Over the past decade, the Internet and the web have made new breeds of electronic agreements necessary. E-mail and the web have exploded as means of personal and business communication. Think about it – when was the last time you wrote a letter to someone (besides a Christmas or birthday card)? In business, e-mail and the web are sometimes the methods used to negotiate and agree on the terms of a transaction. For online businesses, these are virtually the only methods of communicating and carrying out transactions.

The question for these businesses is, “Are electronic contracts legally enforceable?” Assuming all of the elements to establish a traditional contract are present, an email or web contract can be a valid and enforceable agreement.

A valid traditional contract requires four elements:

1. Agreement – To have an enforceable contract, there must be an agreement between the parties. This requires an offer and an acceptance of that offer.
2. Consideration – The agreement must be supported by something of legal value given in exchange for the promise.
3. Contractual capacity – The parties to a contract must be able to legally enter into a contract. For example, minors are not legally capable of entering into a contract, so they lack contractual capacity.
4. Lawful object – The goal of a contract must be lawful. Contracts to commit a crime or contracts against public policy are void.

Clickwrap Agreements
The term “clickwrap” refers to agreements that obtain a user’s affirmative acceptance electronically. You see clickwrap contracting virtually every time you install a piece of software. During the installation, you are usually presented with check boxes to either “accept the terms of the License Agreement” or “not accept the terms of the License Agreement” along with a link to view the text of the end-user license agreement.

But, the use of clickwraps is not limited to software. They are often used for acknowledgements of assent to contracts for online services, too. In those cases, the text usually invites the user to click to accept the terms of a service agreement covering the online offering.

Generally, courts have treated clickwrap agreements as valid and enforceable contracts. Moreover, the trend over the past decade has been to find these agreements enforceable even if the contract is first presented after the fact – provided that the customer must be given the right to return the goods for a full refund if not satisfied with the contract terms.

Electronic Signatures
Over the last decade, the law has adapted to the reality that most customers demonstrate their assent to terms of an online agreement document with no more than clicks of a mouse. Many states have passed laws making electronic signatures binding to the same extent as a traditional hard copy signature. In 2000, the U.S. government enacted the Electronic Signatures in Global and National Commerce Act, or E-SIGN, recognizing a digital signature on interstate and foreign contracts as legally binding.

An electronic signature is defined under E-SIGN as:

“an electronic sound, symbol, or process attached to or logically associated with a contract or other record and executed or adopted by a person with intent to sign the record.”

This broad definition means that virtually any form of electronic assent can constitute an effective electronic signature. E-SIGN also provides that a contract “cannot be denied legal effect … solely because it is in electronic form.”

Electronic signature laws mean that most commercial contracts in the United States can be digitally signed and will not be held unenforceable simply because the agreement is in electronic form. There are some exceptions, though. For example, you cannot convey real estate or execute your will with a click.

Summary
Electronic contracts allow a single company to be a party to millions of contracts. They make mass contracting fast, efficient and very low cost, but care must be taken to ensure the traditional elements of a contract are met to provide to ensure enforceability.