Are clickwrap or browsewrap contracts enforceable?

Are Online “Click to Accept” Agreements Valid?

This is an archived copy of an article that originally appeared in Communications Lawyer, published by the ABA in January, 2015.

From the Chair: “Click Here to Accept the Terms of Service”

Vol. 31 No. 1

By Alison S. Brehm, Cathy D. Lee

Alison S. Brehm is a partner, and Cathy D. Lee is an associate, with Kelley Drye & Warren LLP in Los Angeles, California.

In today’s online-centered world, website owners and website users are necessarily reaching agreements, all the time. These agreements govern a variety of terms, from license agreements to privacy policies to choice of law. Courts typically have grouped these contracts into “clickwrap” or “browsewrap” agreements, depending on the manner in which the consumer has notice of or otherwise assents to the terms of the agreement. Given that the terms usually involve an exchange of rights and obligations between a website owner and user, disputes over the enforceability of such agreements abound.

Many times those disputes receive significant media attention, bringing a company’s particular policies and practices into sharp public focus. Indeed, one such online agreement that garnered media attention recently was Facebook’s data use policy, on which the company relied when defending the social experiment it conducted on hundreds of thousands of users’ newsfeeds. The public outcry that resulted illustrates the importance of clarity and fairness when forming contracts online, particularly when significant rights are at stake—for both the website owners and the users.

This article will address the key features of the most common types of online agreements—clickwrap and browsewrap agreements—the circum- stances under which courts have upheld such agreements, and best practices for ensuring the agreements are enforceable.

How Clickwraps and Browsewraps Are Used

Clickwrap and browsewrap agreements differ in presentation and functionality. Clickwrap agreements require a user to affirmatively click a box on the website acknowledging agreement to the terms of service,1 which are often available in a scrolling text box, before the user is allowed to proceed.2 Browsewrap agreements have hyperlinked terms of use that are typically found on a separate webpage, which the user does not have to visit to continue using the website or its services.3

Whatever the name, these agreements govern a variety of terms, including software licensing,4 terms of use for utilizing a website,5 privacy policies,6 terms of sale,7 subscriber agreements,8 and credit card applications.9 The agreements have real ramifications because they can dictate a variety of terms critical both to users and website owners. Among other things, the agreements may govern where a lawsuit can be adjudicated,10 whether arbitration will be mandatory,11whether a prohibition on copying a website’s content will be enforceable,12 and whether a provision limiting use of the website for noncommercial purposes will be enforceable.13

At bottom, many of these terms are no different from those seen in the brick and mortar world, and thus the basic legal landscape for enforcement is not much different. Indeed, Internet commerce “has not fundamentally changed the principles of contract.”14 To determine the enforceability of a clickwrap or browsewrap agreement, courts apply traditional principles of contract law and focus on whether the plaintiffs had reasonable notice of and manifested assent to the agreement.15 There is no manifestation of assent unless a party intends to engage in the conduct and knows or has reason to know that the other party may infer from his or her conduct that he or she assents.16

Against this backdrop, courts have considered the presentation, form, and functionality of browsewrap and clickwrap agreements in determining whether there is a clear manifestation of assent.

Cautionary Tales

Browsewrap Agreements

Generally, courts have declined to enforce browsewrap agreements because the fundamental element of assent is lacking.17 As an initial matter, because no affirmative action is required by the user to agree to the terms other than use of the website, the validity of a browsewrap turns on whether a user has actual or constructive knowledge of a site’s terms.18

For example, in Be In, Inc. v. Google Inc., a social media developer alleged that defendants Google Inc., YouTube, and Google UK breached the CamUp website’s terms of service by visiting the CamUp website to copy and exploit the website for the defendants’ social network platform.19 The home page of the CamUp website included a link to the “Terms of Service,” which stated that “by using and/or visiting this Website . . . you signify your agreement to these Terms of Use, [and] CamUp’s Privacy Policy.”20

A district court in the Northern District of California found that the plaintiff failed to allege a contract was formed because beyond the existence of a hyperlink, there were no other allegations showing that the defendants were on notice that the mere use of the website would be interpreted as an agreement to the terms of service. Specifically, the plaintiff did not allege the size or typeface of the link, the central or obvious location of the link on the webpage, or even the text of the link.21 Accordingly, the plaintiff’s browsewrap agreement was not binding on the defendants.

