Are Your Website Terms Enforceable? Maybe Not, According To These Recent Decisions – Advertising, Marketing & Branding

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Whether they refer to their online terms as “website terms
and conditions,” “terms of use,” or something else,
online marketers and sellers often seek to enforce contracts to
manage the relationships with their customers and mitigate the
consequences of legal action. Two recent decisions illustrate that
marketers must obtain and have proof that customers agreed to their
terms.

Companies faced with putative class action lawsuits often use
class action waivers, mandatory arbitration clauses, choice of law,
and other provisions to reduce exposure and administer the
litigation process. Online terms provide other rights and
protections, including for permissible uses of the website,
automatic renewal programs, and user-generated content, such as
consumer reviews and feedback.

To achieve these goals, the first thing companies must do is
bind consumers to the terms. This is where things get tricky, and
courts have been far from clear about how companies can do
this.

In April the Ninth Circuit held in Berman v. Freedom Financial that the
webpage “did not adequately call to [consumers’] attention
either the existence of the terms and conditions or the fact that,
by clicking on the ‘continue’ button, they were agreeing to
be bound by those terms” containing mandatory arbitration
provisions. In that case, the plaintiffs sued for violations of the
Telephone Consumer Protection Act (TCPA). The marketer argued that
its website terms and conditions required plaintiffs to arbitrate
their claims rather than proceed as a class action in federal
court. The Ninth Circuit disagreed and held that the plaintiff was
not bound by the terms.

This decision surprised many because the website included
language on two separate pages above the call-to-action button
stating, “I understand and agree to the Terms & Conditions
which includes mandatory arbitration and Privacy Policy.” The
Ninth Circuit found this insufficient. First, while the underlined
phrases “Terms & Conditions” and “Privacy
Policy” were hyperlinks, they appeared in the same gray font
as the rest of the sentence, rather than in the blue color
typically used to convey a hyperlink. And although the notice
appeared directly above the button, the court found that even the
proximity of the hyperlink to relevant buttons users must click
on—without more—is insufficient to give notice.

Instead, the notice must explicitly explain the legal
significance of the action the consumer must take to enter into a
contractual agreement, such as “By clicking the Continue
button, you agree to the Terms & Conditions.” The Ninth
Circuit found that the marketer did not bind the plaintiffs to the
terms because the design and content of the web pages plaintiffs
visited did not adequately call to their attention either the
existence of the terms and conditions or the fact that, by clicking
on the “continue” button, they were agreeing to be bound
by those terms.

The moral of the next case is simple: Get the substance of the
terms and conditions right at the outset or at least get proof of
consent to changes when they are made. In Sifuentes v. Dropbox, a court held
that modifications to terms and conditions, which contained a
mandatory arbitration clause, did not bind the plaintiff, even
though the seller emailed him notice of the modifications.

In that case, the plaintiff filed a putative class action
against DropBox over a 2012 data breach. DropBox argued that the
plaintiff affirmatively checked a box agreeing to the terms of
service when he created an account in 2011. The terms changed
twice, including in 2014 when DropBox added an arbitration
provision to its terms of service. DropBox argued that it emailed
plaintiff and its other customers, notifying them about the updated
terms and summarizing the changes, including the new arbitration
provision. The plaintiff denied that he ever agreed to arbitrate or
read any updated terms of service or opened any emails about these
issues.

The court held that the modification did not bind the plaintiff
because nothing in the record showed that plaintiff saw or read the
email, such as a read receipt reflecting that plaintiff opened the
email. Accordingly, the defendant had not shown that plaintiff had
actual notice of the updated terms of service—something that
could have been cured by getting the terms right at the outset or
obtaining proof that the plaintiff consented to or at least saw the
revised terms.

These decisions demonstrate that the devil is in the details
when drafting online terms and obtaining proof that consumers
consented to them. It remains to be seen whether these decisions
will have broader impacts on other types of marketing and legal
risks, including obtaining consent for telemarketing under the
TCPA, other privacy statutes, and automatic renewal laws.
Regardless, it might be time for marketers and sellers to
reevaluate their terms and conditions, look at how the terms are
presented to consumers, and ensure that consent to the terms can be
proved.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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