Clickwrap / Browsewrap Agreements: It’s the Notice, Stupid!

If your company sells stuff online, it likely relies on a Terms of Use link to bind its customers to a purchase agreement, or requires its customers to click through a Terms of Use agreement before a sale can be consummated.

But is that enough?   A recent case out of NY says, maybe not.

In Nguyen v. Barnes & Noble, Inc., the plaintiff purchased two 16 GB HP TouchPad Tablets for $101.95 through Barnes & Noble’s website.  A short time later he received an email from Barnes & Noble confirming his order.  All seemed well until the next day when the plaintiff received another email from Barnes & Noble canceling his order, stating that his order would “not be shipped for the advertised price.”

As a result, the plaintiff “was unable to obtain an HP Tablet during the liquidation period for the discounted price, “and he was “forced to rely on substitute tablet technology, which he purchased . . . [at] considerable expense.”  (Yes, I know…that’s a peculiar basis for a lawsuit.  And yes, I know, he might have been able to get “substitute tablet technology” from eBay or a hundred other places at a discounted price.   And yes, I know, HP’s “tablet technology” might have been unsuitable for his needs—remember, HP discontinued those tablets due to poor sales.  But the merit of the plaintiff’s lawsuit isn’t as important as what happened next….so let’s move on.)

Barnes & Noble moved to dismiss the lawsuit and to compel arbitration, citing its website’s “Terms of Use” document that required arbitration for all claims arising from purchases made through the website.  The plaintiff countered by arguing that he didn’t agree to arbitrate his claims because the website didn’t require him to click through or affirmatively assent to the website’s Terms of Use.  (In fact, this was true: the Terms of Use hyperlink was located on the bottom left corner of each webpage, and it wasn’t necessary for a visitor to click on the Terms of Use hyperlink in order to buy something through the website.)  The plaintiff further argued that the Terms of Use were inapplicable since (i) he never clicked on the Terms of Use hyperlink, and (ii) he never actually read the Terms of Use before making his purchase. 

The court agreed with the plaintiff, and refused to dismiss the case against Barnes & Noble.  This was a predictable (and in my opinion, correct) result.  See, if you follow these types of clickwrap/browsewrap cases, then you know that these cases are rarely decided on whether a person had to click an “I Agree” button or follow a Terms of Use hyperlink.  Instead, the key to these cases is simply whether the person had reasonable notice of the terms imposed by the seller.  (Now the title of this blog article makes sense, right?)

There’s no bright line rule governing when and how “reasonable notice” is provided at a seller’s website.  But here’s my informal, not-legal-advice-but-for-educational-purposes-only list that might help you determine whether notice is “reasonable”:

Likely sufficient:

• The buyer has to affirmatively click “I Agree”.
• The buyer has to click a checkbox indicating his/her assent to the website’s terms.
• The Terms of Use hyperlink is clear and conspicuous and located in the upper portion of the seller’s website.
• The buyer is a regular visitor to the seller’s website, and is familiar with the Terms of Use of the seller’s website.

Likely insufficient:

• The Terms of Use are provided after the sale is completed.
• The Terms of Use are buried on the bottom of the seller’s website, and/or are displayed in a small font that could be overlooked easily by customers.
• The color scheme used to create the Terms of Use hyperlink makes the hyperlink difficult to distinguish from the surrounding background material.