What You Should Know about Online Agreements for Small Claims Court - dummies

What You Should Know about Online Agreements for Small Claims Court

By Judge Philip Straniere

Online purchases create a sticky situation for small claims courts. You can now buy goods from any place in the world through the Internet. In the vast majority of cases, the online ordering system works flawlessly. If there are problems, they’re often resolved amicably. But if you have a problem with someone halfway around the world or even halfway across the country, things become complicated.

Contract terms

If you’re dealing with a business that regularly engages in Internet commerce, someplace in your online order you probably were asked to “accept” or “decline” the terms or to click that you “agree” to the terms. This language is often referred to as a clickthrough or clickwrap agreement and actually constitutes a contract.

As with traditional purchase agreements with the small print on the back, most people don’t read the terms. This is because in the overwhelming majority of transactions, everyone does what they agreed to do, or if there is a discrepancy, it gets resolved without going to court. In most cases, you really don’t have to read the fine print.

The difference between traditional and Internet purchases is that in the traditional contract setting, you have a paper copy issued when you enter into the transaction. It shows your rights and obligations on the date of the agreement.

The reason you want to keep a copy from the date of the agreement is because the terms and conditions attached to any Internet offer can be changed by the seller at any time.

You may get another chance to save a copy of the agreement when the product you ordered arrives. It may contain the terms of the contract in a separate box or envelope shipped with the item

If you’re negotiating directly with a seller over goods you purchased over the Internet, proving the terms of your contract becomes even more difficult.

You can produce e-mails between you and the seller, but you have to produce all the e-mails sent — the entire history of all communications between you and the seller.


Because you can’t reach into the Internet and physically sign papers the Internet has developed the concept of electronic or e-signatures. The law recognizes them as being as valid as a handwritten signature would be under the common law.

By statute, an e-signature can be an electronic sound, symbol, or process used by a person to indicate intent to sign the electronic record. The term record refers to information stored in an electronic medium and retrievable in a perceivable form.

Arbitration clauses

You have a problem with an item you purchased online, and were smart enough to save the click-wrap agreement. You read through to see what you need to do to bring the matter to the court’s attention. To your surprise, you find that the contract says you agree to go to arbitration before a private arbitration association and forfeit your right to bring an action in small claims court.

Because the arbitration clause is included in the agreement, most courts recognize that as the avenue you must follow to resolve the dispute. This is the case even if the arbitration may be conducted some distance from where you live.

If there’s an arbitration clause in the agreement, the arbitration is one of three types:

  • Binding arbitration: Neither side can appeal the arbitrator’s decision to a court of law.

  • Binding arbitration with a right of the parties to go to court to enforce the arbitrator’s award: The arbitrator’s award is considered binding. If the arbitrator rules in your favor and says you’re entitled to money, and the defendant fails to pay, you can go to court to enforce the award.

  • Non-binding arbitration: If either party is dissatisfied with the arbitrator’s decision each has a right to go to court and start all over with a new action in the court of law. This is called a trial de novo.

Where the contract was performed

The reason it’s important to know where the contract was made or performed is that you can only bring a lawsuit in a state that has jurisdiction over the out-of-state defendant, especially if there’s no clause in the contract listing where cases can be tried.

If the contract doesn’t state that any case must be heard in a particular predetermined location or venue, one of the factors determining where you can bring your lawsuit may be whether the seller has an active or passive website:

  • An active website allows you not only to get information about the seller and the product but also to complete the transaction online. A commercial business has an active website, in most cases.

  • A passive website basically provides information only. In order to complete the transaction, you must contact the seller by some other means, such as a telephone call, facsimile (fax) transmission, letter, or some other traditional method of communication.

Can you sue?

Just because you’ve established the terms of the agreement doesn’t necessarily mean you can bring a case against the defendant in small claims court. Ask yourself the following questions:

  • Are you limited by the contract to arbitrating disputes or to using some other out-of-court dispute resolution process?

  • If you can use the court system, is the defendant subject to the jurisdiction of your state? How much business does the seller transact in your state? Does she have an office or warehouse? Does she ship a lot of orders into your state or is yours it? Does she advertise and solicit transactions in your state?

  • If the seller has enough contacts with your state, can you use small claims court to resolve your claim?

    On this point, you have to consider what relief you’re seeking. If it’s money damages, then small claims court is the proper jurisdiction. If you’re seeking something that qualifies as equity relief, then small claims isn’t available in most states.