The Court of Appeals for the Ninth Circuit has warned website owners that if they are not active in ensuring user assent to their terms of use, those terms may be deemed unenforceable by the courts.
The case involved an online purchase of discontinued Hewlett-Packard Touchpads on the Barnes & Noble website. Kevin Khoa Nguyen bought two of the Touchpads online on August 21, 2011 and received an email confirming the purchase. However, on the following day he received an email from Barnes & Noble telling him that his order had been cancelled due to unexpectedly high demand for the devices.In April of 2012, Nguyen filed suit in the California Superior Court alleging that the company had engaged in deceptive business practices and false advertising.
Barnes & Noble sought to compel arbitration under the Federal Arbitration Act, saying that Nguyen was bound by the arbitration clause in the website’s Terms of Use. These Terms of Use site were located on the bottom left corner of every page of the site. However, Nguyen never actually clicked on the link or read the terms. He argued that he couldn’t be bound by the arbitration clause because he neither had notice of, nor agreed to, the site’s Terms of Use. Barnes & Noble argued that the “Terms of Use” hyperlink gave Nguyen constructive notice of the Terms of Use, including therefore the arbitration clause. The district court disagreed and Barnes & Noble appealed.
In the appeal, the Ninth Circuit noted that the Barnes & Noble Terms of Use are what’s known as “browsewrap” (or “browserwrap”):
Unlike a clickwrap agreement, a browsewrap agreement does not require the user to manifest assent to the terms and conditions expressly . . . [a] party instead gives his assent simply by using the website. … Indeed, “in a pure-form browsewrap agreement, `the website will contain a notice that—by merely using the services of, obtaining information from, or initiating applications within the website—the user is agreeing to and is bound by the site’s terms of service.’”
And stated that, if
Nguyen had actual notice of the Terms of Use or was required to affirmatively acknowledge the Terms of Use before completing his online purchase, the outcome of this case might be different. Indeed, courts have consistently enforced browsewrap agreements where the user had actual notice of the agreement.
Barnes & Noble argued that the placement of the hyperlink at the bottom corner of every page, close to the buttons a consumer must click to complete a purchase, was enough to put a reasonably prudent user on constructive notice. The Ninth Circuit disagreed, saying that even inclusion of a “conspicuous hyperlink” on each website page does not suffice, and does not amount to constructive notice if it is not supplemented with notice to users or prompts to take “affirmative action to demonstrate assent.” The court further states:
While failure to read a contract before agreeing to its terms does not relieve a party of its obligations under the contract, [cite] the onus must be on website owners to put users on notice of the terms to which they wish to bind consumers. Given the breadth of the range of technological savvy of online purchasers, consumers cannot be expected to ferret out hyperlinks to terms and conditions to which they have no reason to suspect they will be bound.
Although the decision is only binding in the Ninth Circuit (which includes California), this court is very influential when it comes to technology law matters, and other courts are likely to follow its lead. District courts within (and eventually outside) the Ninth Circuit may be reluctant to enforce browsewrap agreements against consumers unless website owners do more than post inconspicuous and even conspicuous hyperlinks to such agreements.
Website owners may want to consider using clickwrap agreements, instead of browsewrap, to have a higher level of confidence that the terms will indeed be enforced.
