Protecting Your Ecommerce Company with Enforceable Online Contracts and Class Action Waivers


The rise of ecommerce has brought with it unique legal questions—among them, how do companies ensure that contracts formed online are valid and enforceable? In this presentation, we delve into the world of click-wrap, scroll-wrap, and hyperlinks to provide concrete guidance on the best ways to get agreement from your customers online. We also discuss the important opportunity that ecommerce companies have to help protect themselves from class action litigation through the careful use of provisions requiring arbitration and class action waivers.

Key Takeaways

  • Class action litigation is growing with nearly 60% of US companies facing some type of class action lawsuit. Carefully crafted class action waivers in customer agreements and employee contracts avoid most class action litigation.
  • In order to maximize your chances of success with class action waivers in arbitration clauses, you have to (1) make sure you get the language right; and (2) make sure you actually have agreement to the arbitration provision.
  • In terms of the language, arbitration requirements and class waivers historically have been disfavored by courts. However, under the Federal Arbitration Act, rules that limit the right of parties to agree freely to arbitrate are preempted. At the same time, generally applicable contract defenses are preserved so long as they do not unnecessarily burden the right to arbitration.
  • In order to avoid challenges based on state contract doctrines, such as unconscionability, it is important to draft the provisions in a consumer-friendly manner, so that it is clear that individuals who have claims against the company have a genuine opportunity to have them addressed. There are many pitfalls in drafting arbitration provisions and class waivers and the case law is evolving, so it is important to keep track of developments. 
  • Once you have the language right, you also have to make sure you have clear agreement. The good news is that electronic agreements are fully enforceable, so long as you have a clear offer and require affirmative steps to indicate acceptance. Pay special attention to the “call to action” language that informs the consumer that by taking some step (e.g, taping the “place your order” button, clicking a check box, etc), they are indicating their agreement to terms, including the arbitration agreement.

Note: This presentation was one of the most popular in the 2019 Technology May-rathon webinar series.