You agree to online contracts all the time

You sign online contracts every time you browse the Web, install some application or do just about anything on your devices. This is how it works.

How many online contracts did you agree to, today? Everything in this day and age is done online – whether it is shopping, browsing Wikipedia, sharing your thoughts on twitter or posting pictures on Facebook. In fact it has become so prevalent that people of absolutely all ages are occupied almost throughout the entire day with updates on their phones, tablets, laptops and PC’s. We are always connected and with that comes its own quagmire of “what am I actually agreeing to?”.

How you agree to so many online contracts

During your online shopping spree or when uploading a picture of yourself and your beloved feline companion, you have almost certainly come across an “I agree” button. Whether it is agreeing to provide a website with your location and/or email address (for location accuracy purposes) or whether you are agreeing that you are actually entitled to upload the picture, you are agreeing to “something”. That “something” is typically an online contract.

And, instead of fully understanding what we are agreeing to, we have simply become a species of “yes people”, only to happen to click the “I agree” button just to get your music download or complete your purchase. But what does that actually mean? By clicking on that ever increasingly intimidating “I Agree” button, we as online users may be binding ourselves to legally enforceable contracts with the online service provider. And I don’t know about you, but that really scares me.

But did we, as online users, actually “agree” to anything, really? As with any legal agreement, both sides, including the user, must agree to the online contract in the form of the terms and conditions being offered by the relevant online service you are currently using, whether it is Facebook or eBay, in order to create a legally enforceable “agreement”.

Understanding the difference between click-wrap agreements v.s browse-wrap agreements

Some service providers ask for your agreement by requiring you to click the “I Agree” or “Accept” button after being shown the agreement (i.e. a “click wrap” agreement). A common example of a click-wrap agreement is where a consumer is transported, usually by clicking a hyperlink, to a webpage containing terms and conditions which will be included in the agreement, where there is normally (at the end of the page) a button with the phrase “I agree” or “Accept” printed on or next to it.

I agree Screenshot - WTL blog post

As its name suggests, a click-wrap agreement requires a positive act from a consumer, still other service providers, try to characterise your simple use of their website as your “agreement” to a set of terms and conditions buried somewhere on the site, a sort of “what agreement are you talking about” site (i.e. a “web-wrap” or “browse-wrap” agreement). The browse-wrap is similar to the click-wrap agreement, and is often used under similar situations, except for one rather important difference.

Not all online contracts behave the same way. Where a click-wrap agreement actually requires a positive action to indicate agreement, a browse wrap agreement does not. It is sneaky that way.

Sometimes the terms will be displayed on the web page being used and other times it will not. A kind of “out of sight out of mind” scenario. An online user is not required to click on the terms and conditions if it is provided via a hyperlink, and there are very few ways to actually ascertain whether or not such a user was made aware of the terms and conditions. There are other similar themes as the click wrap or browse wrap, such as mandatory checkboxes (“check this box to indicate your agreement to our terms and conditions”) or email notices (“by continuing to use our service, you agree to the recent modifications to our terms of service”).

But thankfully not all methods, be they click-wrap or browse-wrap, are good enough to create “legally binding contracts”. I sense a collective sigh of relief.

But when are online contracts binding?

But when or how will such online interactions constitute binding agreements? The consensus here depends on which region you are in – by participating in online transactions in whichever form they are in, we can all basically assume that the interactions here will most likely be cross or trans-border.

This does create some difficulty in the sense that some territories, like The United States, are more evolved in this aspect than others. For example in South Africa there is very little to no case law on this matter. In the UK and EU they too have very limited case law or Legislation based on what binds a user to online terms and conditions except to say that they have established one rule

an online user should be provided with all terms and conditions in a manner that is readily available and easily accessible without inappropriately or irrevocably binding a consumer to terms he had no real opportunity to become acquainted with.

It seems rather polite of them and a decent way to conduct oneself when interacting online. Could one say “typical of the British”? Whereas the US have accepted as a rule of thumb, the click-wrap agreement for its obvious enablement of the user to assent to the website’s terms and conditions. In other words the user, by clicking that “I Agree” button acknowledges that they intend to bind themselves.

In South Africa we are sort of playing catch up with both the US and the UK. In this regard and with the application of our contract law as well as our Common Law, one needs to look at the intention of the parties as well as the actual agreement of the parties. With click-wrap agreements it is quite easy to ensure that the user indicates their agreement by making a mark in the relevant space.


In our Electronic Communications and Transaction Act, an electronic signature is defined as that of “data attached to, incorporated in, or logically associated with other data and which is intended by the user to serve as a signature”. It is therefore accepted that the function of a signature is some kind of personal mark which may be used to identify a party and to convey or confirm an intention to be bound. Common knowledge, I would assume.

