To make on online contract legally binding there must be an offer, acceptance, an intention to form legal relations, and certainty of terms. Offer, acceptance and incorporation of terms are of particular importance when forming a contract online. This piece is going to briefly discuss the formation of a contract online.
Offer and acceptance:
A websites terms and conditions should give the trader control over the terms of the contract. The terms and conditions often clearly state that by submitting an order the customer is making an offer. They should also clearly describe when the trader is regarded as having accepted that offer. Such as, the offer is accepted when the trader issues the customer with an order confirmation email, or when the goods are dispatched.
Incorporation of terms:
It is vital that the terms of the contact are appropriately brought to the customers attention prior to the completion of the contract. Definitive guidance on how the terms and conditions should be incorporated online has not been given by the English courts. However, a common and effective method used by many traders is known as a click-wrap contract or, an end user licence agreement in the context of software licence agreements. A click-wrap contract is achieved by designing the website so that the customer is unable to complete their order until, they have scrolled down the full terms and conditions on the screen and then clicked an ‘I accept button’. I am sure most people will have experienced this whilst shopping online.
The two other common methods used are a browse-wrap contract and a shrink-wrap contract. A browse-wrap contract is when the user is plainly notified that by continuing to use the software, they will be bound by specific terms and conditions. This is done without the user having to perform a positive action to accept them. A shrink-wrap contract is when a user buys a physical software product and the terms and conditions are either, contained with the packaging or, in a file that must be opened during installation.
You should be aware though that in a business to consumer context, the Explanatory Notes of the Consumer Rights Act 2015, state that browse-wrap contracts are unlikely to be deemed contracts capable of placing obligations on the consumer. This is because there is no valid acceptance like there is with a click-wrap contract.
Shrink-wrap contracts are also unlikely to be enforceable against the consumer on the basis that they are possibly unfair. Schedule 2 of the Consumer Rights Act 2015 lists terms which could be considered unfair in consumer contracts. This includes, ‘a term which has the object or effect of irrevocably binding the consumer to terms with which the consumer has had no real opportunity of becoming acquainted before the conclusion of the contract.’
However, both browse-wrap and shrink-wrap contracts could be considered a ‘non-contractual notice’. This is a form of warning to the consumer which could for example, aim to discharge a duty of care that the website operator may otherwise have encountered and, can act to grant a unilateral licence to use the software. Even as non-contractual notices both these contracts still need to comply with Part 2 of the Consumer Rights Act 2015 (unfair terms).
In a business to business context it is also unlikely that a browse-wrap contract would be legally binding as there is no opportunity for acceptance of the terms. It has been unclear as to whether a business to business shrink-wrap contract is enforceable.
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