The reluctance to hold browsewrap agreements enforceable is further supported by the Ninth Circuit’s recent decision in Nguyen v. Barnes & Noble Inc.22 In Nguyen, the plaintiff purchased Touchpads on Barnes & Noble’s website, but then was notified that his order had been canceled due to unexpected high demand. The plaintiff filed a class action on behalf of consumers whose Touchpad orders had been canceled, alleging deceptive business practices and false advertising. Barnes & Noble moved to compel arbitration, based on the arbitration agreement in the website’s terms of use. The district court denied the motion. On appeal, the Ninth Circuit affirmed.

The critical question was whether Nguyen assented to the terms of use—specifically, the arbitration clause. Nguyen had neither clicked the hyperlinked terms of use nor read them.23 Barnes & Noble argued that Nguyen was on constructive notice of the terms. Barnes & Noble contended the placement of an underlined, color-contrasting hyperlink that read “Terms of Use” on the bottom left of every page on the Barnes & Noble website, and the hyperlink’s close proximity to the buttons a user must click on to complete an online purchase, were enough to place a reasonably prudent user on constructive notice.24 The court disagreed, concluding that the proximity and conspicuousness of the hyperlink alone is not enough to give rise to constructive notice. The court instructed that a textual notice of the terms of use, such as a final checkout screen reminding the user to review the terms, would likely give rise to sufficient notice.25 In so holding, the court cautioned that website owners must ensure their sites put users on notice of any binding contractual terms in light of the “range of technological savvy of online purchasers.”26

Despite the fact that browsewraps are typically held unenforceable, one court recently deemed a browsewrap enforceable. In AvePoint, Inc. v. Power Tools, Inc., the “Terms and Conditions” provided that “[u]sers may access, print and download materials and information on this Site solely for personal and noncommercial use.”27 The plaintiff alleged that the defendant breached the terms and conditions in its browsewrap agreement by downloading a copy of the plaintiff’s software for competitive and commercial purposes. The defendant moved to dismiss on the grounds that the plaintiff had not alleged an enforceable contract.28

A district court in the Western District of Virginia disagreed. The court reasoned that the plaintiff alleged additional facts to support that the defendant had actual or constructive knowledge of the terms and conditions, instead of merely alleging the existence of a link at the bottom of the plaintiff’s website. Specifically, the plaintiff contended that the fact that the defendant went to the trouble of creating a fictitious profile and e-mail account to download the software suggested that the defendant knew about the terms and conditions and was aware that they prohibit users from downloading materials for commercial use. The plaintiff also claimed that because the defendant had a similar browsewrap agreement on its own website that restricts the use of downloaded software, the defendant should have known that the plaintiff’s website had similar terms.29

AvePoint demonstrates that while browsewrap agreements are generally not enforceable, courts may enforce such agreements when there are factual allegations—independent of the presentation of the agreement on the website—that support a user’s actual or constructive knowledge of a site’s terms and conditions.

Clickwrap Agreements

Unlike browsewrap agreements, courts have routinely upheld clickwrap agreements.30 The enforceability of these agreements turns not on the label of “clickwrap,” but rather whether the party had constructive notice of the terms of the agreement and thus agreed to be bound by them.31

A Tenth Circuit decision from 2012, Hancock v. American Telephone & Telegraph Co., illustrates this principle.32 In Hancock, AT&T consumers argued that the clickwrap agreement did not give them notice of and meaningful opportunity to assent to the forum selection and arbitration clauses in the terms of service. AT&T technicians presented customers with a printed copy of the terms and gave customers an opportunity to review the terms, to which customers agreed by clicking on the “I Acknowledge” button on the technician’s laptop for the TV/voice terms.33 Customers also clicked on the “I Agree” button to manifest assent to the Internet terms, which customers had an opportunity to review in a scrolling text box.34 The court found the clickwrap agreements enforceable.35Clickwrap agreements have been enforced even when the consumer did not read the agreement. For example, in Davis v. HSBC Bank Nevada, N.A., the plaintiff alleged that HSBC and Best Buy defrauded customers by offering credit cards without disclosing an annual fee.36 After reading an advertisement stating that applicants would receive a $25 reward certificate, the plaintiff decided to apply for the credit card. While applying, the plaintiff was directed to the terms and conditions, which were available in a scrolling text box on Best Buy’s website. The plaintiff did not read the terms, but he checked the box stating that he agreed to the terms and conditions. After the plaintiff’s application was approved, the plaintiff received his credit card and an “Additional Disclosure Statement.” Upon reading the latter, the plaintiff learned that there was a $59 annual fee for using the card. At that point, the plaintiff revisited Best Buy’s website and discovered the annual fee.37

