How to Avoid Short-Circuiting Electronic Contracts

You’re probably familiar with electronic contracts that require you to scroll down and “accept here” before you’re able to download something from the Web or are able to move on to the next screen in an online transaction. Yet what some businesses don’t realize is that not all online contracts are enforceable.

If you want to avoid sleepless nights, you’ll want to make sure all of your bases are covered.

In the United States there are three requirements that must be satisfied before a contract is created: there must be an offer, there must be acceptance, and there must be some form of consideration.  In cyberspace, as in the brick and mortar world, all three elements must be successfully met. 

Mess any one of them up, and there is no enforceable deal.

Make Your Terms and Conditions Accessible

Your offer needs to be clear.  Besides identifying the item being acquired, the offer also includes terms and conditions.  Reputable online businesses protect themselves by requiring the user to acknowledge that they agree to the terms and conditions of the transaction. 

Acknowledgments can be achieved in many ways.  Among the most popular are the terms and conditions pages that require you to scroll through all of language because the “accept” or “acknowledge” box is strategically placed at the end of all the verbiage. 

Another popular method is to have a highly visible link to the terms and conditions next to the acknowledgment check-off box or button. 

Either method lets you easily find and read the details if you’re so inclined.  By the way, as a consumer, not reading the terms and conditions doesn’t get you off the hook if you check-off that you agree and then later decide you don’t. But we’re wearing our business hats here, and as a business you want to make your terms and conditions easily available.  The last thing you want to do is play coy or hide the terms and conditions.

And definitely don’t do what Cvent did. The event planning software company buried its terms of use behind a link that appeared in tiny type next to 27 other tiny type links at the bottom of its Web page.  In a subsequent lawsuit, a court ruled that no reasonable person could be expected to find the terms at the bottom of the page under those conditions. As a result, the court invalidated the contract. 

Connect the Dots Between the Transaction, the Signer, and the Identity of the Signer

Properly processing a credit card payment request requires verification and authorization of the account holder.  It’s an important security precaution.  It’s therefore very important that you, as the business owner, make sure you can reasonably identify who is entering into the agreement.  Good online shopping cart programs do this for you.  But if you try to create something unique on your own website you need to be aware of authentication issues that can negate the “acceptance” requirement of a valid contract.

E-commerce lets you enter into purchase agreements and transfer payment with the click of a mouse at any time, day or night.  Make sure those customers don’t slip through your fingers because of glitches in your online contract process.  It’s worth having your local business lawyer review your online setup.

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Hanna Hasl-Kelchner is a business legal strategist, author, speaker and trainer who teaches and coaches business people on how to avoid lawsuits.  She is the author of The Business Guide to Legal Literacy: What Every Manager Should Know About the Law and forthcoming How to Turn Your Business into a Litigator’s Chew Toy: Taking the Bite Out of Legal Liability.  Follow Hanna on Twitter @nononsenselawyr and her Chew Toy sidekick @acelitigatorwit.  Subscribe to this blog’s RSS feed to get the latest updates.