Browsing the Seller’s Terms

Before the Internet became a major retail venue, courts struggled with the enforceability of terms of “shrinkwrap” agreements in software sales that were hidden in the box. More recently, the courts have been faced with the enforceability of terms posted on web sites for sales of varied merchandise. A recent federal case suggests that sellers have to make sure customers have clear notice of the need to read the terms before they will be enforced.

When the HP Touchpad tablet was discontinued in 2011, Barnes & Noble sold its remaining inventory by an online sale. Unfortunately, demand for the cut-rate price outstripped supply, and some of the orders had to be declined when the tablets sold out. One of the disappointed buyers filed a class action for consumer protection violations. Barnes & Noble tried to enforce a clause in the terms of use of its website, requiring arbitration.

Barnes & Noble’s problem with the arbitration clause was that the buyer hadn’t read the terms of use.

The case went to the federal Court of Appeals, which treated the law on the enforceability of website agreements as essentially uniform nationally, regardless of which state’s law might apply. (The two choices in this case were California and New York, and the court ruled that the law in both states was the same. It’s probably also the same in all other states with the possible exception of Louisiana, at least when the contract is for the sale of goods.)

Nobody disputes that “clickwrap” forms, in which the buyer has to click on a checkbox or button stating that the buyer has read and agreed to the terms, are enforceable. Barnes & Noble, unfortunately, didn’t use a clickwrap.

Instead, Barnes & Noble used a “browsewrap” form, which claims that simply using the website, or opening an account, or placing an order, constitutes acceptance of the terms. It did put a link to the terms in the lower left hand corner of every page, including the checkout, but its only attempt to highlight the link was to use a different color type and underlining the link.

The court noted that a browsewrap that specifically required the buyer to affirmatively accept the terms would be enforceable. Because Barnes & Noble didn’t require this, the court asked if the design of the site gave the buyer enough notice that he should have realized there would be terms to read. Essentially, the question was whether the buyer should have known there was fine print.

The court ruled that there wasn’t enough notice, even with a link placed on every page. Instead, a clear and conspicuously placed notice that the buyer was agreeing to the terms was required. (And just to make its point, it noted a previous case from another court in which a gray-on-gray notice was not considered sufficiently conspicuous.)

If you are a web designer asked to put a browsewrap agreement on a site, you probably should consult a lawyer who can advise what notices would be required to ensure the agreement would be enforceable. If you are a business that wants browsewrap terms on your site, you probably should have a similar discussion with a lawyer and a web designer. And if you are a consumer, you may want to print every page of the site that you see so that a lawyer might be able to advise you later if you did agree to terms you didn’t expect.

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One Response to Browsing the Seller’s Terms

  1. After I wrote this article, I discovered another case from the Federal Court of Appeals involving what I would call an attempt to create a “usewrap” agreement. A car was sold with a 90-day trial subscription to Sirius XM. The terms of the Sirius XM subscription were mailed to the buyer about a month later, and Sirius XM tried to enforce an arbitration clause when the buyer sued for making unsolicited calls to his cell phone in violation of a federal privacy law. The court ruled for the buyer on the grounds that he had no reason to expect to be bound by terms not disclosed at the time of purchase.

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