Courts Indicate Notice of Assent Is Essential

Have website agreements gone too far? Can too much disclosure cause people to no longer care enough about Terms of Use (TOU) to read them fully before agreeing to them?

When I was young, my parents told me that if I didn’t know the meaning of a word, I should look it up in the dictionary. That’s how I learned words such as miasma (noxious exhalations from putrescent organic matter), overbearing (domineering; dictatorial; haughtily or rudely arrogant) and pedestrian (a person who goes or travels on foot; walker). Nowadays, printed dictionaries largely have been replaced by online dictionaries. For example, merriam-webster.com claims average monthly page views of 100 million with 25 million unique hits per month. Dictionary.com boasts more than 70 million monthly users worldwide.

If a user only wants to look up the word “dog,” he or she agrees to the terms of use and privacy policy of the site. Dictionary.com’s TOU contains more than 2,000 words, including “consequential,” “indemnification” and “libelous.” The Merriam Webster site’s Privacy Policy has more than 2,200 words, including “beacons,” “demographics” and “fulfillment.” MacMillan’s site’s TOU contains more than 7,000 words and includes terms such as “revocable,” “intolerance” and “profane.”

So, to look up the definition of “dog” or even “dictionary,” the user must be able to read a significant document with more complex words than are being researched. Should a user need to consult a paper dictionary to understand the words in the terms of use? Is it really practical to require someone to read a TOU just to look up a word? Do people even read them?

On April 1, 2010, an online gaming store, GameStation, proved that many people do not read terms of use, or if they do, they do not appreciate the legal impact of their assent. In an April Fools’ Day prank, GameStation modified its TOU to include what was termed the “immortal souls clause.” This clause published by GameStation read:

By placing an order via this Web site on the first day of the fourth month of the year 2010 Anno Domini, you agree to grant Us a non transferable option to claim, for now and for ever more, your immortal soul. Should We wish to exercise this option, you agree to surrender your immortal soul, and any claim you may have on it, within 5 (five) working days of receiving written notification from gamesation.co.uk or one of its duly authorized minions.

It was reported that on one day alone this prank resulted in the voluntary surrender of 7,500 souls (GameStation later returned these claimed souls). Fox News, commenting that “no one reads the online terms and conditions of shopping,” reported that only 12 percent of the purchasers noticed the clause that contained a link to nullify the transfer (astute shoppers received a coupon for their observation).

The Law & Enforceability

Yet, developing law continues to uphold the effectiveness of terms of use, provided the user is given the appropriate notice about the terms. Over the past year, courts have continued to find that online agreements are enforceable when the terms are acknowledged, even if there is no proof the person ever read them.

The U.S. District Court for the Eastern District of New York in Nicosia v. Amazon.com, Inc., No. 14-cv-4513 (SLT) (MDG) (February 4, 2015), found that the plaintiff “was, at a minimum, on inquiry notice of the current terms of the Conditions of Use when making his purchases,” and therefore held that the plaintiff agreed to be bound by the mandatory arbitration clause and class action waiver in the Conditions of Use. Nicosia involved a proposed class action by a plaintiff who had purchased a weight-loss supplement containing sibutramine, which it was contended was a “controlled substance … [that has] never been permitted for sale without a prescription from a licensed physician … [and that is] associated with a serious risk of cardiovascular events and strokes.” The Court granted Amazon’s motion to dismiss as the case was deemed subject to mandatory arbitration.

However, in Sgouros v. Transunion Corp. et al., No. 14 C 1850 (JBZ) (February 5, 2015), the U.S. District Court for the Northern District of Illinois denied a motion to dismiss seeking to compel arbitration where the layout and text of the manner of assent was “confusing enough to mislead a user to assume that he was [merely] agreeing to the terms of the Authorization Paragraph” to obtain their personal information, and not to consent to arbitration.

Is mere assent enough to signify that the person has had notice of the terms to which he or she agreed? In May 2011, investment specialist Skandia released a study that showed at least 93 percent of adults conceded that they did not always read full online terms and conditions when signing up for products and services, with 43 percent claiming they do not read them because they are boring and hard to understand. Given the option, most adults (58 percent) would rather read an instructional manual, and 12 percent would prefer to read the phone book. Although 21 percent of the people surveyed acknowledged that they had suffered as a result of agreeing to terms they never read, this attitude continues.

Many sites have not only terms of use but also privacy policies (mandated in certain states), terms of sale, end-user license agreements, copyright notices, disclaimers and other “legal notices.” Studies have been done showing that if a person read all of the privacy policies they encountered on a daily basis, it would take them about 250 working hours per year, or about 30 workdays; and that is just privacy policies. If users were to read all of the online contracts, the time commitment would be greater. It seems hard to imagine that even the 7 percent of adults surveyed by Skandia who claimed to have read full online terms and conditions would have invested that much time.

Requirement of Notice

The requirement of notice comes from the court’s scrutiny of contracts to determine whether a contract is one of adhesion that can be voided. Contracts of adhesion are characterized by a lack of bargaining power by one party typically against the drafter. Where unconscionability has been a focus of the legal analysis of enforcement of written contracts of adhesion, the legal analysis of online agreements has focused on whether proper notice was given to the participant.

While courts continue to evaluate the scope of the notices in online agreements to determine their enforceability, it is important for website operators to ensure that notice is adequately given and the terms of such agreements are fairly drafted with no unconscionable surprises.

Wilson Elser continues to monitor litigation concerning terms of use, privacy policies and other online agreements.