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Bar Journal 2017

That's a Wrap! Examining the Enforceability of Electronic Agreements

By Emilie Blanchard Wedman and Timila S. Rother

The internet has spawned a new breed of contract – one whose terms are made available on the offeror’s website and whose acceptance is presumed from some act of the offeree, be it an online purchase, a download or mere continued use of the site. These are “wrap” agreements, and their enforceability1 is the subject of a quickly evolving body of law. Even with the proliferation of the internet and its transformation of everyday commercial and consumer transactions, the essential elements of contract formation remain unchanged. Thus, formation of a wrap agreement requires, inter alia, a manifestation of mutual assent to its material terms. Wrap agreements present novel issues in this regard because the internet is not conducive to traditional methods of assent such as written signatures, handshakes and oral expressions of agreement. 

Online assent issues typically arise in the course of a broader dispute about the particular product or service offered and accepted over the internet. Before addressing the underlying dispute, the court must decide whether the offeree agreed to the terms and conditions purporting to govern the transaction. For instance, a recurring scenario involves a challenge to assent when the proponent of the wrap agreement seeks to enforce a provision therein mandating arbitration or litigation in a particular forum and/or prohibiting the litigation of claims as a class action. 

Courts have struggled to apply traditional contract principles to discern the existence of assent in the online setting. The analysis typically turns on whether a user or consumer (offeree) who later disclaims actual notice of the disputed terms(s) is nonetheless bound by virtue of constructive notice. And, because the constructive-notice doctrine is predicated on the acumen of the proverbial “reasonably prudent” offeree,2 the enforceability of a wrap agreement under this analysis hinges, in large part, on the reviewing court’s perception of online consumer savviness. While courts have notably varied expectations,3 certain patterns have emerged by which the enforceability of a particular wrap agreement can be discerned — or at least predicted — by examining its characteristics.

CATEGORIES
Wrap agreements are broadly categorized as either “clickwrap” or “browsewrap.” Clickwrap agreements are those that require the offeree to indicate his or her assent by clicking an “I agree” icon. Clickwrap agreements are usually upheld on the theory that the offeree: 1) has fair notice of the terms, having been forced to confront them as part of the transaction; and 2) affirmatively manifests assent by clicking “I agree.” A “scrollwrap” agreement is a more conclusive type of clickwrap agreement that requires the offeree to confront all of its terms by physically scrolling through the entirety of the online contract before affirming his or her agreement.4 

In contrast to clickwrap agreements, browsewrap agreements do not require affirmative conduct to evidence the offeree’s consent to its terms and conditions. The contract terms are available, usually by hyperlink, somewhere on the website, where the offeree may (but is not required to) navigate prior to effecting assent. Courts are more skeptical of browsewrap agreements because the offeree is not forced to confront the terms and conditions governing the transaction. Ultimately, constructive notice of browsewrap terms depends on “the design and content of the website and the agreement’s webpage.”5 

ENFORCEABILITY

While the clickwrap and browsewrap labels provide a helpful framework for analysis, wrap agreements cannot always be neatly categorized as either clickwrap or browsewrap, and indeed, courts are increasingly encountering hybrid forms that exhibit characteristics of both.6 Ultimately, the label does not matter because the underlying inquiry is the same: whether the wrap agreement (or hyperlink embodying it) is sufficiently conspicuous — i.e., whether a reasonably prudent offeree would have had fair notice of its terms.7 In making this determination, courts consider the following factors:

Positioning and Accessibility of Contract Terms
First and of greatest importance, courts examine the positioning and accessibility of the online contract terms. Because wrap agreements are frequently made available via hyperlink, the analysis tends to focus on 1) the proximity of the hyperlink to the operative site content (e.g., the item or service being purchased, a field required to complete the transaction or an icon that must be clicked to advance the transaction) and 2) the frequency with which it appears. A court is more likely to enforce a wrap agreement if its terms, or a hyperlink thereto, are positioned near the operative site content and/or appear on successive pages throughout the transaction.

