Forming contracts by “clicking through” documents on the Internet is a fixture in the transaction of business today. However, as recently recognized in Sgouros v. TransUnion, a late March 2016 Seventh Circuit decision, despite the ubiquity of contracting online, “the law governing the formation of contracts on the Internet is still in the early stages of development.”

Consumers and businesses regularly encounter the “click to accept” button in online transactions and are told that by clicking “accept,” they are accepting the terms and conditions that will govern the transaction. Sgouros v. TransUnion affirms that it is fair to presume the general contract principles that require mutuality of assent will govern the formation of contracts on the Internet. But there are obvious practical distinctions in obtaining acceptance through a signature at the bottom of a document and a “click through” on a web page to accept terms embedded in a document accessible through a web link. Sgouros offers guidance as to what is likely to pass muster in order to obtain consent to terms and conditions found in a document embedded in a web page.

‘Click to accept’

The dispute in Sgouros arose from an online sale. In Sgouros, the terms and conditions the vendor sought to impose were buried in an agreement embedded in a link on a vendor’s web page. The agreement included a provision purporting to require the arbitration of all disputes tied to the transaction and a class action waiver.

As is common in Internet transactions, the consumer had to click through various screens to make the purchase. The customer advanced from screen to screen by responding to click-through prompts and ultimately came to a screen that included an embedded service agreement with a link to a printable form of the service agreement. It included a “click to accept” button that did not directly refer to the service agreement or to the terms and conditions expressed in that document.

The consumer did not even have to open or scroll through the service agreement to “accept” and proceed to the next page of the website. The disclosure above the click “acceptance” failed to advise prospective purchasers that the vendor’s terms and conditions would be “accepted” by clicking through to the next screen. The notice above the “click to accept” prompt did not advise that the service agreement incorporated an arbitration clause or a class action waiver provision. And critically, the notice to prospective purchasers failed to tie the embedded agreement to the “click through” acceptance. The merchant asserted that the consumer accepted the terms and conditions found in the service agreement embedded in the web page above the button when he clicked the “accept” button.

Reasonable communicativeness

The question presented in Sgouros is what is required to obtain objective acceptance to the terms of a document embedded in a web page by “click through” acceptance. The court noted that a party who signs a written contract is generally presumed to have notice of all of the terms of the contract. In general, it is reasonable to assume that the signatory had notice of the terms of the contract that preceded his signature. But as illustrated in Sgouros, that same presumption may not apply when there is no inherent connection between the clicked “acceptance” and the embedded document and that “the trick here is to know how to apply these general principles to newer forms of contract,” the court noted.

To determine whether the terms of an Internet contract have been communicated in a way that would satisfy a “reasonable communicativeness” test, a court generally examines two factors:

(1)   whether the web pages presented adequately communicate all of the terms and conditions of the agreement; and

(2)   whether the circumstances support the assumption that reasonable notice was given of those terms.

The court noted that it “cannot presume that a person who clicks on a box that appears on a computer screen has notice of all contents not only of that page but any other page that requires further action (scrolling, following a link, etc.).” It found that where the terms and conditions of the agreement purportedly imposed on the “accepting” party are not displayed on the screen but are accessible only through a hyperlink, there should be some clear prompt directing the user to read the terms.

The enterprise risk management takeaways from Sgouros:

  • A “click to accept” button, in itself, should not be presumed to be inherently sufficient to obtain consent to the terms of an agreement embedded on a web page. The court found that “no court has suggested that the presence of a scrollable window containing buried terms and conditions of purchase or use is, in itself, sufficient for the creation of a binding contract.”
  • If a party is relying on the terms and conditions embedded in the document to control the risks associated with its transaction, it must design an acceptance process sufficient to meet the “reasonable communicativeness” test. To obtain acceptance comparable to that obtained through a written signature, Sgouros suggests that a party should call attention to the consequences of the click (i.e., acceptance of the terms and conditions described in the embedded document).
  • Failure to effectively communicate the consequences of the click – what it is that the user is actually accepting – is likely to make the terms and conditions unenforceable.