Just How Enforceable Are Online Terms? What You Need To Know
We have all, at some point while online, clicked on the “I Accept” button without giving it a second thought. Whether creating a social media account, signing up a for an online service, or just trying to get to bank statements, more and more businesses are linking to their standard terms and conditions online for suppliers and customers. But just how enforceable are these? Does it matter where the link is displayed or how it is displayed. Some courts have refuse to enforce online disclosures due to perceived problems with website layout.
Almost every commercial website provides some amount of information and resources. More often than not, today’s websites offer robust features and content such as article commenting/discussion groups and “pay-wall” access to restricted content and features. In addition, many websites offer content, feeds and articles that are licensed from third parties the use of which may be restricted to in-browser page viewing or caching, with further commercial use restricted. For most businesses, since customers will search and purchase through a website (or mobile application), the principal ecommerce risk is the legal relationship between website users and the web site operator. Whether users only browse information or continue to complete a purchase transaction, a contractual relationship can be formed addressing both parties rights, obligations and remedies.
With respect to contract law in relation to the offer and sale of goods or services, online (ecommerce) contracts generally take one of two forms: (1) Click-through or “Click-wrap” agreements, and (2) User Agreements, often referred to as Terms of Use, Terms of Service, or “Browse-wrap” Agreements. As a general proposition, formation of contracts (offer and acceptance) and enforceability of contractual provisions (choice of governing law) are matters determined by reference to state law. However, in the United States, federal courts are often required to determine matters of state law and most states have relatively uniform requirements with respect to the three principal concepts in the determination of contract enforceability: offer, acceptance and consideration.
The first type of contract, the so-called “Click-wrap” agreement, is usually the agreement formed when a website user purchases goods or services through an ecommerce shopping cart application (e.g. purchasing airline tickets). In the context of online contracts, a user is presented with the online terms and conditions and must “click-through” as part of the transaction.
“Click-wrap” agreements derive their name from the shrink-wrap agreements that were first incorporated into commercially-distributed software. Users were deemed to have accepted the terms of the agreement by opening the package and installing the software. In ProCD, Inc. v. Zeidenberg, the court held that a user was bound by the terms and conditions of a software license agreement (contract) included in a users’ manual within the packaging, and which was displayed on a computer screen upon installation and use of the software. Such contracts are enforceable unless their terms are objectionable on grounds applicable to contracts in general (for example, if they violate a rule of positive law, or if they are unconscionable).
The second type of contract, commonly-known as “browse-wrap” agreements, apply to contractual agreements between the website user and the website operator that arise even though the user may not engage in pro-active contract acknowledgement. Browse-wrap agreements are generally comprised of terms and conditions posted on a website, typically accessible via a hyperlink appearing on various pages on the website, or at the bottom of the website pages, with no requirement that a website user take any affirmative action to indicate assent to the terms and conditions.
The existence and enforceability of browse-wrap agreements is crucial to operation of a website because as a user may search information, information related to the other programs or other information available on the website, without actually consummating a purchase transaction. Since a business likely wishes to protect its proprietary information and other content available to users of the website, it is important review the availability and enforceability of browse-wrap contracts.
Maine State Court held in Sarchi v. Uber Technologies (2022 ME 8 – Maine Judicial Branch) that online contracts are enforceable only if the consumer (1) has reasonable notice of the online contract terms, and (2) has manifested consent to those terms. Following First Circuit’s formulation in Cullinane v. Uber Technologies (No. 16-2023 (1st Cir. 2018)), the Court held the contract unenforceable because 1) the consumer was not provided reasonable notice of the terms, 2) the hyperlink to the contract terms was not readily identified as a link through the use of underlining, blue text, or appearance as a button; 3) the hyperlink was inconspicuous given the use of small font; and 4) the hyperlink was unlikely to draw attention because the screen focused on payment information rather than the hyperlink.
Additionally the Court concluded the consumer did not assent to the terms by clicking the “Done” button on the payment screen because the significance of clicking that button to indicate the user’s consent to the terms of agreement was not explained.