By contrast, a court is unlikely to find sufficient notice if the wrap agreement or hyperlink thereto is buried among other links on the webpage, or if scrolling or successive clicking is required to access it. The leading case on this point is Specht v. Netscape Commc’ns Corp.8 At issue in Specht was whether plaintiffs assented to licensing terms when they downloaded a free software plug-in. The invitation to download the plug-in was “located at or near the bottom of [the] screen,” but notice of the licensing terms “was located in text that would have become visible to plaintiffs only if they had scrolled down to the next screen.”9 The 2nd Circuit held that notice was inadequate, reasoning that, while the users “may have been aware that an unexplored portion of the … webpage remained below the download button,” they would not necessarily have concluded “that th[e] [unexplored] portion contained a notice of license terms.”10

Since Specht, courts have uniformly held that notice of wrap terms is insufficient if it is not viewable except by scrolling or clicking.11 Courts have likewise refused to enforce wrap terms that are “buried” in the text of the webpage.12
 
Characteristics of the Text
Courts also consider the characteristics of the text containing the wrap terms (again, usually a hyperlink), including its font, size, color and whether it appears bolded, underlined or in “all caps.” Not surprisingly, notice is likely to be held sufficient where the text draws the attention of the offeree or otherwise stands out from the rest of the site content.13 Notice is likely to be held insufficient where the text is indistinguishable from and simply blends in with the rest of the site content.14 This is particularly true where notice of wrap terms is inconspicuous in relation to fields or icons required to advance or complete the transaction. For instance, in Berkson v. Gogo LLC,15 the court considered not only the characteristics of the hyperlinked terms, but also the characteristics of the “sign in” feature that permitted users to enter the site. The court held that notice of the wrap terms was inadequate when compared to the sign-in feature: the hyperlink to the terms was “not in large font, all caps, or in bold,” whereas the “sign in” feature was “very user-friendly and obvious, appearing in all caps, in a clearly delineated box in both the upper right hand and lower left hand corners of the homepage.”16 

Sophistication of the Offeree
Finally, courts assess the relative sophistication of the offeree. A court is far more likely to impute constructive knowledge of a wrap agreement to a business customer or a frequent user of a particular website or of the internet generally.17 At least one court has called for “limited discovery” to determine the plaintiff’s “background and experience and what he knew about ordering from a computer.”18 

CONCLUSION
While the above-described factors are not exhaustive, they do tend to drive courts’ analysis in determining the sufficiency of assent. The cases teach that the best practice for drafting an enforceable online contract is utilization of a clickwrap process that requires the offeree to affirmatively assent to its terms by clicking an “I agree” icon. If the entire agreement cannot be viewed on one screen, implementation of a scrollwrap feature — whereby the offeree must physically scroll or click through each page of the contract to advance to the next screen or continue using the site — will enhance the likelihood of enforceability.19 Though not per se enforceable,20 clickwrap agreements (and particularly, scrollwrap agreements) are rarely held insufficient to afford notice. If a browsewrap or hybrid process must be utilized, the conspicuousness of the terms, or a hyperlink thereto, will improve the likelihood of enforceability. The absence of these features will be the focus of challenges to agreements already “wrapped up” in litigation, driving significant, sometimes, outcome-determinative, issues such as the forum for resolution of a particular dispute or the plaintiff’s ability to litigate claims as a class action. 

Though the internet has exposed courts to novel commercial situations, “it has not fundamentally changed the principles of contract.”21 Thus, even with the many advances in technology, the enforceability of online agreements ultimately “boils down to … notice and in-formed assent with respect to the terms in question.”22 That’s a wrap!

