutinized.




Suggestions for designing Clickwrap Agreement:

Below are some practices recommend for clickwrap agreements - 

Active User Consent 

Users should actively click on buttons like "I agree," "Ok," or similar, to indicate their consent. Pre-checked boxes should be avoided to ensure that consent is given actively and consciously.

Screen Design 

Keep the screen layout simple, uncluttered, and easy to understand, avoiding contrasting colors and ensuring everything fits without scrolling.

Notice of Terms

Provide clear and reasonable notice of terms before terminating services. Ensure that users are informed about important documents such as Terms and Conditions, Privacy Policy, and User Contracts. These documents should be presented in user-friendly language, avoiding complex legal jargon that may confuse users.

User Comprehension 

Ensure that Click Wrap Contracts are easily understood by laymen. It's essential to design the interface in a way that encourages users to read and comprehend the Terms of Service (TOS) before agreeing. This might include using clear language, bullet points for key points, and ensuring that the agreement is presented in a readable format without excessive scrolling.

Revised Conditions: 

In case of any updates or revisions to the terms, ensure that users explicitly agree to the new conditions. This ensures transparency and keeps users informed about any changes that may affect their rights or obligations under the contract.

Highlight Specific Consent: 

Clearly distinguish terms that require specific consent from users. For example, if the agreement involves the use of personal information for marketing purposes, this should be prominently highlighted. Users should be made aware of what they are consenting to, especially regarding sensitive information.

Documentation: 

Maintain accurate records of when consent was obtained and which version of the contract the user agreed to. Proper documentation is crucial for enforcing the terms of the agreement and resolving any disputes that may arise. This includes keeping track of consent dates and version histories to ensure compliance with legal requirements and user expectations.

Self - Identification Requirements: 

To address concerns about minors inadvertently entering into clickwrap agreements, proposals have been made to implement age verification requirements and stricter controls on such contracts. One suggested approach involves requiring users to verify their age or identity before agreeing to terms. This measure aims to prevent individuals who are not legally competent from entering into agreements, similar to provisions in the US Children’s Online Privacy Protection Act, 1998 (COPPA), which aim to protect children from such agreements.


Conclusion 

In conclusion, the evolution of legal frameworks to accommodate Clickwrap Contracts and related digital agreements is crucial for their legitimacy and effectiveness in the digital age. By providing clear guidelines and statutory support, these contracts can facilitate efficient online transactions while protecting users' rights and interests. Ensuring fairness and transparency in the use of these agreements will strengthen trust between businesses and consumers, fostering a robust digital economy built on secure and accountable practices.








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