Federal District Court Refuses to Compel Arbitration, Holding That Zappos.com's "Browsewrap" Agreement Was Not a Valid Contract
November 7, 2012
Browsewrap vs. Clickwrap Agreements
Website operators typically choose between so-called "browsewrap" and "clickwrap" agreements to form binding contracts with their users. As explained in Zappos, "with a browsewrap agreement, a website owner seeks to bind website users to terms and conditions by posting the terms somewhere on the website, usually accessible through a hyperlink at the bottom of the home page; in contrast, a 'clickwrap' agreement requires users to expressly manifest assent to the terms by, for example, clicking an 'I accept' button."
The Zappos Decision
Changes Without Notice
Implications for Companies That Use Browsewrap Agreements
If a company nevertheless chooses to use browsewrap terms, it is important that notice of those terms, as well as of material changes, is conspicuous. Although it is unclear whether systematic notification procedures would have changed the outcome of Zappos, other courts, including in recent federal opinions such as Van Tassell v. United Mktg. Grp., 795 F. Supp. 2d 770 (N.D. Ill. 2011), and Hines v. Overstock.com, Inc., 668 F.Supp.2d 362 (E.D.N.Y. 2009), have held that browsewrap agreements can constitute binding contracts. As explained in those cases, the nature and substance of user notification are key factors in determining whether a particular browsewrap agreement constitutes a valid contract.
As the Zappos case illustrates, whether to use a clickwrap agreement or a browsewrap agreement is an important decision for companies. The decision depends heavily on the nature of the particular service, a company's litigation risk profile, and the importance of the enforceability of the particular terms.
Wilson Sonsini Goodrich & Rosati is actively following developments around the country with respect to the enforceability of online contracts, and the firm is available to assist companies with counseling and litigation regarding these issues. Attorneys in the firm's technology transactions practice are available to review, or help draft, enforceable online contracts. For more information, please contact one of the authors of this alert, Suzanne Bell and John McGaraghan in the firm's technology transactions practice or Rodney Strickland and Dale Bish in the firm's consumer litigation practice, or your regular firm contact.