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Enforceability and Incorporation of Online Terms and Conditions

As the business world becomes increasingly more digital, more and more businesses are providing their standard terms and conditions online. Frequently, businesses will then attempt to incorporate those online terms and conditions into their written contracts.

There are many reasons why a company may want to provide their terms and conditions online. The benefits may include shorter contracts, reduced paper waste, ease of access and distribution, and desire to have uniform terms. However, is it enforceable when businesses utilize these types of hybrid arrangements? In other words, do online terms and conditions still create a binding contract?  

Generally, online terms and conditions incorporated by reference into a separate writing are enforceable. Courts typically look at whether:

(1) the parties had notice that the terms were to be incorporated,

(2) there is a clear reference to where the terms can be found,

(3) there is any objection to the terms at the time of entering the agreement, and

(4) the terms are emphasized.

Notice

In Manasher v. NECC Telecom, 2007 U.S. Dist. LEXIS 68795 (E.D. Mich. 2007), the court found that online terms and conditions were not incorporated into a contract. One of the primary reasons behind the court’s decision was that the parties did not have proper notice that the online terms and conditions were to be incorporated into their contract. Specifically, the attempted incorporation did not explicitly state it applied to the current contract and merely informed the parties of where they could find additional disclosures. In order to incorporate the terms, parties should state plainly and clearly that additional terms apply and the parties intend to incorporate the terms into the current contract.

Reference

Courts have found that online terms and conditions should be clearly referenced in the written agreement. Generally, this means that the language referencing online terms and conditions should lead to an exact location where the terms can be found. This should be as specific as possible. Parties should avoid attempting to incorporate broad groups of documents such as “all the terms and conditions found on my website.” Instead, parties should attempt to use a direct link, such as the online terms and conditions found at XYZ.com/terms-and-conditions, or something similar.

Objection and Emphasis

Finally, courts will consider whether parties have objected to the online terms and conditions at the time they entered into the contract and whether the language referencing the terms and conditions is emphasized. As a best practice, the language should not be in plain text, but rather bold and even capitalized.

It is important to remember that state law usually governs contracts, so different states may have additional requirements when it comes to the incorporation of online terms and conditions. Furthermore, traditional principles of contract law, including offer, acceptance and consideration, will still apply to these situations. For further guidance on contract formation and enforceability, please contact a Foster Swift business & corporate attorney.

Categories: Compliance, Contracts


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