Clickwrap Non-Compete Agreement May be Enforceable.

Posted by Jeanine Gagliardi on Thu, 05/15/2014 - 04:00

As the internet grew and took over commerce, businesses and lawyers wrestled with how to make a contract without paper documents and signatures. Turns out, the law was very adaptable to new technology. You need to establish that both parties assent to the terms. But people can show their assent by virtually any means. A signed piece of paper was merely a customary way.

As paper has become less used, other means of showing assent have become more common. Terms of use posted on a website comprise a contract imposed on users. Users show their assent by continuing to use the website after some notice of the terms. This kind of contract is called a “browsewrap” agreement. Another type of contract is a “clickwrap” agreement. A clickwrap agreement requires some form of affirmative action by the user, such as clicking a button titled "I Agree".

A question that arises at the intersection of the law governing non-compete agreements and the law governing contracts is whether a clickwrap non-compete agreement is enforceable. A Delaware court recently held that it is.

In the case, a business sued a former employee for violating a non-compete agreement. The terms of the agreement were presented to the employee on a website to which the employee had been directed in order to accept a bonus. The website contained:

(1) A checkbox underneath a link to the agreement. Written in bold next to the checkbox was the text “I have read and agree to the terms;” and

(2) An accept button beneath a bolded instruction that, to complete the acceptance of the bonus, “…you must read and accept the terms outlined in the document posted above…Your…acceptance will be final once you click Accept.”

The court held that the employee manifested assent to the terms by checking the box and clicking the accept button.

Although the general contract law relied upon by the Delaware court is the same as that used in pretty much every jurisdiction, it is not certain what a court in another jurisdiction would do with the same facts. The enforceability of non-compete agreements remains a complex issue that requires assessment of all of the circumstances of each case.

Still, there are some things that website owners can do to increase the likelihood that clickwrap agreements will be enforced. They include:

(1) Using plain English that can be understood by the average user;

(2) Requiring users to navigate through all of the terms of the agreement before getting to the "I Agree" button; and

(3) Including both an accept and a decline button at the end of the terms.

These steps will be useful evidence when demonstrating to a court that the counterparty assented to the terms.

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