Ninth Circuit to Website Owners: Don’t Bury the Terms of Use

On August 18, 2014, the US Court of Appeals for the Ninth Circuit issued an opinion sending website owners a clear warning that the onus is on them to put users on notice of the terms of use to which they wish to bind consumers. In invalidating an agreement to arbitrate located in the Terms of Use posted on a website owned by Barnes & Noble, Inc., the Ninth Circuit provided guidance to website owners using so-called “browsewrap” agreements — where a website’s terms and conditions of use are generally posted on the website via a hyperlink at the bottom of the screen. (Browsewrap agreements differ from so-called “clickwrap” agreements, which require users to click on an “I agree” box after being presented with a list of terms and conditions for use.)

In Nguyen v. Barnes & Noble, Inc., No. 12-56628 (9th Cir., August 18, 2014), plaintiff sued Barnes & Noble when his order for an H-P Touchpad was cancelled, causing him to have to buy a more expensive product. Barnes & Noble moved to compel arbitration, based on language in its Terms of Use providing that any dispute must be resolved through binding arbitration. The Terms of Use on the Barnes & Noble website were available via a hyperlink in the bottom left-hand corner of the company website; those hyperlinks also appeared — underlined and in green typeface — in the lower left-hand corner of every page in the online checkout process. In the trial court, Barnes & Noble contended that this was sufficient to place plaintiff on notice of the Terms of Use (even though Nguyen never clicked the “Terms of Use” hyperlink, nor actually read the Terms of Use); the district court disagreed, and the Ninth Circuit affirmed.

Reaffirming that commerce on the Internet has not altered basic contract law principles, the Ninth Circuit explained that “mutual manifestation of assent, whether by written or spoken word or by conduct, is the touchstone of contract.” It then went on to explain that, in situations where a website owner wishes to bind a user to the terms in a browsewrap agreement, “the validity of the browsewrap agreement turns on whether the website puts a reasonably prudent user on inquiry notice of the terms of the contract” and that, in turn, “depends on the design and content of the website and the agreement’s webpage.”

The Ninth Circuit’s analysis of the issue makes clear that district courts should be reluctant to enforce browsewrap agreements against individual consumers in the absence of evidence that the website owners took steps to make sure that users became aware of the terms being enforced against them. In fact, the Ninth Circuit explicitly held that making the Terms of Use available for review via a conspicuous hyperlink is insufficient to create constructive notice:

[W]e therefore hold that where a website makes its terms of use available via a conspicuous hyperlink on every page of the website but otherwise provides no notice to users nor prompts them to take any affirmative action to demonstrate assent, even close proximity of the hyperlink to relevant buttons users must click on — without more — is insufficient to give rise to constructive notice. While failure to read a contract before agreeing to its terms does not relieve a party of its obligations under the contract … the onus must be on website owners to put users on notice of the terms to which they wish to bind consumers. Given the breadth of the range of technological savvy of online purchasers, consumers cannot be expected to ferret out hyperlinks to terms and conditions to which they have no reason to suspect they will be bound.

At the end of the day, although the Ninth Circuit did not come out and say so, this decision strongly suggests that browsewrap agreements are going to have to adopt some of the defining characteristics of clickwrap agreements if they are to be enforceable — at least as to individual consumers using commercial websites.

If you have any questions about this alert, please contact Dana J. Finberg, or the Arent Fox professional who handles your matters.