Whether they refer to their online terms of service as “website terms and conditions”, “terms of service” or something else, online marketers and sellers often seek to enforce the contracts to manage relationships with their clients and mitigate the consequences of legal action. Two recent decisions illustrate that marketers must obtain and have proof that customers have agreed to their terms.
Companies facing 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. The Online Terms provide additional rights and protections, including for permitted uses of the website, automatic renewal programs, and user-generated content such as consumer reviews and comments.
To achieve these goals, the first thing businesses need to do is bind consumers to terms. This is where things get tricky, and the courts have been far from clear about how companies can achieve this.
In April, the Ninth Circuit was held at Berman vs. Freedom Financial that the webpage “did not properly call to [consumers’] attention either to the existence of the terms and conditions, or to the fact that by clicking the “continue” button, they agreed to be bound by these terms” containing binding arbitration provisions. In this case, the plaintiffs sued for violations of the Consumer Protection Act (TCPA).The marketer argued that its website terms of service required the plaintiffs to arbitrate their claims rather than pursue a class action in federal court.The Ninth Circuit disagreed and found that the plaintiff was not bound by the terms.
Instead, the notice should explicitly explain the legal meaning 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 and conditions.” The Ninth Circuit found that the marketer failed to bind the plaintiffs to the terms because the design and content of the web pages plaintiffs visited did not sufficiently call their attention either to the existence of the terms or to the fact that by clicking on the “continue” button, they agree to be bound by these terms.
The moral of the next case is simple: get the substance of the terms and conditions upfront or at least get proof of consent to changes when they are made. In Sifuentes vs. Dropboxa court held that the changes to the terms and conditions, which contained a mandatory arbitration clause, were not binding on the plaintiff, even though the seller had notified him of the changes by e-mail.
In this case, the plaintiff filed a putative class action lawsuit against DropBox for a data breach in 2012. DropBox argued that the plaintiff had actually checked a box agreeing to the terms of service when he created an account in 2011. The terms have changed twice, including in 2014 when DropBox added an arbitration clause to its terms of service. DropBox argued that it emailed the claimant and its other customers, notifying them of the updated terms and summarizing the changes, including the new arbitration provision. Plaintiff denied ever agreeing to arbitrate or reading updated terms of service or opening emails regarding these issues.
These decisions demonstrate that the devil is in the details when drafting online terms and obtaining proof that consumers have 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 laws. and automatic renewal laws. Either way, it may be time for marketers and sellers to re-evaluate their terms and conditions, review how terms are presented to consumers, and ensure consent to terms can be proven.