In this context, this “mark” as an indication of a person’s agreement is the same as a click-wrap agreement. This in essence leads one to believe that the click-wrap agreement is more than just an “I Agree” Button, but rather an “I have been shown the terms and conditions, have read them and have agreed to be bound by them” button. If you are like me, I immediately think of my iTunes account and the constant need to “accept” their terms of use when updating your version of iTunes account. If I am absolutely honest, I have never actually read the terms of use before clicking “accept”. As astounding as that sounds from someone of my vocation, all I really want to do is download my music or update my WhatsApp application.


ALWAYS read the terms and conditions

Once I have finished writing this article, I think I will go avail myself (really) of Apple’s user terms and conditions and next time I click on the “I agree” or “accept” button make sure that I well and truly “Agree” or “Accept” because what I have learnt from writing this article (and which should be obvious) is that with everything, be it a written, a formal Contract or online terms and conditions – read before you click that button, it may hold more consequences than you think!


Your website terms and conditions may contain prohibited terms

I’m working on a particularly interesting challenge at the moment which was introduced by proposed regulations to the Consumer Protection Act which goes fully into force in a couple months. First a little background. The Consumer Protection Act will have a fairly radical impact on consumer rights in South Africa. One of the better publicized influences (and probably one of the more understated and yet more important ones) is the requirement that contracts be written in plain language. This requirement, alone, should have a dramatic benefit for consumers who have been confused by legal jargon for far too long. This is particularly important as contracts become increasingly complex to accommodate new legislation like the Consumer Protection Act, ironically.

The Consumer Protection Act prohibits a number of practices and this includes certain types of contractual terms. Section 48 of the Act deals with “Unfair, unreasonable or unjust contract terms” and section 48(1)(a) has the following to say:

48. (1) A supplier must not—

(a) offer to supply, supply, or enter into an agreement to supply, any goods or services—

(i) at a price that is unfair, unreasonable or unjust; or
(ii) on terms that are unfair, unreasonable or unjust;

The Act, itself, doesn’t give too many specific examples of which terms would be considered “unfair, unreasonable or unjust” although it does mention that terms which are “excessively one-sided in favour of any person other than the consumer or other person to whom goods or services are to be supplied” would be considered problematic.

The Trade and Industry Minister published draft regulations to the Consumer Protection Act for comment in November and one of the provisions in these draft regulations caught my eye. The draft regulations deal with a number of issues (the draft regulations run to about 96 pages) and right at the very end is section 56 which gives some substance to the Consumer Protection Act’s prohibition on contractual terms which are considered to be unfair and unreasonable. Section 56(o), in particular, proposes deeming the following types of clauses to be unfair:

enabling the supplier to unilaterally alter the terms of the agreement including
the characteristics of the product or service

This seems fair, suppliers should be able to change contract terms and conditions that consumers have reviewed and agree to. Well, they seem fair until you consider that website terms and conditions are contracts with the website’s users and visitors and they generally contain a clause which allows the website owner to change the terms and conditions unilaterally. This common clause in website terms and conditions has an important, practical function. It allows the website owner to make what may be important changes to its contract with its users which may be necessary for the website’s proper functioning and operation without the need to negotiate the changes with each and every user and visitor individually. Ordinarily, parties would be required to negotiate amendments to their contracts and agree on them for them to be of any force and effect. In the context of a contract between a consumer and a supplier in the ordinary course, requiring that the parties negotiate and agree on changes to their agreement is beneficial to the consumer because it means the consumer won’t find herself subject to terms she didn’t agree to when buying the product or requesting the service.

Certificate of the Slaves on the Syrena, 05/12/1820 (page 1 of 2)

The problem is that this requirement doesn’t scale very well, certainly not with the sorts of numbers of consumers (aka, users and visitors) who frequent popular websites. In fact, requiring website owners to negotiate changes with users and visitors (casual visitors can probably be handled a little differently to ongoing users, I think) would likely result in multiple versions of the terms and conditions, each containing variations particular to each consumer’s negotiations with the website owner. The complexity and variation of the terms and conditions would only increase in time and managing these contracts would become practically impossible. The only way to circumvent this is a clause in the contract (aka, the website terms and conditions) which enables the website owner to change terms and conditions unilaterally. Unfortunately, this could become a prohibited practice if this line item remains in the published regulations.

This presents a challenge to website owners who may soon find that this often understated clause could well become an unfair or unreasonable term and, effectively, prohibited. I have a couple ideas how to deal with this but the one risk is not implementing a solution which doesn’t amount to another prohibited practice under the Act, for example a term which has as its general purpose or effect defeating the purposes or policy of the Consumer Protection Act (section 51(1)(a)(i)). It is an interesting challenge and short of a workable contractual mechanism or legislation relief, this may be something for a court to address in years to come.

