February 1, 2013

Ensuring that Terms of Use are Binding

As discussed here, the terms and conditions of use (Terms) for your website put limits on your legal liability.  The way that users of your site agree to your terms may make a difference to how binding those Terms are.

THE NOTICE PRINCIPLE

Courts in Australia have not yet ruled directly on what methods of agreement ensure that Terms are binding.  That said, courts have indicated that there are methods of agreement that are less risky than others.

In order to make your terms and conditions binding, you need to ensure the user or customer has been given reasonable “notice” of terms and a reasonable opportunity to refuse them.  You must reasonably believe that the attention of the user will be drawn to the terms by your choices of layout and presentation.

METHODS

Ways to put a user on notice (from least to most effective) include:

  • a link at the bottom of the web-page labelled ‘legal notices’;
  • pop-up screens that set out the terms at strategic junctures, like just after account registration; and
  • “clickwrap agreements”.

Clickwrap provisions are a system for agreement that prevents a user from carrying out an action on the website until they have agreed to the terms and conditions of use.  The terms and conditions of use generally pop up in a new window with a button to signal acceptance of these terms. If the user does not agree to the terms and conditions, the website is designed so that the visitor cannot proceed any further.

THE CLICKWRAP APPROACH IS BEST

The clickwrap agreement is the best approach, particularly in the online transactions setting.  It is far less plausible for one of your users to claim to have missed the terms, which could lead a court to rule the agreement invalid.  Taking extra measures like forcing a user to scroll through all the terms to click “I agree” will further mitigate your risks.

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