The plaintiff filed a class action complaint alleging false advertising, fraudulent concealment, and unfair competition. The plaintiff contended that the relevant portions of the terms and conditions were not visible without scrolling down.38 The Ninth Circuit affirmed the dismissal of the plaintiff’s complaint with prejudice.39 The court found that the plaintiff’s failure to read the terms and conditions before checking the box accepting the terms irrelevant to determining enforceability. The court reasoned that the annual fee was “within [the plaintiff’s] observation” because he was able to discover it when he revisited Best Buy’s website and scrolled through the terms and conditions.40Hybrid Clickwrap-Browsewrap Agreements

Online agreements do not always fit neatly within the clickwrap or browse- wrap categories. Sometimes, the agreements display features of both. In Fteja v. Facebook, Inc., the District Court for the Southern District of New York considered the enforceability of the forum selection clause in the hybrid clickwrap- browsewrap agreement between Facebook and its user, requiring that all disputes be litigated in California.41

The Facebook page stated, “By clicking Sign Up, you are indicating that you have read and agree to the Terms of Service.”42 The court commented that Facebook’s terms of use are like a browsewrap in that the terms are only visible via a hyperlink, but also like a clickwrap in that the user must click “Sign Up” to assent to the hyperlinked terms.43 The court analogized Facebook’s terms to a sign next to a bin of apples that says, “By picking up this apple, you consent to the terms of sale by this fruit stand. For those terms, turn over the sign.”44 Applying that analogy to the instant case, the court saw no reason why the agreement should not be upheld simply because Facebook’s terms of use appear on another screen. The court concluded that the Facebook user consented to Facebook’s terms of use and also to the forum selection clause therein, and thus granted Facebook’s motion to transfer to the Northern District of California.45

Fteja shows that the more an online agreement resembles a traditional clickwrap agreement, the more willing courts are to find the notice necessary to give rise to constructive assent.46 Specifically, a major factor for the Fteja court in holding the agreement enforceable was that Facebook informed the user of the consequences of clicking “Sign Up,” and showed the user where to click to understand those consequences.47

Another recent case signals the enforceability of these hybrid agreements. In Tompkins v. 23andMe, Inc., a district court in the Northern District of California determined that just because the hyperlinked terms of service were not presented in the same screen does not mean that customers lacked adequate notice of the agreement.48 After the Food and Drug Administration informed the defendant that it was violating the law by selling genetics services without approval, the plaintiffs brought class actions alleging false advertising, unfair competition, and consumer protection claims.49 The plaintiffs’ receipt of genetic information took place in two steps: (1) the plaintiffs bought DNA kits online from the defendant, and (2) the plaintiffs created accounts and registered their DNA kits online and sent DNA samples to the defendant.50

At the purchasing stage, the terms of service were accessible via a hyperlink at the bottom of the defendant’s homepage under “LEGAL,” but customers were not required to view the terms or to click to accept the terms.51 At the subsequent account creation and registration stage, the webpage required customers to check a box next to the statement, “Yes, I have read and agree to the [blue hyperlinked] Terms of Service and Privacy Statement.”52

The defendant filed a motion to compel arbitration, arguing that the arbitration provision in the terms of service was enforceable. The court concluded that the plaintiffs had not agreed to the terms of service at the purchasing stage, but that the terms of service took effect upon the account creation and registration stage. After considering various defenses to arbitrability, the court granted the defendant’s motion to compel arbitration.53

One recent case underscores that the visibility of the hyperlink to an agreement is critical in determining enforceability. In Harris v. comScore, Inc., before consumers could download and install comScore’s software, the purchasers had to click a box acknowledging that they agreed to the terms of the license agreement, which terms could be accessed through a hyperlink.54 The terms contained a forum selection clause. A dispute arose when the plaintiffs claimed that comScore had improperly obtained and used personal information from the plaintiffs’ computers after they downloaded and installed the software.55

