'Wrapped' Up: Hidden Terms and the Corporate Risk of Online Contracting

Abstract

Managing contractual obligations is a key role of in-house legal departments. Many times, the process is clear: prospective agreements are reviewed, and obligations are identified and communicated to the appropriate intra-company stakeholders. It is a cut-and-dry exercise that allows every potential obligation to pass before the eyes of in-house attorneys. Risks are noted, analyzed and mitigated. But the Internet has greatly increased a company’s exposure to contractual obligations. In fact, every time an individual accesses a webpage in his or her capacity as an employee, the company could be at risk of incurring obligations that the legal department does not become aware of until it is too late. This is due to the prevalence of ‘clickwrap’ and ‘browsewrap’ agreements (referred to collectively as ‘wrap’ agreements), which allow a party to enter into a contract over the Internet by clicking an ‘agree’ button or merely accessing a webpage. U.S. Courts have shown a willingness to enforce such agreements against corporate entities. This paper explores the mechanics of ‘wrap’ agreements, as well as the U.S. case law that has developed around these agreements. It also discusses risks that companies should be aware of, arguments for avoiding enforcement and ways to prevent employees from unintentionally entering into such agreements.