Click Your Web Contracts With Caution
Introduction
Web contracts can come in the form of shrink-wrap, click-wrap and browse-wrap agreements. Each of these web contracts has its own different mechanisms to bind users to terms and conditions. The differences between these web contracts are as follows:
- Shrink-wrap:
- Commonly used in software licensing.
- Acceptance of contract occurs post-purchase, either when the package is opened or the software is installed.
- It is arguable whether this reflects clear and unequivocal acceptance by the user.
- Click-wrap:
- Requires users to click "I agree" or check a box to accept terms and conditions, before users can proceed with a transaction or access service on website.
- Browse-wrap:
- Users are assumed to have accepted the terms and conditions of website when they browse the website.
As more transactions are being conducted online and physical contracts are replaced by web contracts, users may challenge the validity of the web contracts and raise important issues regarding fairness and enforceability, especially in cases where users may not fully understand or review the terms of a contract before giving their consent and bind them to the terms and conditions online. Therefore, it is important for service providers to create a valid and enforceable web contract by using clear language, maintain transparency, ensure opt-in consent, and keep records of user's acceptance.
Among all the web contracts above, click-wrap agreement may be the best option for service providers as this type of contract proactively present policies and terms to users, and users need to explicitly acknowledge and agree that they have read and accept the terms and conditions of the contract. Likewise the normal physical contracts, web contracts in Malaysia also need to fulfill the elements under the Contracts Act 1950 namely offer, acceptance, consideration, intention to create legal relations, capacity and free consent.
Validity of Web Contracts
In Malaysia, the validity of web contracts can be seen under the Electronic Commerce Act 2006 (“Act”) whereby Section 2(1) of the Act provides that contracts for commercial transactions can be conducted through electronic means and such commercial transactions include transactions relating to the supply or exchange of goods or services, agency, investments, financing, banking and insurance (1). On the international front, the validity of web contracts is widely recognized as standard practice, as reflected in legal frameworks such as the Electronic Signatures in Global and National Commerce Act (ESIGN) and the Uniform Electronic Transactions Act (UETA) in the United States. These laws provide that web contracts are as legally binding as their paper counterparts.
Safeguarding E-consumers' Interest
To preserve the rights of e-consumers in Malaysia, Malaysia may consider adopting best practices from other countries. For instance, Article 11 of the EU Council Directive of E-commerce requires contracts to include an acknowledgment of receipt. This acknowledgment of receipt is a requirement for users to take measures by double clicking the “I Agree” button and the “I Confirm” button on the website to clearly establish users’ consent before a transaction is finalized and confirmed. By clicking the second “I Confirm” button, the contract is deemed as valid.(2)
Furthermore, users must review the terms and conditions provided on the website before giving their consent. This is important to note as failure to read such terms and conditions does not release them from being legally bound by the web contract. This principle was highlighted in the case of Open Country Dairy Ltd v Able Food Sdn. Bhd. [2021] 7 CLJ 716, which concerned a breach of contract for the supply of instant milk powder. The respondent argued that the sales terms on the website were not incorporated into the main contract. However, the court held that the terms, which were referenced in an email and accessible via a link, were valid and enforceable despite the respondent did not actually click or read them. In essence, a party can be bound by contract terms that are incorporated by reference, regardless of whether those terms were read or not.
Conclusion
In essence, service providers must ensure that all elements of a contract are fulfilled to create a valid and legally binding web contract. At the same time, users must understand the importance of reading online terms and conditions before giving their consent. Clicking “I Accept” or any similar button without reviewing the terms may lead to unintended legal obligations.
Reference
(1) Section 5 of the Act
(2) Nooraneda Mutalip (2015). Adequacy of Contracts Act 1950 in Governing the Formation of E-contracts in Malaysia: Uncitral Model Law in E-commerce as Benchmark [2015] 1 LNS(A) lxxxi as cited in Vincent, A. (2000). Commentary of Formation and Enforceability of Contracts: The UNCITRAL Model Law on E-commerce and the EU Directive. World Internet Law Report 01/02 [1976] 2 MLJ 9.
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Suhada Sapri
Associate (Commercial & Corporate) | NSA Legal
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