Making terms of use enforceable

A fundamental principle of contract law is that forming a contract requires a meeting of the minds. This principle is particularly relevant in the context of contracts in an online environment. There are essentially two types of contracts found on the internet. One type is a clickwrap agreement which requires the user to click in an “I accept” box, or take some other affirmative action, to accept the terms of use. The other type is a “browse wrap” contract, whose terms of use are found on the website, but does not require any affirmative action on the part of the user.

Generally speaking, courts have found clickwrap agreements enforceable, because the internet user may not take advantage of goods and services being offered without taking some affirmative step to accept the terms of the online contract. However, courts continue to struggle with browse wrap agreements which do not require such affirmative action.

In a recent case, a New York federal district court judge found that an online provider’s terms of use were not enforceable as a contract because the user had no actual notice of the terms of use, and the user had no constructive notice of the terms of use.

Typically, these cases are founded on issues of the enforceability of an arbitration or forum selection clause. Obviously, if the terms of use are not enforceable, the internet provider of goods and services may be required to arbitrate or litigate in a distant forum at greater expense to the internet provider.
Using browse wrap terms of use instead of clickwrap terms of use make for a better consumer experience, but the risk is significantly greater that a court will find that the terms of use are not enforceable.

If enforceability is a concern, either clickwrap the terms of use or structure the website so that the user has actual knowledge of the terms of use, clearly notifying that the user should not use or take advantage of the website, or any of the offerings of the website, without first reading and accepting the website’s