Be Super Obvious: A How-to for Enforceable Online Agreements

April 2016

On March 17, 2016, a California Court of Appeals, in Long v. Provide Commerce, Inc., refused to enforce a website's Terms of Use (Terms), holding that hyperlinks to Terms are not enough to put users on notice of the Terms and to effectuate the users' consent thereto. The next week, the Seventh Circuit Court of Appeals, in Sgouros v. TransUnion, refused to enforce the arbitration clause of a website's agreement because the "layout and language of the site" did not provide users with "reasonable notice that a click" would manifest assent to arbitrate. These cases serve as reminders of the weaknesses of online agreements and provide insight into what facts would give rise to making them enforceable.

There are two common methods for forming contracts online: "Clickwrap" agreements, which were involved in Sgouros, require a user to manifest assent to Terms, often by clicking "I Agree" after being presented with a scroll-through version of the Terms. "Browsewrap" agreements, which were involved in Long, rely on a user's use of the website alone to amount to consent. Clickwrap agreements that provide clear notice that the click will constitute acceptance of the relevant Terms are widely recognized as valid contracts; however, the enforceability of browsewrap agreements is less certain.

In Long, the Court of Appeals followed a bright line rule for browsewrap agreements that was established by the Ninth Circuit in Nguyen v. Barnes & Noble Inc., in that "where a website makes its terms of use available via a conspicuous hyperlink on every page of the website but otherwise provides no notice to users nor prompts them to take any affirmative action to demonstrate assent, even close proximity of the hyperlink to relevant buttons users must click on - without more - is insufficient to give rise to constructive notice." Applying this rule, the Long court held that consumers were not bound by the arbitration clause in the Terms of because there was no textual notice that their use of the website would constitute agreement to the Terms, and the only notice given of the Terms was a hyperlink to them on every page of the website. In contrast, a California District Court in Cairo, Inc. v. Crossmedia Services, Inc. enforced a browsewrap agreement where every page on the website had a textual notice that read, "By continuing past this page and/or using this site, you agree to abide by the Terms of Use for this site, which prohibit commercial use of any information on this site."

The Seventh Circuit's Sgouros opinion serves as a reminder that, although putting users on reasonable notice that their click of a button constitutes assent to a clickwrap agreement "is not hard to accomplish," it is not foolproof. The Seventh Circuit found that TransUnion failed to provide this notice by, among other things, misleading the customer as to what they were agreeing. For example, the court observed that while there was a bold paragraph between scroll-through Terms and the "I Accept & Continue to Step 3" button informing the user that clicking on the box constituted authorization for TransUnion to obtain personal information, it did not mention the contractual Terms or the arbitration clause contained therein. In fact, as the court noted, "the web pages on which Sgouros completed his purchase contained no clear statement that his purchase was subject to any terms and conditions of sale." The Seventh Circuit thus refused to enforce TransUnion's Terms, reaffirming that websites should avoid any ambiguity and ensure that their users will realize that the "I Agree" button, or its equivalent, pertains exclusively to their Terms.

Given the cautionary tales of Long, Nguyen, and Sgouros, website providers that are relying on a browsewrap agreement should include conspicuous textual notices with their Terms hyperlinks and be mindful that "conspicuousness and placement of the 'Terms of Use' hyperlink, other notices given to users of the terms of use, and [a] website's general design all contribute to whether a reasonably prudent user would have inquiry notice of a browsewrap agreement." Furthermore, when utilizing a clickwrap agreement, courts have found that websites can bind users simply "by placing the agreement, or a scroll box containing the agreement, or a clearly labeled hyperlink to the agreement, next to an 'I Accept' button that unambiguously pertains to that agreement."

In order to ensure the enforceability of your online Terms, or if you have other questions concerning the legal implications of your activities online, including as they relate to privacy laws, please contact John Greenberg, Carleen Griffith, or Krista McCormack.