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Online click-wrap Agreements - An Analysis

We all have been subject to a behavioral pattern where while browsing internet, we come across a page which interests us, but in order to proceed on the webpage, we have to click on “agree” or “I accept” somewhere in the bottom of the page. Without thinking twice about the repercussions of our act, we accept the terms of the contract without knowing the contents. Sometimes this virtual, harried consent leads us into receiving a flood of spam emails, but what's worse is we have no intimation as to who has access to our data and how deep of an access do they have. Such details are included in this agreement which has been drafted by the party having a higher bargaining power, i.e. the company providing the services and the person receiving such services has no way of negotiating or altering these terms. With a rise in the number of such contracts worldwide, in this article I am attempting to shed some light on how an online agreement works, weather it can be said to be a valid contract and the scope of Indian laws in this.

Online Agreements -

Online Agreements also commonly known as “clickwrap” agreements are a type of contract which is commonly used for online transactions, use of software licenses and social media. In these agreements the terms such as “Agree” or “I accept to the terms and condition of the user policy” etc are used to note the acceptance and consent of this contract by the contractee i.e. the user. Here the terms of the contract are already laid out and the contractee has no means to negotiate these terms. The contractor essentially creates a “take it or leave it” situation where if the contractee does not consent to these agreements they cannot proceed with the transaction. These types of contracts are also known as “Contracts of Adhesion” where one party has a dominant stand or a position of power and it drafts the contracts and decides its terms and conditions. Here the other party has no power to negotiate or alter the terms of the contract and he/she has to merely “take it or leave it”.

People enter such innumerable contracts of Adhesion even without them being aware of such contracts. For eg, while opening a bank account, while enrolling for some membership, buying consumer products etc such contracts are signed and its acceptance is implied. When there is any problem associated with the contract it is assumed that the terms of the contract apply and the signatories of the contract have to abide by it. Although this concept sounds dubious, it does in fact get upheld by the courts of law and hence a person cannot claim that he was never aware of the contract or that he was coerced into signing the contract, unless he can specifically prove so.

Globally such contracts have been challenged a number of times and courts have discussed their validity extensively. Some of the prominent cases and their abstracts are discussed here:

Feldman v.s Google

Here, Feldman had purchased the “Google Adwords” services from Google and when Feldman had issues with the product he sued Google in the court of law, here in the United State District Court of Pennsylvania. Google contested that as per the contract executed by Feldman, the jurisdiction lied in the courts in California. Feldman refuted this contract stating that “the Agreement was never seen, signed or negotiated by him or any of his associates”. He stated that in the absence of knowledge of the terms of the contract, the was no “meeting of minds” between him and Google and hence the Contract was void.

However, Google claimed that when feldman was purchasing the “Google Adwords” services from them, he was directed to a webpage displaying the Contract, further, the webpage in bold letters stated the following “ Carefully read the following terms and conditions. If you agree with these terms, indicate your assent below.”

Followed by these words was the entire text of the contract which Feldman had to scroll through the window and at the end of which he had a choice to accept the terms and conditions or refuse them and not purchase the services from Google. Feldman, had indeed clicked on “Accept” and hence accepted the terms and conditions of the Agreement

The court upheld the claim of Google and noted that the fact that the entire contract was displayed by Google and that Feldman had scrolled through the text meant that Google had provided reasonable notice to the contents of the contract and hence Feldman was deemed to be aware of the contents of the contract and here the validity of the “Clickwrap Agreement” was upheld.

Specht vs Netscape Comms. Corp

In the previous case, it was observed by the court that if the contracting party clicked on a button which stated expressly that clicking on this button would mean acceptance of the contract, then the contracting party could not later refute the terms of the contract stating that he wasn’t aware of them.

However, in this case, the contract mentioned that by downloading the defendants software, the plaintiff had agreed to the terms of the agreed. This particular statement was mentioned in the contract however, it was nowhere mentioned near the Download button. The plaintiff was hence unaware that downloading the software would make them subject to the License Agreement.

The United States Court of Appeals held here that the defendant failed to make the contractual nature of the “Download” button obvious and hence the plaintiffs were not subject to the terms of the License Agreement

Bragg vs Linden Research Inc

Here a player of an online game sued the gaming company stating that the although he had agreed to the contract prior to purchasing the game from the defendant, he had not anticipated the contractual terms to be procedurally and substantively unconscionable. He claimed that this Clickwrap agreement was a form of Adhesion contract where the terms of the contract were drafted in such a manner that it was extremely one-sided and would shock the conscience.

The United States District Court of Eastern Pennsylvania upheld the contention of the Plaintiff here and refuted the validity of the contract.

Clickwrap Agreements and India

The Indian Contract Act, in its definition of Contract merely states that a Contract is an agreement enforceable by law. The 1872 Act has not been amended yet to specifically include the scope of an Electronic Agreements or Click-wrap Agreements. The Supreme Court of India in Trimex International FZE vs Vedanta Aluminum Limited, India, 2010 (1) SCALE 574 upheld that if the terms of a Contract had been discussed over the email, such emails constituted to be a valid contract and hence were enforceable. Here the Supreme Court recognised the validity of electronic contracts even if they were not electronically signed and registered.

In the case of LIC India vs. Consumer Education and Research Centre the Supreme Court of India commented on the scope of its intrusion in a contract where the parties to the contract had unequal bargaining power. The Court held that when a contract is of such a nature that it can be stated to be an Adhesion Contract and further when the parties to the contracts do not have equal bargaining power then in the light of Article 14 of the Constitution of India (guaranteeing equal protection of law to its citizens) the Supreme Court shall strike an unfair or unreasonable contract.

It can thus be observed that the Indian Courts have accepted the validity of electronic contracts however this is not a blanket acceptance. They are willing to delve deeper into the contents of the contract, the bargaining powers of the contracting parties and the terms of the contract to decide upon its validity. However, the courts have not yet discussed the possibility of where the jurisdiction would lie in cases where one party is domiciled in India and another party to the contract (a party with a higher bargaining power) is based out of the country.

In these circumstances, it is essential for us to understand what factors must we consider while agreeing to an online or a “click wrap” agreement. Some of these factors are listed as under -

The most primary precautionary measure would be to try and read the contents of the agreement. The entire agreement need not be read at length, but it is essential to glance to the agreement to understand what data shall be shared with the other party, are there any third parties involved etc.

The number of clickwrap agreements executed on a daily basis by any person is large hence it would not be possible to read and analyse every single agreement. However, those contracts which are for high priority tasks such as creation of an online bank account, purchasing expensive goods and services online need to be read prior to accepting them.

If a contract does not expressly provide an “I agree to the terms and conditions” button or an “Accept” button or if the contract is hidden and only the “Agree/Accept” button is visible, then such contracts can be contested.

It is a common trend that most of the contracts include a clause for arbitration, usually in the county of the creator of the contract. Such clauses can at times considered to be unconscionable considering the fact that the party with a lesser bargaining power has no means to travel to and attend the proceedings in another country. Such terms can be highlighted while contending that the contract is highly biased.

In conclusion, it can be said that such electronic contracts and clickwrap agreements are gradually getting more common globally and their drafting is such that they make it nearly impossible to be contested. In such circumstances, it is prudent to be aware of the contents of the contract proposed to be executed rather than being caught unawares by their biased terms.

Cases on Clickwrap Agreement -
Feldman vs Google
Specht vs Netscape Comms. Corp
Bragg vs Linden Research Inc
Trimex International FZE vs Vedanta Aluminum Limited, India, 2010 (1) SCALE 574
LIC India vs. Consumer Education and Research Centre

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