The defendant moved to dismiss the plaintiffs’ complaint on the ground of improper venue, claiming the dispute should be adjudicated in Virginia because of the forum selection clause in the license agreement. The plaintiffs disagreed, contending that the terms of service were obscured during the installation process in such a way that the average consumer would not notice the hyperlinked terms.56

The court agreed with the plaintiffs, explaining that the defendant had not provided sufficient detail about how the hyperlinked agreement was presented to the user. It was not clear that the user could reasonably find the hyperlink to the terms or manifest assent to it during the installation process. The court noted that it must accept the complaint’s factual allegations as true, and thus declined to infer that clicking a box acknowledging that a user had read an agreement indicates that the agreement was reasonably available to the user, particularly when the plaintiffs alleged that the hyperlink to the agreement was obscured. The court concluded that the forum selection clause was not reasonably communicated and denied the defendant’s motion.57

Best Practices for Ensuring Enforceability

A review of the decisions addressing online agreements—whether clickwraps, browsewraps, or a combination of both—reveals that there are a variety of ways to increase the likelihood that the agreements will be enforced, and these can be easily followed by website owners:

  • There is a check-box that users must click adjacent to an affirmation similar to, “By clicking on the box, you are indicating that you have read and agree to the Terms of Use”;
  • The webpage is designed so that if the user does not check the box manifesting assent to the terms, the user cannot proceed in the transaction;
  • In addition to a check-box that users must click, the terms of use are available either in a nearby scrolling text box or a nearby hyperlink;
  • Any hyperlink of the terms is obvious, e.g., “Terms of Use” is underlined and has decent size lettering and visible coloring (not small lettering and not obfuscatory coloring);
  • Any hyperlink of the terms has a central or obvious location on the webpage, e.g., the hyperlink is directly below the “I Agree” button (not relegated to the bottom of the webpage, which would require the user to scroll down to a submerged portion of the webpage);
  • Any hyperlink of the terms immediately displays the terms (instead of requiring the user to click on a series of hyperlinks to view the terms);
  • The terms of use are evident in every webpage on the website (rather than visible on only one webpage), in addition to requiring users to attest that they have read the terms of use;
  • The terms are in readable font (at least 12 point); and
  • The agreement contains all requisite elements of an enforceable contract (e.g., consideration, sufficiently definite material terms, etc.).58

Both website owners and users stand to benefit from such clear presentation of the terms. The owners have more certainty in knowing that the agreements will be upheld, and the users have a greater understanding of the terms dictating their use of the website or any commercial transaction. Ultimately, the more that an agreement looks like a clickwrap (i.e., requiring users to check the box next to the statement, “I have read and agree to the Terms of Use”), the more willing courts will be to find the notice necessary to give rise to constructive assent and enforce the agreement.59

Endnotes

1. The phrases “terms of use” and “terms of service” are often used interchangeably. See Be In, Inc. v. Google Inc., No. 12-CV-03373-LHK, 2013 WL 5568706, at *6 (N.D. Cal. Oct. 9, 2013).

2. Fteja v. Facebook, Inc., 841 F. Supp. 2d 829, 837 (S.D.N.Y. 2012).

3Be In, 2013 WL 5568706, at *6.

4. Rassoli v. Intuit Inc., No. H-11-2827, 2012 WL 949400, at *1 (S.D. Tex. Mar. 19, 2012).

5Be In, 2013 WL 5568706, at *6.

6Id. at *8.

