Five Easy Ways to Make Online Contracts More Enforceable

Author:Mr Edward Naughton
Profession:Holland & Knight LLP

Not very long ago, it was an open question whether

an agreement entered over the Internet was an enforceable contract.

There were plenty of good reasons why such agreements shouldn't be viewed

any differently than agreements on paper, but there were few laws or cases

that addressed the issue.

As consumers and businesses engage in billions of

dollars worth of business online, electronic commerce is hardly even news

anymore. Recent legislation, including the federal E-SIGN Act and the

state Uniform Electronic Transactions Act, remove any doubt that electronic

agreements and signatures are as enforceable as transactions on paper.

Still, the fact that electronic agreements may be

enforceable in principle does not mean that a particular agreement is

enforceable in practice. Here are five things you can do to increase the

odds that a court will enforce an electronic agreement.

Make sure that the transaction is one that can be

conducted electronically. Although E-SIGN and UETA authorize a vast range of

commercial transactions, there are some exceptions. The cancellation or

termination of utility services or insurance benefits, for instance, are not

authorized by E-SIGN. Similarly, E-SIGN does not allow notices of

default, acceleration, repossession, or eviction under a rental agreement or a

credit agreement secured by a home mortgage to be sent electronically.

UETA states that it does not apply to UCC transactions except those under

Article 2 and 2A. Virtually all states have laws that govern the

requirements for wills, codicils and testamentary trusts that are not affected

by E-SIGN or UETA.

Display all of the terms of the contract. A

party seeking to enforce a contract must show that there was mutual assent to

the terms of the contract. If the other party does not have the

opportunity to review the terms before executing it, enforcing the contract

will be more difficult. Thus, it is important to display all of the

terms of the contract to the other party before asking for acceptance so that

the other party cannot claim that it did not know to what it was agreeing.

Many agreements cannot be displayed in a single

screen. It is typically sufficient to present the contract in a manner

that allows the user to scroll through the agreement. Just as many

people do not read written contracts before signing them, however, many users

do not take the time to scroll through an entire agreement before clicking

“OK.” If the transaction is important enough - such as an


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