6 Ways to Use eContracts to Dramatically Lower Chargebacks


An eContract, or electronic contract, is simply a contract sent to a customer electronically, typically via a service like DocuSign or AdobeSign. There are many good reasons to have customers sign eContracts prior to providing a product or service. They can serve to minimize customer disputes, define payment terms, explain the scope of service, set forth return and refund policies, reduce the likelihood of litigation, and dozens of others. Another, often overlooked use for eContracts, however, is to help minimize and win credit card chargeback disputes.

Remember, even though the chargeback system favors the customer over the business, the customer doesn’t automatically win. Rather, if you can prove that you fully explained the product or service, the terms of the agreement, and that you provided the full product or service according to those terms, then your business will win the vast majority of chargeback disputes. And well constructed customer eContracts are perhaps the most effective way of accomplishing that. In fact, eContracts can increase the likelihood that your business wins a chargeback dispute from the industry average of 25-30%, up to 85-95% once eContracts are used.

In this article, we’ll look at ten things that all effective electronic contracts should include, in order to minimize the potential for chargebacks occurring, and to win those that do occur.

1. Breakdown The Purchase In Detail

Your eContract should list with detail exactly how much the product or service costs, any associated costs or fees, taxes, shipping, any future recurring charges, etc. Ideally, all of these charges should be clearly delineated by product or service to a level of detail that the customer clearly understands what they are paying for, and that a third-party (the credit card issuer) can clearly understand when reviewing the eContract during a chargeback dispute.

Free Downloadable Sample eContract

Free Downloadable Sample eContract

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Why It Matters:
Customers often simply misremember how much a particular good or service costs, and claim that the amount charged was not what they agreed upon. By providing a detailed eContract that breaks out specifically what they are going to be charged and why, and having the customer electronically sign (and thus consent) to this document before the credit card is charged, your business can effectively win these chargeback disputes.

2. Identify the Credit Card On The eContract

Your eContract should clearly identify the method of payment. Specifically, it should include the card type (Visa, MasterCard, Discover, AmEx) along with the last 4 digits of the card used, and the expiration date of the card.

Why it matters:
By clearly identifying which credit card was used (without revealing sensitive cardholder data) you minimize the possibility of a “card not authorized” chargeback dispute being successful.

3. Obtain Proof the eContract Was Delivered

Simply keeping a copy of an eContract on file in the event of a chargeback dispute does you no good if you can’t prove that the customer actually received a copy of the eContract. That’s why your eContract software needs to list, on the signed agreement itself, the email address (and/or MAC or IP address) the document was sent to, the customer’s electronic signature, and the date and time of that eSignature.

Why It Matters:
A disgruntled customer may attempt to say that they never saw a copy of your eContract or receipt. By having electronic proof on the actual document that it was sent to the customer and that they acknowledged it by their eSignature prior to the charge being run, you will almost certainly win this type of chargeback dispute.

4. List Full Refund Policy On the Receipt

A lot of businesses prefer to list their refund policy on their website, and merely make reference to it in their eContract because it’s so lengthy. Unfortunately, that’s not always sufficient when it comes to fighting chargebacks where the customer claims they were not sufficiently informed about the company’s refund policy.

Why It Matters:
When a customer is initiating a chargeback dispute as a means to circumvent the limitations of a company’s return policy they will often state that they were not informed of the return policy at the time of the sale, and surprisingly, this is often a very successful way of winning a chargeback dispute by the customer. To ensure that you win these types of chargeback disputes, not only should the return policy be available on the website’s order page (if applicable) but also on the actual eContract that the customer signs and receives a copy of. That return policy should state the time limit, and restocking fees, and any terms or conditions that will apply for a return to be accepted.

5. List Terms of Service On The Receipt

Just as with your company return policy, if there are specific terms of use, terms of service, or terms of cancellation with the products or services that your company offers, they should be listed in full (or as fully as practicable, including all material elements, with a link to the full policy) on the receipt itself.

Why It Matters:
The issuing bank that adjudicates chargeback disputes is going to heavily weigh things in favor of the customer. So a customer claiming that they were unaware of the terms of service, despite the fact that they are clearly listed on your website, is often going to be successful in their chargeback dispute. In order to better ensure that you win these claims, make sure that the terms of service policy is fully listed on the actual eContract that the customer signs.

6. Obtain Notification Authorization For Future Billing

If your business uses a recurring billing model, you’re likely well aware of the potential for customers to initiate a chargeback out of convenience rather than simply going through the company’s cancellation procedure. Unfortunately, unless you can prove that you provided the customer with sufficient notification in advance of the recurring charge, you’ll almost certainly lose this chargeback dispute, even assuming that the eContract properly informed them of future charges.

Therefore, it’s important to make sure that your eContract details how the customer will be notified of the charge in advance (e.g. have the customer write in their email address), and require that the customer inform you if they’d like to update the email address for the notification emails going forward.

Why It Matters:
If you cannot provide evidence that the customer was informed of a recurring charge prior to the rebill, then you’re almost certain to lose the chargeback dispute. In order to prove that the customer was informed, not only will you need a copy of the detailed advanced email notification, but also some evidence that the customer was aware of how they were going to be notified. This prevents a customer from stating down the road that they were not properly informed.

As a business owner, you’re not going to win every single chargeback dispute, and frankly, unless you honestly believe that your business operates without flaw, you shouldn’t. By implementing the six eContract recommendations above, however, you can reduce the overall number of chargebacks your business has to deal with by reducing consumer confusion, and when inevitable chargebacks do occur, dramatically increase the likelihood that by providing a copy of the eContract during the chargeback dispute process, your business will win the dispute.

About Soar Payments:

Soar Payments is a merchant account provider that specializes in high risk merchant accounts, including eCommerce and MoTo based businesses. Their payment solutions include integrated chargeback mitigation and management tools that are effective and simple to use. To apply for a merchant account with Soar Payments, apply here.

Disclaimer: This chargeback mitigation information and the included sample eContracts are provided for informational purposes only, and Soar Payments does not warrant their effectiveness for any individual business. Moreover, Soar Payments encourages all businesses to work with all dissatisfied customers in good faith first, and only resort to the chargeback and re-presentment process when amicable resolution cannot be achieved.

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Bradley Martin
Bradley Martin
Chief Marketing Officer at Soar Payments
Brad Martin, editor of the ‘High Risk’ Blog, is a payments industry expert with a particular focus on writing about high risk merchant services industries and the challenges that high risk businesses face. Previously, Brad managed business development for a US based low risk credit card processor.