If customers use your website or online service or app, you need to have enforceable terms and conditions. That way, if there is some dispute, you can control over how it’s resolved,. You can also contain the costs by putting an arbitration clause in the terms and conditions. Instead of an expensive lawsuit, you can resolve it in arbitration which is often less expensive, quicker, and more private.
For terms and conditions to be enforceable, one must prove that the customer actually agreed to them. You’d be surprised how often companies find themselves in the expensive hassle of fighting over whether their terms are enforceable, then finding out they’re not. This can cause them to miss out on the cost savings and efficiency of arbitration.
This happened just just this week. A federal court of appeals ruled that an app developer didn’t structure the interface in a way to put users on notice of the terms. So since the developer couldn’t prove the users saw the terms, the case will proceed in court instead of arbitration.
And perhaps even worse, the case will probably move forward as a class action. Had the terms been enforceable, it would probably have just been limited to one-on-one lawsuits. That would have been much better for the developer.
If you’d like to discuss your terms and conditions, drop me a line or give me a call.
About the author:Evan Brown is a technology and intellectual property attorney in Chicago. Follow him on Twitter and Instagram, connect on LinkedIn and subscribe to his YouTube channel for videos on interesting topics about law and technology.
Plaintiff was bound by forum selection clause found in online terms and conditions.
Plaintiff sued TripAdvisor and some related defendants (including Viator, a company that TripAdvisor acquired) for a number of torts arising from an ATV accident that plaintiff had while on a tour in Mexico that she had booked online through defendants’ website. Defendants moved to dismiss, or in the alternative, to transfer the matter to federal court in Massachusetts based on the forum selection clause found in the Terms and Conditions that plaintiff agreed to when she booked the tour. The court granted the motion to transfer.
To purchase the tour, plaintiff was required to click on a “Book Now” icon, directly under which the following message was located: “[b]y clicking Book Now and making a reservation, I acknowledge that I have read and agree to be bound by Viator’s Terms and Conditions and Privacy Statement.” The phrase “Viator’s Terms and Conditions” appeared in blue underlined text, in the form of a hyperlink, which directed the consumer to the website’s Terms and Conditions.
Viator’s Terms and Conditions included a forum selection clause, which, in relevant part, provided:
[T]his agreement is governed by the laws of the Commonwealth of Massachusetts, USA. You hereby consent to the exclusive jurisdiction and venue of courts in Boston, Massachusetts, USA and stipulate to the fairness and convenience of proceedings in such courts for all disputes arising out of or relating to the use of this Website. You agree that all claims you may have against Viator, Inc. arising from or relating to this Website must be heard and resolved in a court of competent subject matter jurisdiction located in Boston, Massachusetts.
The court found that plaintiff had agreed to the forum selection clause, and that the clause was enforceable. In determining whether plaintiff was bound by the clause, the court was guided by “fundamental precepts of contract law.” More specifically, under New Jersey law, “[a] contract term is generally binding if the contract has been mutually agreed upon by the parties, is supported by valid consideration, and does not violate codified standards or offend public policy.” W. Caldwell v. Caldwell, 26 N.J. 9, 24-26 (1958).
Plaintiff had argued that the Terms and Conditions amounted to an invalid browsewrap agreement, because she neither received reasonable notice of their existence, nor provided an unambiguous manifestation of assent. Primarily relying upon Specht v. Netscape, plaintiff argued that she was not bound by the Terms and Conditions, because Viator’s website was designed so that a user can use its services without affirmatively assenting to the web page’s terms of use. According to plaintiff, she was ultimately permitted to purchase the ATV tour without ever being asked to check a box or click an “I Agree” button, or even acknowledge that the Terms existed. Without proper notice, plaintiff maintained that enforcing the forum selection was not appropriate.
The court disagreed. It found that the hyperlinked terms on defendant’s website adhered to the requirements of reasonable notice. Regardless of whether plaintiff was required to scroll through the Check Out page, the hyperlinked Terms and Conditions were conspicuously placed directly underneath the “Book Now” icon. Based on its location, therefore, the court found that the hyperlink was not hidden in an area of the screen that plaintiff was unlikely to notice, but, instead, was clearly displayed in a section of the webpage that she needed to review in order to effectuate her purchase of the ATV tour. Stated differently, the hyperlink was placed within the immediate proximity of an icon that plaintiff was required to click, for the purpose of confirming her purchase on defendant’s website.
About the Author: Evan Brown is a Chicago technology and intellectual property attorney. Call Evan at (630) 362-7237, send email to ebrown [at] internetcases.com, or follow him on Twitter @internetcases. Read Evan’s other blog, UDRP Tracker, for information about domain name disputes.
Company could not argue it was not bound by competitor’s browsewrap agreement, because it used a browsewrap agreement for its own website.
Oilpro filed a counterclaim for breach of contract against its competitor, DHI, arguing that DHI breached the agreement it had with Oilpro – such agreement being in a browsewrap agreement found on Oilpro’s website – to not scrape, crawl, or use other automated means to download data from Oilpro’s website. DHI moved to dismiss the breach of contract claim, arguing that Oilpro had insufficiently pled that DHI assented to the terms of the browsewrap agreement. The court denied the motion to dismiss.
