Those Elusive “Clickwrap” Agreements
Last August, my daughter, Katie, moved into her first apartment after college — in New York City. Like the weather, the rental market was hot. When Katie and her roommate finally found an apartment in their price range, they knew they had to jump. Things came together quickly, and they moved in just a week later.
Everything was great… until the outside temperature started dropping. Because when they closed their windows, they quickly learned that the cigar bar directly beneath them wasn’t quite as airtight as one might hope. Within a few days, cigar smoke inundated their apartment.
It didn’t take long for Katie, now frantic, to call her attorney dad. So I asked her, “Do you have the lease?” Her response, “Um — no, I think we just clicked on some link at the agent’s site and accepted it with all the other paperwork.”
With no lease in hand, we didn’t even know what our options were. We did finally get a copy, along with the associated building policies, and to his credit, the landlord didn’t object when Katie asked to walk away. Still, it was a good reminder of how important it is to know (and understand) whatever you’re agreeing to.
The “I Accept” Button is Legally Binding
When things go awry (as they often do!), a business may need to refer to the agreement to ascertain its rights and obligations. For this reason, every business ought to have some basic policies and procedures in place that govern how and when it enters into these agreements and how the agreements are retained.
In our personal lives, we all click on and accept a range of contracts when we sign up for online services — such as Netflix, Uber, or Spotify — or when we use mobile applications from our bank, fitness center, gas station, etc. Businesses do too, but the stakes (and dollar amounts) are typically much higher.
And while the governing terms for these online services might not be negotiable either, a prudent business should consider the following when determining when and how it enters into and retains clickthrough terms…
Assume Valid and Enforceable
As a general rule, assuming certain basic requirements are met (which I won’t get into here), the clickwrap agreement will be valid and enforceable between businesses. In most cases, as long as a business has had the opportunity to review the terms (regardless of whether they are actually reviewed) and has indicated consent, the courts will recognize that such terms are valid and enforceable.
Transaction Size Is Not Necessarily Correlated with Potential Risk
I’ve seen businesses set monetary thresholds, below which transactions do not require review or approval by the company’s legal or procurement departments. In most cases, that makes sense — it would be wildly inefficient to require approval every time an employee buys office supplies online or orders lunch through a delivery app.
However, some instances, regardless of the size of the transaction, require additional scrutiny. Even though the dollars involved may be small, the risk to the company may be significant. For example, if your company will be storing sensitive customer or employee information with a vendor — information that if lost or stolen could result in liability to you — the expense associated with the service is irrelevant.
Ultimately, each business should consider those relationships where liability may arise despite the size of the transaction. In those cases, a mandatory review of the applicable terms and conditions is essential.
Which Employees have Authority? Are They Aware of Your Internal Process?
So, make sure there is a clear policy designating who can approve and under what circumstances. That way, those with authority are clear on what’s required, and those without authority don’t set you up for problems down the road.
Clickthrough agreements provide a convenient and expedited means for entering into a business arrangement.
Just make sure that in your eagerness to get going — whether in renting an apartment or signing up with an online service — you understand what you are agreeing to and establish processes and procedures for tracking those legally binding contracts.