The Enforceability Of Boilerplate Electronic Agreements

Electronic agreements, formed through some sore of internet activity, are very common. You probably encounter them all the time. An agreement to an internet contract can occur through various methods, including by simply just entering a page, by clicking on a link, or by specifically checking an "I agree" box. But just how enforceable are these electronic internet agreements, which people often don't realize they've agreed to and even fewer actually read?

Internet commerce has not fundamentally changed the principles of contract. Iowa law requires an enforceable agreement to contain an offer, acceptance, and consideration. An offer is a manifestation of willingness to enter into a bargain, so made as to justify another party in understanding that the party’s assent to that bargain is invited and will conclude it. The parties to a contract must manifest their assent to be bound and do so in a manner that is sufficiently definite to be enforceable.

In translating the principles of contract formation to the internet, the relevant inquiry is (1) whether the web pages presented to the consumer adequately communicate all the terms and conditions of the agreement and (2) whether the circumstances support the assumption that the purchaser receives reasonable notice of those terms. The internet use must have knowledge of the electronic contract's terms in order to be bound by them. Courts may not enforce secret electronic terms or terms that the internet provider did not make readily available to the user.

When the assent to terms of a contract is largely passive, as is often the case with electronic contracts of adhesion, the contract-formation question will often turn on whether a reasonably prudent offeree would be on inquiry notice of the terms at issue. When there is no actual notice of contractual terms, offerees are still bound by the provisions if they are on inquiry notice of the terms and assent to them through the conduct that a reasonable person would understand to constitute assent. Inquiry notice is actual notice of circumstances sufficient to put a prudent man upon inquiry.

In making a determination about whether a prudent offeree was on inquiry notice of the terms of a contract, the clarity and conspicuousness of the terms are important. The design and content of the website and the putative agreement’s webpage are also factors. Courts disregard and do not enforce links to terms and conditions that are found at the bottom of a page or placed in obscure places. The conspicuousness and placement of a “Terms of Use” hyperlink, other notices given to users of the terms of use, and the website’s general design all contribute to whether a reasonably prudent user would have inquiry notice of a electronic adhesion agreement.

Courts have developed several general principles in trying to apply standard contract law to electronic boilerplate agreements. First, terms of use will not be enforced when there is no evidence that the website user had notice of the agreement. Second, terms of use will be enforced when a user is encouraged by the design and content of the website and the agreement’s webpage to examine the terms clearly available through hyperlinkage. Third, terms of use will not be enforced when the link to a website’s terms is buried at the bottom of a webpage or tucked away in obscure corners of the website where users are unlikely to see it.

Harley Erbe