Electronic Contract – Can Contracts Be Formed Online?

Most online transactions are contractual in nature. The problem, of course, is who has the time or ability to write out individual contracts and have them printed in such circumstances? The answer is no one, which is why we Electronic Contract formed onlinenow have the concept of electronic contracting.


Contracts have traditionally been written out on pieces of paper and signed. If you’ve purchased a home or new car, you undoubtedly ended up spending half the day signing different documents and wondering what you were getting yourself into.

As technology has changed over time, so has the concept of a contract. When you pay for a purchase with a credit card, for instance, you have already signed an open-ended contract with the credit card company guaranteeing you will pay any borrowed amounts. The credit card company has, in turn, forced retailers to sign an agreement with it regarding fees and such. When the transaction occurs, you then also agree to pay the retailer if the credit card company fails to make payment. Ultimately, these are all contracts and can be produced in court if issues arise.

Online Contracts

Things change when we move to the internet. How do we create a contractual relationship when some joins a site such as a social media platform like Facebook? The answer is not all that easy to come by from a traditional legal perspective. Traditional contract law called for a written agreement signed by both parties. On the web, we have no written agreement and certainly no physical signatures. Hmmm….

Lawyers thrashed around with this issue to no end for some time. The first rudimentary answer was to create a contract that people had to print out and fax in. As you can imagine, that was not a big hit at all. Then the idea of posting the contract on the site and forcing people to read it first before getting to the good stuff was tried. Again, not such a good idea. Eventually, the idea of posting the contract on a passive page and having people agree to it came to the forefront. This contract concept eventually evolved into the terms and conditions for a website that we have today.

The basic idea with these agreements is the site can set forth the terms that it demands the user comply with before the user is allowed to participate on the site. For instance, a site might include terms that state that a user will not upload items for which it does not own copyright. If the user goes ahead and does this, the site can then terminate them or release their information to the copyright holder that files a complaint pursuant to the agreed terms.

To Click or Not To Click

The problem with using terms of use on your site as a contractual agreement is fairly obvious. Let me ask you a simple question to show why – when was the last time you ever read the terms of a use of a site you visited? The vast majority of people never read the terms of a website, so trying to argue the terms should be binding because of a link embedded in the footer of a website is pretty weak.

The interesting thing is more and more courts are starting to agree with this assessment. We are seeing decisions come down holding the lack of an actual affirmative act acknowledging agreement with the terms of a site means the terms are not binding on the user. There are no published opinions setting this new standard, but it is only a matter of time. [An appellate opinion must be “published” before it is binding. A judgment or ruling in a trial is not a published opinion. Perhaps less than 5 percent of all cases appealed end up in published opinions, so a decision on this issue could take some time.]

What Is A Site Owner To Do?

The answer is pretty straightforward. Most sites will want to make sure that users click a statement that they agree to the terms before they get into the site. This act should be recorded internally and matched to their profile and IP address. If the terms become an issue, the evidence of user’s agreement will go a long way to establishing a binding contract.

Ah, but what if you have a site a user isn’t required to join? For instance, a blog. Well, the answer is still pretty much to post the terms and hope for the best. A few courts are still willing to enforce this browsewrap approach. [See Hines v Overstock.com, Inc. (ED NY 2009) 668 F Supp 2d 362, 367]. That being said, let’s not kid ourselves. The vast majority of judges are very uncomfortable with this approach. Given this, rely on browsewrap agreements at your peril.

As you can probably surmise, the law has a rough time handling many internet issues. The subject of electronic contracting is very much one of those problematic areas. If you are a site owner, make sure you keep up to date on changes in this area. You can follow me on Facebook, Google+, Twitter by clicking the relevant buttons at the top of the right column or sign up to receive my electronic newsletter for updates on a host of internet issues.

Richard A. Chapo, Esq.