Browse-wrap Agreements Are Ineffective As e-Commerce Contracts

A California State Appeals Court followed a Second Circuit Federal Appeals Court and a Ninth Circuit Federal Appeals Court decision in declaring that a browse-wrap contract for website selling goods did not establish a contractual obligation to arbitrate disputes. Long v. Provide Commerce, Inc., Case No. B257910 (Ca. App. 2d, March 17, 2016) (Available Here). Although the California State Appeals Court mentioned that the floral arrangement sold at the e-commerce website by defendant Provide Commerce (“Provide”), the reference to the consumer-based relationship was not the prime focus of the appellate court decision. Therefore, this case reasonably establishes that browser wrap agreements are not effective for many, if not all, e-commerce websites. See also Nguyen v. Barnes & Noble Inc., 763 F.3d 1171, 1175 (9th Cir. 2014); and Specht v. Netscape Communs. Corp., 306 F.3d 17, 30 (2d Cir. 2002).

The consumer in the Long case purchased a floral arrangement from website owner Provide at its website which arrangement was advertised as being a completely assembled floral product but was delivered as a do-it-yourself kit requiring assembly. The Plaintiff consumer brought suit in the lower trial court on behalf of himself and a class of California consumers. Defendant Provide, which operates several e-commerce websites, had a “Terms of Use” or TOU (similar to “Terms of Service” or TOS) contract which was viewable via many hyperlinks at the bottom of each page on the e-commerce website. The terms of use required arbitration of all disputes but the trial court denied Provide’s petition to compel arbitration and Provide appealed. The court distinguished a browse-wrap agreement as compared with a click-wrap agreement.

Unlike a click-wrap agreement, a browse-wrap agreement does not require the user to manifest assent to the terms and conditions expressly stated in the terms of use. Instead, a party gives his or her ascent simply by using the website. Thus with respect to browse-wrap agreements, simply by visiting the site, which is something the user has already done, the user agrees to the terms of use or terms of service listed on the site available typically by clicking on a hyperlink. In contrast, a click-wrap agreement requires an affirmative action by the website user to agree to the terms of a contract other than through his or her use of the website. The determination of the validity of the browse-wrap contract depends on whether the user has actual or constructive knowledge of the website’s terms and conditions.

With respect to the website operated by defendant Provide, the terms of use were shown on each page in a capitalized and underlined hyperlink titled “terms of use” which was presented to the user in a light green typeface on the website’s lime green background. Further the terms of use hyperlink was situated among 14 other capitalizing underlined hyperlinks of the same color, font and size. In the checkout flow presentation, customer information fields and click through buttons were displayed in a bright white box set against the website’s lime green background. However, the privacy policy and terms of use where the bottom of each checkout flow page. After the consumer made the purchase, an email was sent to the purchaser confirming the order. In the email, the terms of use were in small gray typeset were to hyperlinks, one for privacy policy and the other for terms. Several other hyperlinks such as birthday, anniversary, get well, roses, plants and gourmet gifts were displayed above the terms of use hyperlink.

The California State Appeals Court noted that no other California appellate court addressed what sort of website design elements were necessary “to deem a browse-wrap agreement valid in the absence of actual notice” to the user of the site.

In the Second Circuit case, Specht v. Netscape Communs. Corp., 306 F.3d 17, 30 (2d Cir. 2002), the federal appeals court declined to enforce an arbitration provision contained in the software licensing browse-wrap agreement where the hyperlink to the agreement appeared on a submerged screen below the download button. Although it was argued that the consumers clicking on the download button indicated the consumer’s assent to the contractual terms, the Second Circuit Court of Appeals, applying California contract law, ruled that the consumer clicking on the download button would not signify and assent to the terms of use or the terms of service. This is true even given that the website in this Second Circuit case explicitly stated “please review and agree to the terms of the software license agreement before downloading and using the software.”

In Nguyen v. Barnes & Noble Inc., 763 F.3d 1171, 1175 (9th Cir. 2014), the terms of use was visible without scrolling down the webpage and was very close to the “proceed with checkout” button. However, the Nguyen case also concluded that the consumer’s act of placing the order did not constitute an unambiguous manifestation of assent to be bound by the browse-wrap agreement.

According to the California Appeals Court, the Nguyen court set forth a “bright line rule” regarding validity of browse-wrap agreements. “Where website makes its terms of use available via a conspicuous hyperlink on every page of the website but otherwise provides no notice to users nor prompts them to take any affirmative action to demonstrate assent, even close proximity of the hyperlink to the relevant button buttons users must click on – without more – is insufficient to give rise to constructive notice” of the contract terms.

Applying this analysis to the present case, the California State Appeals Court found that notwithstanding that the terms of use hyperlinks were found on every checkout flow page and in the confirming email, their color, placement, size and qualities, when compared with the overall website design, are simply too inconspicuous to meet the legal standard in Nguyen.

Lastly, the Appeals Court indicated that, with respect to this consumer contract, “given the breath of the range of technological savvy of online purchasers, consumers cannot be expected to ferret out hyperlinks to terms and conditions to which they have no reason to suspect they will be bound.” See Nguyen. In conclusion, the Appeals Court refused to enforce the arbitration provisions of the browse-wrap agreement.

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