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As the owner and operator of an online store, you will likely have terms and conditions listed on your website. However, it may be unclear how enforceable these terms are on you and your customers. This article will:

  • outline how enforceable online terms and conditions are in New Zealand; and
  • detail what you need to include on your online store to ensure that your terms and conditions are enforceable. 

How Enforceable are Online Terms and Conditions?

Your terms and conditions act as the terms of the contract between you and your customers. The terms and conditions cannot create a binding and enforceable agreement unless the terms have been incorporated into your online contract. You can incorporate your terms and conditions into your contract by:

  • getting the customer to agree to the terms and conditions; or 
  • providing the customer with reasonable notice of the terms and conditions.

Your terms and conditions will also not be enforceable on the parties if the terms:

  • amount to misleading or deceptive conduct; or
  • fall within the category of an unfair contract term.

Incorporation of Terms and Conditions

The two most common methods of incorporating terms and conditions in an online store are the:

  • click wrap method; or
  • browse wrap method.

The Click Wrap Method

Under the click wrap method, a customer must accept or consent to your store’s terms and conditions before they can complete their purchase or transaction. A customer may express their consent by clicking:

  • on a box that says ‘I have read and agreed to the following terms and conditions’, or a similar phrase; or
  • an ‘OK’ button beside a text box that states ‘I have read and agreed to the following terms and conditions, or a similar phrase.

These phrases will usually be listed beside a list of your terms and conditions. Or, a link that displays your terms and conditions on another webpage.

The click wrap method is an effective way to secure your customers’ consent to your terms and conditions, and incorporate your terms into your online contract. To ensure your terms are properly incorporated, you should ensure that:

  • it is clear that clicking the ‘I agree’ or ‘OK’ button will mean that the customer is assenting to your terms and conditions;
  • the link to or list of your terms is close to the assent button; and
  • your terms and conditions are detailed succinctly, clearly and accurately. 

Doing so will guarantee that your terms and conditions are enforceable on your store’s customers.

The Browse Wrap Method

The browse wrap method refers to the process of incorporating your terms and conditions somewhere on your website, usually under a ‘terms and conditions’ tab at the bottom of the website. These terms will contain a statement that details that the terms are binding on any individual that uses your website or your store’s services. It includes this statement instead of an ‘I agree’ or ‘OK’ button.

The browse wrap method is not an effective way to incorporate your terms into your online contract. You will likely be unable to enforce a term that has been incorporated using the browse wrap method as your customers have not:

  • assented to your terms and conditions; and 
  • been provided with enough notice to read through the terms themselves.

If you do wish to use the browse wrap method, you will have to display your terms and conditions prominently on your website. These terms should be displayed so that your customers can read through the terms prior to finalising their purchase or transaction. However, as they are still not provided the opportunity to agree with these terms, it is best practice to use the click wrap method.

Misleading or Deceptive Conduct

If you fail to successfully incorporate your terms and conditions, you may be at risk of committing misleading or deceptive conduct. Misleading or deceptive conduct refers to any conduct that, when viewed objectively, would be likely to mislead or deceive the recipient of that conduct.

Say, for example, you use the browse wrap method and include a small tab that links to your terms and conditions on the bottom of your website’s homepage. In these terms you state that the conditions are binding and enforceable on all website viewers. However, due to your failure to effectively incorporate these terms, the conditions are not enforceable. In such circumstances, you would have misled your customers. They were led to believe that the terms were binding when they were not.

If you are found to have committed misleading or deceptive conduct, your store’s terms would be deemed unenforceable and you may be subject to:

  • criminal proceedings; 
  • a court order; or
  • a large fine.

Given these consequences, it is crucial that you effectively incorporate your terms and conditions into your online store.

Unfair Terms and Conditions

A term in your store’s terms and conditions will not be void, and thus unenforceable if it qualifies as an unfair contract term. To be an unfair contract term, the term must:

  • be a provision in a standard form consumer contract. Most online terms and conditions meet this requirement as your customers are unable to negotiate any changes to these terms; 
  • cause a significant imbalance between the rights and obligations of you and your customers; and
  • cause detriment to your customers if it were to be enforced. 

For example, you could not state in your terms and conditions that your customers are prohibited from purchasing products from any of your competitors. Such a provision would be deemed an unfair contract term.

Key Takeaways

Terms and conditions act as the terms of the contract that is created between you and your online store’s customers. However, not all terms and conditions are enforceable. To ensure that you can enforce your store’s term, you should:

  • use the click wrap method to incorporate your terms into your store’s contract;
  • ensure that your terms do not qualify as misleading or deceptive conduct; and
  • ensure that your terms do not contain any unfair contract terms. 

If you need assistance with drafting your store’s terms and conditions, contact LegalVision’s contract lawyers on 0800 005 570 or complete the form on this page. 

FAQs 

Are online terms and conditions enforceable?

An online store’s terms and conditions can be legally enforceable if they are effectively incorporated into the store’s contract, do not qualify as misleading or deceptive conduct, and do not contain any unfair contract terms. 

What is the click wrap method?

The click wrap method, or click wrap agreement, refers to a process of incorporation through which a customer will be required to accept a store’s terms and conditions before they can complete their purchase or transaction by clicking a button or link.

What is the browse wrap method?

The browse wrap method, or browse wrap agreement, refers to the process of incorporation in which your terms and conditions are listed somewhere on your website. These terms will contain a provision that states that all users of the website agree to the store’s terms and conditions. 

What method of incorporation is better? 

The click wrap method is the preferred method of incorporation as it requires customers to actively agree to an online store’s terms and conditions. 

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