Recently Dick’s Sporting Goods, Barnes & Noble and Proflowers.com have been on the losing side of court cases that involve enforcement of their websites’ terms of use. In each case, the defendants relied unsuccessfully on so-called “browsewrap” agreements, where a website’s terms and conditions of use are generally posted on the website via hyperlink.
Why Care?
This is important, especially for e-commerce sites, because the terms of use (or terms of service, terms and conditions) on your site govern your rights and obligations vis-a-vis your customers, and you may find yourself wanting to defend or enforce those rights. If you are using a browsewrap agreement for strategic business purposes, this may be a case where legal input should drive the decision to reconsider that choice.
What is “Browsewrap?”
The “wrap” moniker came from the brick and mortar notion that if a consumer tore open the shrink wrap on a tangible good, this constituted assent to the terms of sale printed somewhere in the packaging. Online retailers picked up this notion by relying on “clickwrap” agreements, where consumers must check a box on a web page saying “I agree” before they can complete a transaction. In “browsewrap” agreement cases, the consumer is not required to click agreement to terms to complete a transaction, but website owners argue that the terms were available via a prominent hyperlink on the web page, such that consumers supposedly must have noticed and implicitly agreed to the terms by conducting business with the owner.
The enforcement of these alleged online agreements often comes up when the defendant seeks to enforce an arbitration or choice of law or venue clause in the online terms.
Notice and Assent, Defined (Almost)
The courts in the above-mentioned cases all affirmed a general principle: users must not only have sufficient notice of the terms and conditions underlying any commercial transaction, but must also assent to those terms, in order for those terms and conditions to be enforceable. These courts held that even a “conspicuous hyperlink” to terms without other “notice to users” or “affirmative action to demonstrate assent,” even where the hyperlink is placed near a button that consumers must click, is insufficient to create an enforceable agreement.
Businesses and in-house counsel should bear in mind the following guidelines when developing or updating their e-commerce websites:
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Websites must have conspicuous notice of terms. Courts are growing increasingly strict about how much notice consumers must receive of terms in order for browsewrap agreements to be enforceable. Merely providing a hyperlink to terms and conditions will not render them enforceable. Further steps should be taken to ensure that users are given explicit textual notice that they consent to the owners’ terms and conditions by conducting business with the owner through its website.
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Consider using clickwrap agreements whenever possible. Clickwrap agreements are much more likely to avoid any gray area regarding what courts consider sufficient notice and assent to terms. Requiring users to check a box indicating they agree to the terms and conditions set forth under the agreement will render their intent to be bound clear.
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Counsel should stay involved in the website design process or revisit any existing browsewrap practices. Choosing how to present terms and conditions on a website or digital product involves balancing strategic direction with legal risks. While there may be various reasons to choose a browsewrap agreement (for instance, user friendliness or aesthetic appeal on a website), the legal considerations should be given weight in light of these enforceability issues.
Counsel for online retailers should ensure that their clients are not only making terms and conditions clear enough on websites or downloadable digital products but are also requiring consumers to clearly indicate their assent to such terms. Important terms like mandatory arbitration clauses or agreements regarding data use and privacy should be presented clearly and legal counsel should be involved in the presentation of these important terms to ensure they serve their purpose.
