Technology has drastically changed how we do business. Thanks to the Internet, virtually anything you want – from personal information to a bag of dog food – is obtainable. You can trade stocks or file taxes online with just the click of a button (or a touch of a screen). Advances in communication and information have changed the ease and pace of conducting business.  These changes have made it much easier for companies to transact business and sell products online. However, despite the advantages, there are still many legal issues that should be addressed when doing business on the Internet.  For example, the Internet has not altered the basic principles of contract formation – specifically, the principle of “mutual assent,” i.e., agreeing to a contract.

Generally, most businesses these days have a website, and most have an agreement stating the terms and conditions of using the site.  Typically, terms of use agreements (or “TOU agreements”) are one of two types.

“Clickwrap” agreements

A clickwrap agreement requires the user to manifest his assent by clicking on an “agree” or “ok” button, or something similar thereto, to agree to the terms of the agreement. Most clickwrap agreements are binding because the user is deemed to have been put on notice of the terms by physically having to confirm acceptance of the agreement. 

“Browsewrap” agreements

Browsewrap agreements are posted by a link at the bottom of the webpage. Often, users who visit the webpage may not even know the agreement exists.  Courts are increasingly hesitant to bind users to an agreement where there is no evidence that the user knew about its terms.

Recently, Barnes & Noble found out the hard way that its browsewrap agreement was not properly agreed-to by customers visiting their website. In a class action lawsuit against B&N, plaintiffs claimed B&N engaged in deceptive business practices and false advertising in connection with the sale of HP TouchPads on B&N’s website.  Early on in the lawsuit, B&N tried to compel arbitration of the suit under its TOU agreement, which B&N claimed was binding between it and website users based on the fact that the terms were available via a hyperlink placed on its “checkout” page.

Unfortunately for B&N, the Ninth Circuit Court of Appeals disagreed, finding that the browsewrap agreement was not binding because the user lacked notice of the agreement’s terms and conditions.  The court noted that there was no evidence that the terms of use were part of a clickwrap agreement or that the plaintiff was otherwise forced by the website to read or even acknowledge the terms, holding that  even close proximity of the hyperlink to relevant buttons users must click on wasn’t enough by itself to show a properly formed agreement.  

Although other courts may not agree with the Ninth Circuit’s approach to browsewrap agreements, the decision is bound to have a significant impact on businesses that use an online contracting process. Using clickwrap agreements that require affirmative acceptance where possible is likely more prudent than relying on browsewrap agreements to enforce the intended terms of use.  A simple click of a mouse (or touch of a screen) can be the difference between an agreement that is enforceable and one that is not.