[Post by Venkat Balausbramani]

One often asked question is: “How should online terms be structured?” Should users be required to check the box saying that they agree to terms? Should the terms be linked on the bottom? Do courts impose some sort of obligation on the part of consumers to read the terms for websites they use?

The answer is that a website or online merchant should do everything it can in to preempt a plaintiff’s possible argument that “I didn’t agree to the terms because I did not read them.” If a website has some sort of registration process, the best thing to do is to require a user when they sign up to check the box saying that they have read and agree to the terms. This process should be “leakproof,” meaning that there should be no way for a user to navigate beyond the registration page without clicking on the “I agree” box. This is equally applicable to merchants.

If a website does not have a registration or transaction process and merely allows for browsing, the website should make sure its terms aren’t “buried.” The defendant in Hoffman v. Supplements Togo Mgmt. LLC, A-5022-09T3 (N.J. Ct. App.; May 13, 2011) did not take this approach, and as a result, the court found that a clause in the online terms requiring disputes to be brought and resolved in Nevada was presumptively unenforceable.

The court’s opinion contains a fairly useful summary of the basic principles at play:

as . . . internet transactions have become more prevalent, so too have legal disputes proliferated over the contractual rights created in cyberspace between buyers and sellers. The present case exemplifies such a modern-day dispute, raising the question of whether the presentation of the forum selection clause on defendants’ website suffices, as a matter of law, to bind internet purchasers of defendants’ merchandise. To resolve that issue in this contemporary setting, we consult basic and long-standing principles of law and jurisdiction.

The court notes that in order to be bound by a forum selection clause (or any other online contractual term), “there must have been a meeting of minds of the parties.” Forum selection clauses are enforceable when they are presented “in a fair and forthright fashion.” Where the online consumer must view the contractual term in order to complete the transaction, the term will be valid and enforceable. There is no particular placement necessary for a forum selection clause; the only requirement is that the party, against whom the clause is sought to be enforced, must have “reasonable notice.” The court contrasted the clause in Caspi v. Microsoft, where the consumer had to click “I Agree” in order to complete the transaction, with Specht v. Netscape. In Specht, the online agreement contained an arbitration clause, but the clause “was located well below an icon inviting subscribers to download” the program. The Second Circuit found that the arbitration clause at issue in Specht was unenforceable because the plaintiffs were not provided “reasonable notice.” The court in this case also distinguishes between “clickwrap” agreements (where users manifest assent by clicking “I Agree”) with “browsewrap agreements, where the users ostensibly agree with online terms merely by browsing. The agreement in this case can be characterized as a browsewrap.

Here, the available evidence showed that consumers could complete the transaction without viewing the forum selection clause. In fact, the court found that:

the forum selection clause was unreasonably masked from the view of prospective purchasers because of its circuitous mode of presentation.

The court does not credit defendants’ argument that plaintiff should have reasonably looked into the applicable terms, and also does not take into account plaintiff’s sophistication or experience in determining that the forum selection clause was unreasonably buried. On the other hand, the court also rejects plaintiff’s argument that in order to be enforceable, the website had to have some affirmative manifestation of assent (other than completing the transaction). In the end, the court states that the forum selection clause is “presumptively unenforceable,” but also that defendants can overcome this presumption if they can show that plaintiff actually read and agreed to the terms.

There’s some question as to whether particular clauses need to be highlighted, and the court’s opinion here is not crystal clear as to whether forum selection clauses are more closely scrutinized in their presentation. (I think the answer is no, but there was some ambivalence in the court’s opinion.) At the end of the day, the key is to make sure that no clause is buried. If the agreement was presented in a leakproof fashion in this case, I’m not sure it would have mattered either way. The plaintiff was a lawyer, and the argument that “although I’m a lawyer I didn’t actually read the agreement” does not tend to resonate.

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