Delaware Court Holds Clickwrap Agreements Enforceable

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In a novel question regarding e-commerce, the Delaware Court of Chancery recently held that clickwrap agreements are valid and enforceable contracts. As defined by the court, a clickwrap agreement is “an online agreement that requires a webpage user to manifest assent to the terms of a contract by clicking an ‘accept’ button in order to proceed.” In this particular case, the clickwrap agreement concerned receipt of employee benefits that were conditioned on compliance with various post-employment restrictions.

The case was brought by Newell Rubbermaid, whose subsidiary manufactures and sells infant and juvenile products. Newell sought a temporary restraining order (TRO) seeking to enjoin a former employee (Defendant) from violating post-employment non-solicitation and confidentiality conditions of restricted stock unit awards (RSUs) that Defendant was awarded over the course of several years. Defendant accepted the RSUs through a third-party website that required her to review and accept the terms of the RSU grant program by clicking the “accept” button. The 2013 grant award program added confidentiality and non-solicitation provisions, which Defendant claimed were not sufficiently conspicuous on the website. Defendant resigned from Newell in early 2014, taking a new position at a direct competitor in the infant and juvenile products market. Newell alleged that Defendant solicited two Newell employees to leave the company. Consequently, Newell sought a TRO, arguing that it had enforceable non-solicitation and confidentiality agreements with Defendant.   

The court granted Newell the TRO, finding that Defendant was bound by the agreement formed when she clicked the “accept” box next to the phrase “I have read and agree to the terms of the Grant agreement.” The court found that Defendant’s affirmative action evidenced her assent to the agreement with actual notice of the terms. The terms of the award, including the restrictive covenants, were accessible via a link next to the “accept” box. The court observed that “Newell’s method of seeking [Defendant’s] agreement to post-employment restrictive covenants, although certainly not the model of transparency and openness with its employees, was not an improper form of contract formation.” Despite acknowledging the “harsh” result for the Defendant, who claimed not to know about the restrictive covenants, the court explained that the Defendant found “herself in this position because of her willingness to accept an agreement without reviewing its terms when there should have been no doubt that she was assenting to a valid, enforceable contract.”   

Newell Rubbermaid Inc. v. Storm, No. 9398-VCN (Del. Ch. Mar. 27, 2014).

Topics:  Clickwrap Agreements, Contract Formation

Published In: General Business Updates, Communications & Media Updates, Labor & Employment Updates, Science, Computers & Technology Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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