I added checked="checked" and it worked perfect:
PHP Code:
<input type="hidden" name="accept_terms" id="accept_terms" value="Y" checked="checked" />
{* <div class="terms_n_conditions"> <label for="accept_terms"> <input type="checkbox" name="accept_terms" id="accept_terms" value="Y" />
{$lng.txt_terms_and_conditions_note|substitute:"terms_url":"`$xcart_web_dir`/pages.php?alias=conditions":"privacy_url":"`$xcart_web_dir`/pages.php?alias=business"} </label> </div> *}