What does lack of notice mean in contracts?

Lack of notice is a major problem for contracts—especially online agreements. If the person signing does not know exactly what they agree to, it can create an unenforceable contract. A court is likely to decide the agreement is not valid if the terms are buried or hidden in any way.

There are ways to avoid this common problem. A sophisticated design of online agreement like clickwrap can avoid the “lack of notice” argument and create an effective and enforceable contract. Learn more about what lack of notice means for your contract enforceability.

Lack of notice happens when someone is not made aware of the existence of a contract. Often, they sign one a contract but do not know what they are signing. This happens if the terms of the agreement are not conspicuously presented. If the terms are buried or hidden within the contract, this is likely to be considered inconspicuous and can have significant and detrimental effects on agreement enforceability.

As with traditional paper contracts, online agreements are subject to fundamental contract law principles. Both parties must assent to the terms of the agreement, which can only occur with complete understanding. The party who signs the contract must have the opportunity to read the contract easily with no hidden terms.

Litigation over lack of notice has increased sharply along with the rise of online agreements. Many companies created online agreements with terms buried at the bottom of the screen or in hard-to-find locations. Complicated signature processes or hard-to-find contract terms often caused contracts to be unenforceable.

Courts have consistently held that while an electronic click of a button or checkbox is sufficient to sign a contract, the surrounding circumstances must provide adequate notice of the contract terms. Courts look at the signature and surrounding circumstances to determine this, and they often examine:

• Where the contract was placed
• Whether it was easy to find the agreement
• Whether the terms were easy to find within the agreement
• If essential terms (such as arbitration clauses) are conspicuous
• Whether back-end records show the user accepted the contract terms

Impact on B2B and B2C businesses

As more B2B and B2C businesses use online contracts, it’s imperative they design their agreements the right way. By doing so, the other party is on notice of the terms, and you can enforce them. The pandemic and general increase in digital contracts mean that businesses must protect their contracts’ enforceability and should utilize modern software that tracks and stores important information in a digital repository.

Most online agreements are one of three typical methods:

• Browsewrap: This is presented as a hyperlink. It is usually at the bottom of a website with a notice stating, “By using [this website], you agree to the Terms of Service.”
• Sign-in wrap: A user agrees by completing other actions, such as signing in.
• Clickwrap: These contracts are a button or box that states, “I agree.” The user must check the box or button to accept the contract terms.

For any of these methods to be enforceable, they must provide clear notice of the contract terms. Certain methods are better than others, as explained below.

Browsewrap agreements

Browsewrap agreements usually state that simply using the website indicates agreement to the contract terms and conditions. These contracts are commonly unenforceable because of lack of notice. In fact, in our study on clickwrap litigation trends, many cases have challenged the validity of browsewraps. They had a success rate of only 14% because the terms are not “presented” to the user if they are not conspicuous.

Browsewraps do not require affirmative assent to the terms. Furthermore, they provide little notice of the terms of the agreement. While the terms may be available somewhere, they are usually buried at the bottom of a screen somewhere users never see. Many courts have found this constitutes a lack of notice, and they refuse to enforce the agreement. B2B and B2C businesses that still use browsewraps may discover their agreements are unenforceable when they head to court.

Sign-in wrap agreements

A sign-in wrap agreement requires the user to sign in or sign up to agree to the contract terms. This means the “sign in” or sign up” button serves a dual purpose. Dual-purpose buttons tend to be less enforceable than affirmative assent to the contract alone. Courts disfavor sign-in wraps in many situations.

However, courts have enforced sign-in wrap contracts when the language and layout of the screen are clear and give reasonable notice of the contract terms. If the user had access to the agreement and the terms were conspicuous, the agreement may still be enforceable.

Clickwrap agreements

Clickwrap agreements utilize a single-purpose button that requires affirmative assent to the contract terms. Ironclad’s litigation trends report showed that courts most commonly enforce clickwrap agreements. This is not only because of the affirmative assent required to sign but because this method typically provides better notice to users.

A proper clickwrap agreement provides transparent access to the terms and conditions of the agreement. A successful company also ensures the terms themselves are conspicuous and provide sufficient notice.

You can provide conspicuous notice of contract terms by using digital contracting software to help manage your agreements. Instead of time-consuming and cumbersome management methods of the past, you can streamline your process and design enforceable agreements from day one. These tips can help B2B and B2C businesses, in particular, create and track enforceable digital contracts.

Pick the right acceptance method

As noted above, clickwrap agreements are more enforceable than other signature methods. A clickwrap contract is a highly effective signature method combined with additional notice best practices. While this is for many reasons, it also provides better notice to users. Users have access to the terms right next to the checkbox, and they can read the agreement and then affirmatively assent to the terms. The agreement language should be included right next to the acceptance checkbox or button to notify the user of the terms.

While browsewraps and sign-in wraps have been found effective at times, they are far less effective than clickwrap agreements. Browsewraps are rarely effective, and there are better choices. If you choose a sign-in wrap, it is crucial you provide the agreement terms in an easy-to-see hyperlink very close to the sign-in button.

Use a hyperlink feature

Many online agreements use a hyperlink to direct users to the contract terms. This hyperlink should be bright and underlined to make it recognizable as a hyperlink. It should be conspicuous to direct the reader to click on the link and read the agreement.

Keep the agreement in close proximity

The agreement or any link should be near the acceptance language and method. For example, a clickwrap agreement box with “I agree” should have language nearby to allow the user to read the terms of the agreement. When the agreement is hard to find, courts are less likely to enforce the contract as it does not provide sufficient notice of its terms.Effective screen design can help solve this common issue.

Provide notice of any changes

Your company should require affirmative assent to new terms if the agreement has changed since a prior version. Additionally, those new terms should be posted conspicuously in the agreement. There may be a small summary of the changes and information about where those changes are located in the contract. The changes may be specially marked somehow, such as bold font or underlining.

Emphasize important contract terms

While all contract terms are essential, courts will especially scrutinize notice requirements for certain provisions or types of agreements. For example, many form contracts establish an arbitration clause or choice of law provision. These may substantially affect the user’s rights, so courts consider them more carefully. Provisions like these should be set apart by bolding, underlining, or possibly all caps.

Back-end records

Your contract management system should automatically record and organize contract acceptance. This includes information like:

• When the user signed
• What method they used to sign
• Screenshots of what the screen looked like during signing
• Contract version information
• A copy of the terms of the agreement
• Where the terms of the agreement were placed

Ironclad’s digital contracting software gives you the tools needed to create enforceable agreements. You can create, modify, and record contracts with conspicuous terms by following the tips listed above. Lack of notice in contracts can be fatal to a contract’s enforceability, which can cost you significant resources, revenue, and time. You can avoid this issue by creating an effective agreement with clear terms right from the start.