On a related note, it is also worth bearing in mind that this is not the only respect in which the Consumer Protection Act impacts on website terms and conditions. The Consumer Protection Act includes a host of requirements which necessitate a number of changes to website terms and conditions, particularly those dealing with liability limitation mechanisms, so be sure to have your website terms and conditions reviewed and amended.

Digital signatures and contracts in South Africa

What is the status of digital signatures in South Africa? Are digital contracts legally binding contracts? The answer to both questions is yes, but …

Duncan McLeod asked the following question in response to my post titled “Corporate laws to go digital“:

I was wondering what the precedent was for digital signatures in South Africa. For example, is it possible to digitally sign a contract using public/private key type signatures and have that accepted in a court of law?

I was about to respond with a comment of my own and thought I’d rather talk a bit about digital signatures here instead.

The starting point for a discussion about digital signatures in the context of South African law is the Electronic Communications and Transactions Act which was passed in 2002 or so. The ECT Act started with the basic premise that digital communications are no less valid than paper based communications. An important consideration that was taken into account when the Act was drafted is that the Act should be technology neutral so that it isn’t quickly dated as technologies evolve. This translated into an Act that sets out certain features and technology neutral requirements for things like digital signatures which can be used to determine whether the signature concerned (in this example) are satisfactory.

One important consequence of the Act is the fact that a data message, like an email, has just about the same effect as a fax or letter in our law:

Information is not without legal force and effect merely on the grounds that it is wholly or partly in the form of a data message. (Section 11(1))

When it comes to signatures the Act makes reference to an advanced electronic signature which is a specific form of digital signature that has been accredited by the Accreditation Authority, or the Director-General of the Department of Communications. An advanced electronic signature is required where a law specifies that a document be signed. What is also interesting is that where an advanced electronic signature is used there is a presumption that the document concerned has been properly signed unless the contrary has been proved.

Where there is no legal requirement for this sort of signature, a ‘normal’ digital signature can be used to sign agreements, letters and other documents which you may wish to signify your assent to. In the commercial sphere, parties are free to contract electronically and to sign agreements using digital signatures if they wish. It would be up to the parties to the agreement to determine which forms of digital signature they require in order for the agreement to be properly signed. The Act specifies two requirements where the parties to the agreement have not specified the form of digital signature to be used:

3) Where an electronic signature is required by the parties to an electronic transaction and the parties have not agreed on the type of electronic signature to be used, that requirement is met in relation to a data message if-

a) method is used to identify the person and to indicate the person’s approval of the information communicated; and

b) having regard to all the relevant circumstances at the time the method was used, the method was as reliable as was appropriate for the purposes for which the information was communicated.

Basically what this means is that the rules that we apply to the signature of an agreement recorded on paper are applied to digital versions as well. When you sign an agreement your signature is a means to identify you as the signatory. Your signature is also applied to a point in the document where it is clear that the presence of your signature signifies your assent to the terms of the agreement.

Should the digital signatures on an agreement or other document be contested in court, the Act says that the mere fact that the agreement is recorded in a data message (or in digital form) does not invalidate the document. What is required is that the court evaluate the integrity of the data message and, most likely, the system it was generated and transmitted on to ensure that the data message has not, for example, been tampered with and was, in fact, signed by the purported signatory and that this has been verified.

When it comes to the admissibility of data messages, generally, the Act provides as follows:

A data message made by a person in the ordinary course of business, or a copy or printout of or an extract from such data message certified to be correct by an officer in the service of such person, is on its mere production in any civil, criminal, administrative or disciplinary proceedings under any law, the rules of a self regulatory organisation or any other law or the common law, admissible in evidence against any person and rebuttable proof of the facts contained in such record, copy, printout or extract. (Section 15(4))

This clause is an example of how the Act seeks to achieve parity between paper based documents and their digital cousins by catering for the inherent features of paper documents that we take for granted and ensuring that users of data messages are given a leg up, so to speak, and empowered to use data messages as replacements for paper documents with confidence.

I seem to recall that the South African Post Office was supposed to have been accredited as an authentication service provider and authorised to issue advanced electronic signature. As far as I am aware, this has not happened and there don’t appear to be any service providers authorised to issued advanced electronic signatures as contemplated in the Act. When it comes to ordinary digital signatures, you can obtain these from various certification authorities including Thawte and Verisign (Thawte was started by Mark Shuttleworth and who made his initial fortune in the deal to sell Thawte to Verisign).

This post is really just a summary of some of the provisions of the Act pertaining to digital signatures and their commercial application. The Act is far more involved and deals with issues that go beyond the subject matter of this post.

I am interested if anyone has been using digital signatures either in emails or to sign documents and what your experiences have been so feel free to comment below and let me know.