** NOTE – While this content is specific to the United States of America, it is still relevant to Canadians as our laws are often informed by legal precedents being set in the USA. Furthermore, Canada’s recent and ever-evolving anti-spam legislation has a similar take when it comes to click wrap agreements. We hope you enjoy this read and heed the importance of what’s being shared!
It is well established that online clickwrap agreements are increasingly common and have routinely been upheld. For example, where users take an affirmative action to assent to the terms (e.g., clicking on a checkbox or hyperlink).
It is also evident that buried terms do not create proper notice of a browsewrap agreement. For example, in late 2014, the U.S. District Court for the Northern District of Illinois held that a company could not enforce its forum selection clause because it never directed customers to its terms of services link containing the provision. At a bare minimum, users must possess actual or constructive knowledge of pertinent terms by actually viewing them or being directed to view them.
That said, even clickwrap agreements are not without their challenges, especially when it comes to the assertion of defenses to consumer class action matters.
Recently, the Seventh Circuit in Sgouros v. TransUnion Corp. evaluated overall website design and presentation when refusing to enforce a mandatory arbitration clause contained in a clickwrap agreement. More specifically, the court found that the website failed to provide users with reasonable notice that clicking on a button would indicate express consent to the provision.
Here, the relevant website enabled purchases via numerous steps. First, users were required to provide personal information and indicate whether it wished to receive various promotional materials. After affirmatively clicking on a button to continue to the next step, users were asked to provide credit card details, and create an account username and password. There was a small scroll box below containing the Service Agreement. Only a few lines of text were visible. The arbitration clause in dispute was contained on page 8. A “Printable Version” was available directly below the scroll box.
Further below, at the bottom of the page, was a button labeled “I Accept & Continue to Step 3.”
The court held that the scroll box did not pass muster. Primarily, this was due to the fact that the arbitration provision was not conspicuously presented. Nor were users required to affirmatively acknowledge the existence of the scroll box or accept material service terms.
In holding that the scroll box was insufficient for the creation of a binding contract, much less one that bound the plaintiff to arbitrate a dispute, the court noted, “we cannot presume that a person who clicks on a box that appears on a computer screen has notice of all contents not only of that page but of other content that requires further action (scrolling, following a link, etc.).”
Takeaway: Courts (and regulators) scrutinize scroll boxes, especially small ones. If you use one, do not permit users to proceed without first scrolling through the terms and affirmatively indicating assent. Always clearly, conspicuously and unambiguously inform users of material provisions, the purpose of those provisions and what, exactly, is being regulated by checking a box or clicking on a button.
Courts closely scrutinize mandatory arbitration and class actions waiver provisions. Affirmative consent to all material terms is critical. Please contact an FTC defense lawyer with any questions regarding how to bind users to online agreements.
Richard B. Newman is an Internet law, online marketing compliance, telemarketing compliance and regulatory defense attorney at Hinch Newman LLP focusing on advertising and digital media matters. His practice includes conducting legal compliance reviews of advertising campaigns across all media channels, regularly representing and defending clients in investigations and enforcement actions brought by the Federal Trade Commission and state Attorneys General, complex commercial litigation defense, SPAM law compliance and litigation defense, intellectual property transactional and litigation matters, advising clients on promotional marketing programs, and negotiating and drafting legal agreements.
HINCH NEWMAN LLP. ADVERTISING MATERIAL. These materials are provided for informational purposes only and are not to be considered legal advice, nor do they create a lawyer-client relationship. No person should act or rely on any information in this article without seeking the advice of an attorney. Information on previous case results does not guarantee a similar future result.