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Featuring Black’s Law Dictionary Free Online Legal Dictionary 2nd Ed.

Creating Legally Binding Contracts Online

A large portion of business is conducted entirely online these days. From e-commerce to content subscriptions and from expert advice to financial services, business-to-business (B2B) and business-to-consumer (B2C) transactions are constantly carried out on the Internet through legally binding agreements between two or more parties.

Online contracts reflect their offline counterparts in just about every legal aspect. The meeting of minds as well as the offer, intent, consideration, acceptance, execution, performance, and termination can be effectively carried out when crafting an online contract. Verbal contracts and implied-in-fact agreements also occur online; in fact, these types of contracts can be made more effective with the application of Web technologies such as voice recording and JavaScript buttons in lieu of digital signatures.

Drafting an Online Contract

Web pages that contain Terms and Conditions and Terms of Service documents are good starting points for researching the aspects of legally binding online contracts. Writers of contracts can also recreate offline agreements on their websites. The key to implementing online contracts that are legally binding and enforceable is to think of the transaction as being tendered by a website owner or administrator and a visitor or user.

The meeting of minds occurs when a visitor arrives at a website. There should be visual clues to guide users to the contract, which should ideally be contained in a single Web document. Online contracts should be created by following four tenets:

1 – Visitors must be aware of the existence of a contract on the website they are browsing.
2 – Visitors must be given opportunities to review the terms of the agreement and to take time to made decisions.
3 – Visitors must understand the method by which they will execute or decline the contract.
4 – The website owner or administrator making the offer must have a mechanism to prove that the user executed or declined the contract.

Assent and Proof

Although one of the most important aspect of writing online contracts is to create terms that visitors can easily understand, the implementation of assent and proof mechanisms is also crucial. The standard method of assent in use these days is the green “I Agree” button. At this point, visitors should have an expectation of what should happen when they click on that button, and they should also be given an opportunity to perform a different action such as leaving the website altogether if they do not wish to execute the contract.

The mechanism of proof is even more challenging. At a minimum, it must reside on the server side; it should also prove that the four tenets above were accomplished, particularly the fourth one accompanied by a time stamp.

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