in Online Contracting
August 28, 2014
The Nguyen Decision
In Nguyen, the plaintiff filed a putative class action lawsuit after Barnes & Noble canceled his order for two HP Touchpads offered at heavily discounted "fire sale" pricing because of unexpectedly high demand. Barnes & Noble (B&N) attempted to have the case dismissed based on the arbitration clause included in its Terms. The district court denied B&N's motion, finding that the parties never entered into the agreement that contained the arbitration clause, and allowed the case to proceed in court.
Accordingly, because the plaintiff did not have actual or constructive notice of the Terms, the court did not enforce them and did not require the parties to arbitrate his claims, as would have been required by the Terms.6
Considerations in Choosing and Implementing Online Agreements
Choosing Between Clickwrap and Browsewrap. Many website operators may be hesitant to include clickwrap agreements because they introduce a potential barrier to use of the site. When the website consists largely of static information, such as a corporate website summarizing product and service offerings or a news site, there may be little risk associated with failure to bind a user to particular terms. When a website offers services such as e-commerce, content storage, social networking, or financial account management, particularly when the services are paid for, there is a greater need for certainty that the provider will have the benefit of important terms, such as warranty disclaimers, limitations on liability, forum selection, and dispute resolution7 provisions.
Implementing Clickwrap Agreements. In implementing clickwrap agreements, a service provider needs to ensure that the process gives the user a meaningful opportunity to review the terms and requires the user to affirmatively indicate assent before proceeding (such as a checkbox with a hyperlink enabling the user to open the terms in a new window). In addition, providers should ensure that the box is unchecked by default, the form includes sophisticated data validation to ensure that the user cannot proceed without checking the box, and the back-end database saves a date stamp or similar record that the box was in fact checked.
Modifying Terms. Service providers often find that their terms need to be modified for any number of reasons as services evolve over time. It is important to include a modifications provision that entitles the service to make such changes, provided that the provision isn't so broad that it undermines the validity of the terms themselves. If it is important to the service provider that a modification applies to all existing users and not just new users, the provider should require re-assent or, at the very least, provide prominent notice of the change, such as via email to users or a pop-up or similar notification through the service the first time a user returns to the site. While these methods are the most common, companies are increasingly using creative ways to obtain re-assent, or provide notice, with minimal disruption to the user experience. When a service charges a fee or holds any kind of funds on account for users, the service should offer prompt refunds or repayments of unused amounts if the user does not agree to the new terms.
Attorneys in the firm's technology transactions and Internet strategy and litigation practices are available to review, or help draft, online contracts, and advise on implementation strategies. For more information, please contact Suzanne Bell, John McGaraghan, or any other member of the firm's technology transactions practice; or Dale Bish, Michael Rubin, or any other member of the firm's Internet strategy and litigation practice.