1. Enforceability is used herein as shorthand to indicate the formation of a binding, enforceable agreement.
2. See, e.g., Schnabel v. Trilegiant Corp., 697 F.3d 110, 120 (2d Cir. 2012).
3. See Berkson v. Gogo LLC, 97 F. Supp. 3d 359, 400-03 (E.D.N.Y. 2015) (criticizing Fjeta court for overestimating the online sophistication of the “reasonable person” by “presuppos[ing] intensive and extensive use of the internet”).
4. Berkson, 97 F. Supp. 3d at 395.
5. Nguyen v. Barnes & Noble Inc., 763 F.3d 1171, 1177 (9th Cir. 2014).
6. See Fteja v. Facebook, Inc., 841 F. Supp. 2d 829, 838 (S.D.N.Y. 2012) (“Facebook’s Terms of Use are somewhat like a browsewrap agreement in that the terms are only visible via a hyperlink, but also somewhat like a clickwrap agreement in that the user must do something else — click “Sign Up” — to assent to the hyperlinked terms”); Crawford v. Beachbody, LLC, No. 14CV1583-GPC KSC, 2014 WL 6606563, at *3 (S.D. Cal. Nov. 5, 2014) (observing that the case “involve[d] a modified or hybrid clickwrap/browsewrap agreement).
7. Barnes & Noble Inc., 763 F.3d at 1177.
8. 306 F.3d 17 (2d Cir. 2002).
9. Id. at 23 (emphasis added).
10. Id. at 32.
11. See Van Tassell v. United Mktg. Grp., LLC, 795 F. Supp. 2d 770, 792 (N.D. Ill. 2011) (notice insufficient where consumer had to engage in a “multi-step process” of scrolling and clicking to access Conditions of Use); Hines, 668 F.Supp.2d at 367 (E.D. N.Y. 2009) (notice insufficient where plaintiff “could not even see the link to [the terms and conditions] without scrolling down to the bottom of the screen — an action that was not required to effectuate her purchase”).
12. In re Zappos.com, 893 F.Supp.2d at 1064 (D. Nev. 2012) (notice insufficient where Terms of Use were “inconspicuous, buried in the middle to bottom of every ... webpage among many other links, and the website never direct[ed] a user to the Terms of Use.”); Cvent, Inc. v. Eventbrite, Inc., 739 F.Supp.2d 927, 937–38 (E.D. Va. 2010) (notice insufficient where terms and conditions only appeared “via a link buried at the bottom of the first page”).
13. See, e.g., Cullinane, 2016 WL 3751652 at *2 (notice sufficient where “[t]he words ‘Terms of Service & Privacy Policy’ appear[ed] in bold white lettering on a black background, and [were] surrounded by a gray box, indicating a button,” while “[t]he other words [were] in gray lettering”); Crawford, 2014 WL 6606563 at *1 (notice sufficient based in part on the color contrast between the words “Terms and Conditions,” which appeared in blue font, and the surrounding language, which appeared in grey font).
14. See, e.g., In re Zappos, 893 F. Supp. 2d at 1064 (notice insufficient where hyperlink to terms of service was “the same size, font, and color as most other non-significant links”).
15. 97 F. Supp. 3d 359 (E.D.N.Y. 2015).
16. Berkson, 97 F. Supp. 3d at 404.
17. See Register.com, Inc. v. Verio, Inc., 356 F.3d 393, 401 (2d Cir. 2004) (imputing knowledge of website’s terms of use to repeated user of site); Salameno v. Gogo Inc., No. 16-CV-0487, 2016 WL 3688435, at *5-6 (E.D.N.Y. July 7, 2016) (same); Specht, 306 F.3d at 35 (refusing to impute knowledge of website’s license terms based on a single download”); Fteja v. Facebook, Inc., 841 F. Supp. 2d 829, 836 (S.D.N.Y. 2012) (noting that courts are more likely to enforce browsewrap agreements against businesses rather than individual consumers); Cairo, 2005 WL 756610 at *5 (same).
18. Berkson, 97 F. Supp. 3d at 403. But see Nguyen v. Barnes & Noble Inc., 763 F.3d 1171, 1179 (9th Cir. 2014) (rejecting “[Defendant’s] argument that [Plaintiff’s] familiarity with other websites governed by similar browsewrap terms ... gives rise to an inference of constructive notice”; noting that “[w]hether [Plaintiff] has experience with the browsewrap agreements found on other websites such as Facebook, LinkedIn, MySpace, or Twitter, has no bearing on whether he had constructive notice of [Defendant’s] Terms of Use”). 
19. Berkson, 97 F. Supp. 3d at 395.
20. Berkson, 97 F. Supp. 3d at 397.
21. Register.com, 356 F.3d at 403.
22. Cullinane, 2016 WL 3751652 at *5.


ABOUT THE AUTHORS
Emilie Blanchard Wedman is an associate attorney with Crowe & Dunlevy PC, where she practices in the firm’s litigation and trial and appellate practice groups. Her practice focuses primarily on commercial litigation, including contract and lien disputes, insurance, tort liability and class actions. Prior to joining Crowe & Dunlevy, she served as a law clerk to Judge Robert E. Bacharach on the 10th Circuit Court of Appeals.

Timila Rother is a litigation attorney with Crowe & Dunlevy PC and is president and CEO of the firm. Prior to being president, she served 15 years as Crowe & Dunlevy’s loss prevention counsel. She has served as a member of the Oklahoma Legal Ethics Advisory Panel and is on the OBA Professionalism Committee. The emphasis of her legal practice is commercial litigation, including insurance and class action litigation, as well as professional liability and healthcare litigation.

Originally published in the Oklahoma Bar Journal -- OBJ 88 pg. 744 (April 15, 2017)

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