Online Browsewrap Agreement Unenforceable Due to Lack of Notice, Illusory Terms

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In In re Zappos.com, Inc., 2012 WL 4466660 (D. Nev. Sept. 27, 2012), a Nevada district court ruled that an arbitration clause contained in a browsewrap agreement that could be accessed via an inconspicuous link buried near the bottom of every webpage (among many other similarly-looking links) was unenforceable.

The court denied the defendant's motion to compel arbitration of a data security-related dispute because the arbitration clause contained in the terms of use was invalid. The court found that the e-commerce site did not direct users to the browsewrap terms of use when users created an account, logged into an existing account, or made a purchase. As the court noted, "a party cannot assent to terms of which it has no knowledge or constructive notice, and a highly inconspicuous hyper link buried among a sea of links does not provide such notice." Alternatively, the court stated that the arbitration agreement was an otherwise unenforceable, illusory contract because the terms of use contained language that granted the site the unilateral, unrestricted right to revise the terms without notice.

The court found persuasive Hines v. Overstock.com, 668 F.Supp.2d 362 (E.D.N.Y. 2009), aff'd 380 F.Appx. 22 (2d Cir. 2010), where a New York court found that an online browsewrap agreement was unenforceable given that the link to the terms of use was not prominently displayed so as to provide the user reasonable notice of the terms and conditions of the site: "[V]ery little is required to form a contract nowadays – but this alone does not suffice."

Echoing that sentiment, the Zappos court commented that, "Where, as here, there is no acceptance by Plaintiffs, no meeting of the minds, and no manifestation of assent, there is no contract pursuant to Nevada law."