Small Print + Below the Fold Undermine Browsewrap Agreement
People take "browsewrap" agreements for granted - agreements that end users agree to when they browse websites. ("By browsing this website or accessing any of the content, you hereby agree to the following terms and conditions.") The core issue of whether these website terms create enforceable contracts has not been litigated very often (see, e.g., Specht v. Netscape Communications Corp., 306 F.3d 17 (2d Cir.2002), for one example). For the most part, the general consensus is pretty clearly that browsewrap agreements are enforceable, although the parties may dispute the enforceability of particular terms. Much of the action typically takes place around particular provisions such as arbitration, disclaimers of warranties or limitations of liability, or around other tweaks, such as whether parties can incorporate terms by reference.
So it was interesting to see a court rule that terms which were linked in fine print and under the fold were not sufficient to create a binding agreement. The case is Hines v. Overstock, 09 CV 991 (SJ) (2009 U.S.Dist. Lexis 81204 (Sept. 8, 2009) (E.D.N.Y.)). This was a class action where plaintiffs alleged that Overstock improperly assessed "restocking" fees. Overstock moved to compel arbitration, based on an arbitration clause in the browsewrap agreement on the Overstock website. Not only did the court deny the request to arbitrate, the court found that Overstock's website terms did not create an enforceable agreement at all - because plaintiff had no actual or implied notice of the terms.
Ouch:
I don't have a sense of how significant this ruling will be, since in most instances, websites make terms readily available and there is pretty good evidence that the person challenging the agreement read or at least came across the terms. But it's tough to say. Overstock is a pretty large retailer. There are probably others out there who are in a similar position.
Also, it's interesting that many online agreements are being litigated and are being shot down in court. Blockbuster is one recent example that comes to mind - a court found its agreement illusory based on the "we can change the agreement anytime" clause. What's going on here? Did the early wave of online agreement drafters drop the ball? Were they [we] too aggressive? Did they all start off with the wrong “form”? Is there any trend here? Probably not, but it's tough to say. This decision wasn't based on any terms of the agreement, but just the fact that the terms were not obviously displayed to end users. While the court didn't find anything wrong with the terms, the decision reflects some skepticism as to whether anyone actually reads online terms. (I don't know that the blame falls on the shoulders of the lawyers here. Often you draft an agreement with clear instructions and the implementation on the website does not track your instructions, or the website changes.)
Related: BNA's TechLaw has a post on "hyperwrap agreements" that's definitely worth checking out. Ton of good posts at TechLaw lately.
So it was interesting to see a court rule that terms which were linked in fine print and under the fold were not sufficient to create a binding agreement. The case is Hines v. Overstock, 09 CV 991 (SJ) (2009 U.S.Dist. Lexis 81204 (Sept. 8, 2009) (E.D.N.Y.)). This was a class action where plaintiffs alleged that Overstock improperly assessed "restocking" fees. Overstock moved to compel arbitration, based on an arbitration clause in the browsewrap agreement on the Overstock website. Not only did the court deny the request to arbitrate, the court found that Overstock's website terms did not create an enforceable agreement at all - because plaintiff had no actual or implied notice of the terms.
Ouch:
In the instant case, it is clear that Plaintiff had no actual notice of the Terms and Conditions of Use. Defendant has also failed to show that Plaintiff had constructive notice. . . Despite Defendant's assertion. .. [no] evidence submitted by Defendant refute Plaintiff's . . .statement that she was never advised of the Terms and Conditions and could not even see the link to the without scrolling down to the bottom of the screen - an action that was not required to effectuate her purchase.Overstock (and all retailers or anyone else who creates an account on behalf of end users and has some sort of ongoing relationship) should take the check the box route. Make the user check the box to indicate assent to the terms of use. This makes the "I didn't have notice" argument a bit harder. If you do not want to do that at least clearly disclose your terms and conditions and put them in an obviously visible location which the end user will necessarily come across in the course of completing transactions.
...
[Plaintiff] therefore lacked notice of the Terms and Conditions because the website did not prompt her to review the Terms and Conditions and because the link to the Terms and Conditions was not prominently displayed so as to provide reasonable notice of the Terms and Conditions. Very little is required to form a contract nowadays - but this alone does not suffice.
I don't have a sense of how significant this ruling will be, since in most instances, websites make terms readily available and there is pretty good evidence that the person challenging the agreement read or at least came across the terms. But it's tough to say. Overstock is a pretty large retailer. There are probably others out there who are in a similar position.
Also, it's interesting that many online agreements are being litigated and are being shot down in court. Blockbuster is one recent example that comes to mind - a court found its agreement illusory based on the "we can change the agreement anytime" clause. What's going on here? Did the early wave of online agreement drafters drop the ball? Were they [we] too aggressive? Did they all start off with the wrong “form”? Is there any trend here? Probably not, but it's tough to say. This decision wasn't based on any terms of the agreement, but just the fact that the terms were not obviously displayed to end users. While the court didn't find anything wrong with the terms, the decision reflects some skepticism as to whether anyone actually reads online terms. (I don't know that the blame falls on the shoulders of the lawyers here. Often you draft an agreement with clear instructions and the implementation on the website does not track your instructions, or the website changes.)
Related: BNA's TechLaw has a post on "hyperwrap agreements" that's definitely worth checking out. Ton of good posts at TechLaw lately.
Venkat, I've been blogging about Twitter's Terms of Service lately, so that is top of mind for me at the moment. They (and other social networks) don't have any box to check, but rely on pure "browserwrap." On the other hand, changes to their Terms of Service were announced by an email from the company (presumably to the email address of record for each user), and the changes to the terms were widely publicized. I wonder if email or even wide publicity might be effective notice, of the kind the judge in the Overstock case was not finding.
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