In browsewrap cases, because there is no affirmative step to acknowledge assent to the agreement, the party claiming breach has to show that a valid contract exists by demonstrating that the breaching party had actual or constructive knowledge of the terms and conditions. Just having a link to the terms at the bottom of the page, or having them available for review (without having to affirmatively click on something) may not be enough (though there are exceptions to this).
Here, the court found that Oilpro was not relying only on the fact that the agreement was on the pages of the website and available. Instead, Oilpro pointed to DHI’s own web design practices to support its knowledge of the terms of the browsewrap agreement. In the court’s words:
Oilpro alleges constructive notice because DHI has a similar site with a similar browsewrap agreement. Thus, even if there are no allegations that DHI took affirmative action to acknowledge assent, the court finds that the allegations relating to DHI’s constructive knowledge provide more than that the agreement was available and raise the claim to plausible.
So the case stands for the proposition that a company that uses a browsewrap agreement on its own website is less likely to be able to argue it is unaware of other companies’ browsewrap agreements. Said another way, browsewrap-using companies may have a higher standard of diligence in their own online dealings.
It should be noted, however, that the conclusion in this case is likely to apply only in the B2B context, and will likely not affect the enforceability (or non-enforceability) of browsewrap agreements in consumer context. The court said “[t]his conclusion is confined, of course, to instances where both parties are sophisticated businesses that use browsewrap agreements on their websites.”
DHI Group, Inc. v. Kent et al., 2017 WL 4837730 (S.D. Texas, October 26, 2017).
About the Author: Evan Brown is a Chicago technology and intellectual property attorney. Call Evan at (630) 362-7237, send email to ebrown [at] internetcases.com, or follow him on Twitter @internetcases. Read Evan’s other blog, UDRP Tracker, for information about domain name disputes.
Kashmir Hill pointed out that at least one erstwhile file sharing service has changed its business model in response to the federal government’s action against Megaupload. She observes that:
FileSonic users can’t be too happy to have one of the main features of the site taken away. But the company must be less worried about its breach of contract with existing users than it is about the possibility of getting the Megaupload treatment, i.e., arrest, seizure of its property, and a criminal indictment.
This raises an important point. Any kind of online service that pushes the legal envelope may want to build in some mechanisms to pull back with impunity if it gets freaked out or loses its envelope-pushing courage. Said another way, that service should not make promises to its users that it cannot keep in the event the service wants to change what it is doing.
Some well known user generated content sites do this pretty well already in their terms of service. For example:
Dropbox: “We reserve the right to suspend or end the Services at any time, with or without cause, and with or without notice.”
“YouTube reserves the right to discontinue any aspect of the Service at any time.”
Reddit: “We also reserve the right to discontinue the Program, or change the content or formatting of the Program, at any time without notice to you, and to require the immediate cessation of any specific use of the Program.”
Facebook (being kind of vague): “If you . . . create risk or possible legal exposure for us, we can stop providing all or part of Facebook to you.”
All good examples of foresight in drafting website terms and conditions that help innovative sites with damage control.
Major v. McAllister, — S.W.3d —, 2009 WL 4959941 (Mo. App. December 23, 2009)
The Missouri Court of Appeals has issued an opinion that reflects a realistic grasp of how people use the web, and also serves as a definitive nod to self-responsibility. The court refused to accept a website end user’s argument that she should not be bound by the website terms and conditions that were presented to her in the familiar “browsewrap” format.
Ms. Major used a website called ServiceMagic to find some contractors to remodel her home in Springfield, Missouri. Each page she saw during the process had a link to the website terms and conditions. At the point where she submitted her contact information to facilitate the signup process, she was presented with a link to the website’s terms and conditions. We’ve all seen this countless times — the link read, “By submitting you agree to the Terms of Use.”
Major admitted she never clicked on the link and therefore never read the terms and conditions. But had she clicked through she would have read a forum selection clause providing that all suits against ServiceMagic would have to be brought in Denver, Colorado.
When Major sued ServiceMagic in Missouri state court, ServiceMagic moved to dismiss, citing the forum selection clause. The trial court granted the motion and Major sought review. On appeal, the court affirmed the dismissal.
Major relied heavily on Specht v. Netscape, 306 F.3d 17 (2d Cir. 2002). The court in Specht held that end users of Netscape’s website who downloaded a certain application were not bound by the terms and conditions accompanying that download because the terms were not visible on the screen without scrolling down to see them.
But in this case the court found the terms and conditions (including the forum selection clause) to be enforceable. In contrast to Specht, the ServiceMagic site did give immediately visible notice of the existence of the terms of the agreement. Even though one would have to click through to read the terms, the presence of the link was sufficient to place the website user on reasonable notice of the terms, and subsequent use by the end user manifested assent to those terms.
Click image courtesy Flickr user smemon87 under this Creative Commons license.
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