Enforceability of Browsewrap vs. Clickwrap

I’ve discussed before my take on whether clickwrap and related agreements ought to be enforceable in The Libertarian View on Fine Print, Shrinkwrap, Clickwrap; see also The Libertarian Approach to Negligence, Tort, and Strict Liability: Wergeld and Partial Wergeld. (My 2004 Oxford University Press book Online Contract Formation addresses purely legal aspects of such questions.)

A recent Inside Counsel piece, IP: Effective terms of use agreements: Website owners should require users to take an affirmative action to provide evidence that they are aware of and consent to a website’s Terms of Use, discusses a recent case which distinguished the enforceability of clickwrap from browsewrap agreements:

To reduce the risk of transacting business online, virtually all website owners place language on their sites that includes, among other things, forum selection and choice of law clauses, limitations on damages and alternative dispute resolution requirements such as mediation or arbitration. This protective language often is presented in the context of “Terms of Use,” an “End User License Agreement,” or “Terms of Service.” Regardless of what the agreement is called, to effectively reduce their risk, website owners need to make certain that a valid agreement exists with the website users.

A court recently addressed the enforceability of a website’s Terms of Use when Zappos.com Inc. tried to require arbitration of a class action consumer dispute. The plaintiffs, who were Zappos.com customers, claimed their personal information was hacked from the Zappos site. Individual plaintiffs sued in federal district courts across the country seeking relief under state and federal statutory and common law for damages resulting from the security breach. Zappos filed a motion to compel arbitration pursuant to its website Terms of Use. The Terms of Use further stated that: “We [Zappos] reserve the right to change this Site and these terms and conditions at any time,” and “ACCESSING, BROWSING OR OTHERWISE USING THE SITE INDICATES YOUR AGREEMENT TO ALL THE TERMS AND CONDITIONS IN THIS AGREEMENT, SO PLEASE READ THIS AGREEMENT CAREFULLY BEFORE PROCEEDING.”

The Nevada District Court, where the cases were consolidated for pretrial proceedings, denied Zappos.com’s motion to compel arbitration. In doing so, the court distinguished between “browsewrap” and “clickwrap” (or “click through”) agreements. A browsewrap agreement is one in which a website owner seeks to bind website users to terms and conditions by posting the terms somewhere on the website, usually accessible through a hyperlink located somewhere on the website. A clickwrap agreement requires users to affirmatively manifest asset to the terms, for example by clicking an “I ACCEPT” button.

The Zappos.com Terms of Use was a browsewrap agreement with no evidence that the plaintiffs had actual knowledge of the agreement. Therefore, the validity of the agreement depended on whether the website provided reasonable notice of the terms of the contract. In holding that the Zappos.com Terms of Use did not provide reasonable notice, the court reasoned that: …