Enforceability of Online Contracts in Australia

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In recent years, the efficiency and market accessibility of electronic commerce has led to a boom in businesses who prefer to conduct their transactions over the internet. In light of this trend, it is important for business-owners to know the legalities around enforceability of online contracts in Australia.

Two common methods of accepting terms and conditions of an agreement online are the click-wrap agreement and the browse-wrap agreement.

A click-wrap agreement is an electronic agreement where the terms and conditions of the agreement are located on the same page as the “I agree” button. Consumers are usually required to scroll through all the terms and conditions and then take positive action by clicking “I Agree” before being able to proceed. This form of agreement is highly likely to be enforceable as a contract.

However even in a click-wrap agreement, careful thought needs to be given to a number of issues such as:

– when is the contract formed? Is the merchant making an offer online that the customer accepts (that sees the formation of the contract at that point) or is the customer making an offer which may then be accepted or rejected by the merchant. The Terms & Conditions will be need to be tailored accordingly.

– if the contract is formed at the time of clicking “I Agree” other Terms & Conditions cannot be added later.

– do the Terms & Conditions contain clear rights of the merchant not to supply in certain circumstances?

–  do the Terms & Conditions contain clear return and refund terms that are compliant with the law in Australia?

A browse-wrap agreement is where the terms and conditions are not on the same page as the “I agree button,” and can be accessed by a hyperlink on the same page. The consumer is normally not required to access the hyperlink and view the terms and conditions before being allowed to proceed with the contract. This form of agreement is less likely to be enforceable as a contract.

The same rules of paper contracts also apply to electronic contracts. It is therefore important to consider two landmark cases in the law of contracts.

In L’Estrange v Graucob[1], the court decided that, in the absence of vitiating factors such as fraud and misrepresentation, a signature is taken to fully bind the consumer to all terms and conditions of the contract. It is still unclear in Australia as to whether modern technological advances, such as digital signatures, count as a signature for the purposes of the rule in L’Estrange[2]. Therefore, business owners should construct their website in a way that provides reasonable notice prior to the formation of the contract, satisfying the rule in Thornton v Shoe Lane Parking[3].

Business owners should therefore ensure that all steps are taken to ensure the arrangement of the terms and conditions and the “I agree” button express an intention for the terms and conditions to be wholly incorporated into the Contract formed with the customer. Best practice would see:

  • The customer is required to scroll to the end of the terms and conditions (in a scroll box for example) before being allowed to proceed, establishing reasonable notice of the contract’s terms and conditions.
  • The terms and conditions are displayed on the same page as the “I agree” button, but the “I agree” is located at the base of the terms and conditions, once more establishing reasonable notice of the contract’s terms and conditions.
  • Any unreasonable terms and conditions should be bolded or highlighted to draw added attention.[4]
  • An “I have read the terms and conditions” tick box should be assented to (and left blank by default, requiring an additional positive step by the customer) before being allowed to click the “I agree” button. This is to provide a visible mark to the contract[5] and emphasize the user’s agreeability to the contract.[6]

A browse-wrap agreement will place the vendor in a weaker legal position because it does not provide the same degree of reasonable notice to the user, and are not recommended for business owners.

Business owners will also need to take into consideration the application of the Australian Consumer Law (ACL) on their online standard form contracts. Particular attention should be given as to whether any of the contract’s terms may be unfair contract terms.

Our lawyers regularly advise clients on eCommerce legal issues. A conference, with one of our lawyers, by phone or in person, is often enough to provide you with peace of mind that the settings are correct. Please contact us today to book an appointment with one of our lawyers.

For more information regarding the Enforceablity of Online Contracts or Click-Wrap Agreement

Please contact our Business Development Team or call us on (07) 3252 0011 to book an appointment with one of our specialist Commercial Lawyers today.

[1] [1934] KB 394.

[2] Elizabeth Macdonald, “Incorporation of Standard Terms in Website Contracting – ‘Clicking I Agree’ (2011) Journal of Contract Law, 198, 199-210.

[3] [1971] 2 QB 163

[4] J Spuring v Bradshaw [1956] 1 WLR 461; The “red-hand rule”.

[5] In re Cunningham (1860) 164 ER 1491

[6] Peekay v Intermark Ltd v Australia and New Zealand Banking Group Ltd [2006] 2 Lloyd’s Rep 511; Contractual Estoppel