Emerging Markets Law

California Court Rules on Enforceability of Browsewrap Contract

Practitioners might jump to the conclusion that browsewrap contracts are always unenforceable when hearing about the decision of the California Court of Appeals in Long v. Provide Commerce, Inc., 2016 Cal. App. LEXIS 199 (Mar. 17, 2016) (hat tip: Professor Goldman), but a closer reading of the case reveals a more nuanced lesson.

You can find a great summary of the facts of the case here. In short, however, the plaintiff was unhappy with the quality of a product purchased from the defendant’s online store. Plaintiff filed suit, seeking to have the case certified as a class action. Predictably, the defendant moved to have the case dismissed and the arbitration provisions of the browsewrap “terms of use” enforced.

The California Court of Appeals, noting that it was the first time (!) that a California court had ruled on the enforceability of a browsewrap contract, stated that the inquiry begins with the question of whether there was a mutual agreement to arbitrate. It relied on the prior decision of the Second Circuit Court of Appeals in Specht v. Netscape, 306 F.3d 17 (2d Cir. 2002) for a description of the differences between a browsewrap contract (where a hypertext link on a web page purports to bind the user to contractual provisions in the linked page) in contrast to a click-through contract (where the user is required to actually click on an “I agree” button before placing an order or completing a transaction).

The California Court of Appeals cited Specht approving for the proposition that “reasonably conspicuous notice of the existence of contract terms and unambiguous manifestation of asset to those terms by consumers are essential if electronic bargaining is to have integrity and credibility.” 

The California Court in Provide Commerce concluded that the browsewrap terms on the Provide Commerce site simply said, “Terms of Use” without any additional language or symbols that would put a reasonable site user on notice that the ongoing use of the site was intended to bind that user to contractual provisions. As a consequence, while the court declined to enforce the browsewrap contract in this instance, the court affirmatively stated that, “to establish the enforceability of a browsewrap agreement, a textual notice should be required to advise consumers that continued use of a website will constitute the consumer’s agreement to be bound by the website’s terms of use.” 

For practitioners, I think there are two important conclusions.

First, unless there is a compelling reason to do otherwise, online contracts should nearly always be structured as click-through contracts, where the user must affirmatively click on an “I Agree” button. Courts generally enforce such contracts and using the click-through format avoids all of the potential pitfalls that befell the website owner in Provide Commerce.

Second, if you are compelled to rely on a browsewrap contract, make certain to include explicit textual elements to alert the user that continued use constitutes asset to contractual provisions. As the Provide Commerce court suggested, those textual elements should include language sufficient to “advise consumers that continued use of a website will constitute the consumer’s agreement” to the linked contractual terms.

Footnote: Although the court in Provide Commerce said it was the first case on point in California, there is an unpublished opinion of the California Court of Appeals that reaches substantially the same conclusion. See Martin v. Snapple Beverage Corp., 2005 Cal. App. Unpub. LEXIS 5938 (2005).  

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