There is a running joke being shared online among IT professionals that the leading force in digital transformation was the COVID-19 pandemic, not the CEO or CTO as one might expect. While humorous, there is an element of truth to this. As the world went into various forms of lockdown, many businesses were forced to go online with their offering of goods and services, in some instances erecting websites and payment platforms overnight.
So, as the world engages in this digital transformation and e-commence becomes the predominant way of buying goods and services, how do you ensure that your online contracts or website terms of service are valid and enforceable? Thankfully, Justice Beach of the Federal Court in Dialogue Consulting v Instagram has recently considered the question of the formation of contract when using ‘browsewrap’, ‘clickwrap’ and ‘sign-in wrap’ agreements.
In Dialogue, Instagram was looking to obtain a stay of the proceedings on the basis of that there was an arbitration agreement between the parties which arose from Dialogue’s acceptance of the online Instagram terms and conditions. Dialogue opposed the application and denied there was a valid arbitration agreement. Taking guidance from US Courts, Beach J observed that they classified agreements into one of three types.
Those in which users of the site are required to scroll through all the terms and conditions of use before they are able to click the “I agree” button.
The website doesn’t require any agreement or affirmative action to be taken in respect of the terms and conditions. The use of the website, continuing to engage with or use the services provided is taken as the user agreeing to be bound by the terms and conditions, usually published somewhere else on the website. A common example of browsewrap agreements is in the ‘terms and conditions’ found in the footer of many websites.
It is worth noting that the Courts’ position on what constitutes which type of ‘-wrap’ agreement can differ to the generally accepted understanding of what is meant by clickwrap from an IT perspective, and emphasises the importance of having lawyers also review any proposed website layout and agreements.
Justice Beach in Dialogue confirmed that whether online agreements or terms and conditions are enforceable is a question of reasonable notice and manifestation of assent. He noted that the US Courts have a large body of case law on the subject, and that the Australian common law contains and applies similar principles.
Reasonable notice is an objective test to determine whether there was sufficient notice given so that a reasonably prudent person would understand that an offer to enter into a contract was being made. Did the person entering into the contract have actual or constructive notice of the provisions of the contract?
In considering whether reasonable notice has been provided, the courts will look at the layout and user interface of the website. Is the screen cluttered? Is the entire screen including the terms and conditions visible at once? Are the links to the terms and conditions in different colours or contrasting with the background? Are the terms and conditions spatially coupled with the ‘I agree’ or ‘Sign Up’ button? The layout of your website is critical not just from a user experience perspective.
The use of a hyperlink for the terms and conditions won’t preclude a court from determining that there is reasonable notice, provided that the links through to the terms and conditions are clear and conspicuous such that a reasonably prudent website user would have been put on constructive notice of them.
The fact that one does not read the terms and conditions does not mean that the user has not accepted them provided that the user is given reasonable notice.
Manifestation of Assent
Like the question of reasonable notice, the courts will apply an objective standard to whether there was a manifestation of assent by the user to the terms and conditions. If there has been reasonable notice to the user that a particular act, such as clicking a button, signifies that there has been acceptance of the terms and conditions, then if the user clicks the button, they are taken to have accepted all the terms and conditions even if they do not know what they are.
It was noted in dialogue that whilst internet commerce has created new and different situations for the courts to consider, it has not changed the requirement that a touchstone of a contract is the manifestation of assent either through writing or conduct.
In assessing internet contracts the Federal Court noted that the US courts place online contracting on “a spectrum of validity, with clickwrap and sign-in wrap agreements on one end of the validity spectrum and browse wrap agreements on the other.” In Dialogue, Justice Beach found that whilst there was a valid arbitration agreement formed using Instagram’s ‘sign-in wrap’ agreement, Instagram had waived its rights to rely on such arbitration clause. Instagram’s stay application was therefore dismissed. Should you require assistance in determining at which end of the spectrum your internet contracting is at, please contact us.
 Dialogue Consulting Pty Ltd v Instagram, Inc  FCA 1846