7. Jerez v. JD Closeouts, LLC, 943 N.Y.S.2d 392, 394 (Dist. Ct. 2012).

8. Vernon v. Quest Commc’ns Int’l, Inc., 925 F. Supp. 2d 1185, 1187–88 (D. Colo. 2013).

9. Davis v. HSBC Bank Nev., N.A., 691 F.3d 1152, 1158–59 (9th Cir. 2012).

10. Harris v. comScore, Inc., 825 F. Supp. 2d 924, 926–28 (N.D. Ill. 2011).

11. Tompkins v. 23andMe, Inc., No. 5:13-CV-05682-LHK, 2014 WL 2903752, at *9, *18 (N.D. Cal. June 25, 2014).

12. Be In, Inc. v. Google Inc., No. 12-CV-03373-LHK, 2013 WL 5568706, at *8 (N.D. Cal. Oct. 9, 2013).

13. Sw. Airlines Co. v. BoardFirst, L.L.C., No. 3:06-CV-0891-B, 2007 WL 4823761, at *2 (N.D. Tex. Sept. 12, 2007).

14. Edme v. Internet Brands, Inc., 968 F. Supp. 2d 519, 525 (E.D.N.Y. 2013) (quoting Register.com, Inc. v. Verio, Inc., 356 F.3d 393, 403 (2d Cir. 2004)).

15See Feldman v. Google, Inc., 513 F. Supp. 2d 229, 236 (E.D. Pa. 2007).

16Be In, 2013 WL 5568706, at *6 (citing Restatement (Second) of Contracts § 19 (1981)).

17. Tompkins v. 23andMe, Inc., No. 5:13-CV-05682-LHK, 2014 WL 2903752, at *7 (N.D. Cal. June 25, 2014).

18Sw. Airlines, 2007 WL 4823761, at *5.

19Be In, 2013 WL 5568706, at *2.

20Id. at *8.

21Id. at *9.

22. 763 F.3d 1171, 1173 (9th Cir. 2014).

23Id. at 1174.

24Id. at 1177.

25Id. at 1178.

26Id. at 1179.

27. 981 F. Supp. 2d 496, 510 (W.D. Va. 2013).

28Id. at 509.

29Id. at 510–11.

30. Fteja v. Facebook, Inc., 841 F. Supp. 2d 829, 837 (S.D.N.Y. 2012) (citing numerous decisions).

31. Nguyen v. Barnes & Noble, Inc., No. 8:12-cv-0812-JST (RNBx), 2012 WL 3711081, at *3 (C.D. Cal. Aug. 28, 2012).

32. 701 F.3d 1248, 1251 (10th Cir. 2012).

33Id. at 1253.

34Id. at 1254.

35Id. at 1258.

36. 691 F.3d 1152, 1157 (9th Cir. 2012).

37Id. at 1158.

38Id. at 1159–60.

39Id. at 1159, 1171.

40Id. at 1163.

41. 841 F. Supp. 2d 829, 834 (S.D.N.Y. 2012).

42Id. at 835.

43Id. at 838.

44Id. at 839.

45Id. at 841.

46See Be In, Inc. v. Google Inc., No. 12-CV-03373-LHK, 2013 WL 5568706, at *7 (N.D. Cal. Oct. 9, 2013) (citing Fteja, 841 F. Supp. 2d at 835, 838–40).

47Fteja, 841 F. Supp. 2d at 840.

48. No. 5:13-CV-05682-LHK, 2014 WL 2903752, at *8 (N.D. Cal. June 25, 2014).

49Id. at *1–2.

50Id. at *3.

51Id. at *2–3.

52Id. at *3.

53Id. at *1, *5.

54. 825 F. Supp. 2d 924, 926–27 (N.D. Ill. 2011).

55Id. at 925.

56Id. at 925–26.

57Id. at 926–28.

58See Davis v. HSBC Bank Nev., N.A., 691 F.3d 1152, 1158 (9th Cir. 2012); In re Zappos.com, Inc. Customer Data Sec. Breach Litig., 893 F. Supp. 2d 1058, 1064 (D. Nev. 2012); E.K.D. ex rel. Dawes v. Facebook, Inc., 885 F. Supp. 2d 894, 901 (S.D. Ill. 2012); Van Tassell v. United Mktg. Grp., LLC, 795 F. Supp. 2d 770, 791–92 (N.D. Ill. 2011); RealPage, Inc. v. EPS, Inc., 560 F. Supp. 2d 539, 546 (E.D. Tex. 2007); Feldman v. Google, Inc., 513 F. Supp. 2d 229, 236–38 (E.D. Pa. 2007).

59See Be In, Inc. v. Google Inc., No. 12-CV-03373-LHK, 2013 WL 5568706, at *7 (N.D. Cal. Oct. 9, 2013).