As we have noted before, if you want to increase the likelihood that your website terms of use are enforceable against users, you need to do two things. First, you need to display the terms to users in a conspicuous way, and second, you need to require users to affirmatively accept the terms. Sgouros v. Transunion Corporation, a recent Seventh Circuit case, demonstrates that half measures won’t cut it.

Gary Sgouros, the plaintiff in Sgouros, alleged that Transunion had sold him an inaccurate credit report through Transunion’s website. Transunion filed a motion to compel arbitration based on an arbitration provision contained in the website’s terms of use. In discussing whether that arbitration provision was enforceable against Sgouros, the court goes into considerable detail regarding the ordering process on Transunion’s site.

Specifically, to complete his purchase of a credit report on Transunion’s site, Sgouros was required to complete several steps:

  1. Click on a large “Click Here” button on the website’s homepage under the heading “Get Your Credit Score & Report.”
  2. Furnish identifying information, and click “yes” or “no” to Transunion’s offer to send offers from its “trusted partners,” and then click a large orange button labeled “Submit & Continue to Step 2.”
  3. Create a user account name and password, input credit card information and click a “yes” or “no” bubble in answer to a question about whether the user’s billing information is the same as his or her home address.
  4. Click a button stating: “You understand that by clicking on the ‘I Accept & Continue to Step 3’ button below, you are . . . authorizing TransUnion Interactive, Inc. to obtain information from your personal credit profile . . .”

That was all Sgouros needed to do to purchase the credit report—at no point was he required to review or expressly accept the website’s terms of use.

The “I Accept & Continue to Step 3” button was, however, located below a rectangular scroll window with the words “Service Agreement” at the top, and the small hyperlinked words “Printable Version” appeared beneath the scroll box. The 10-page printable version of the Service Agreement in the scroll box did mention the arbitration provision on its first page and did include that arbitration provision in full on its eighth page. But the scroll window allowed Sgouros to view only three lines of text at a time, and no mention of the arbitration provision appeared in the immediately visible text.

Most significantly, the “I Accept & Continue to Step 3” button did not require Sgouros to first click on the scroll box or to scroll down to view its complete contents, nor did it call Sgouros’s attention to the arbitration provision in any way. The court detailed the shortcomings of Transunion’s implementation as follows:

[T]he web pages on which Sgouros completed his purchase contained no clear statement that his purchase was subject to any terms and conditions of sale. The scroll box contained the visible words “Service Agreement” but said nothing about what the agreement regulated. The hyperlinked version of the Service Agreement was not labeled “Terms of Use” or “Purchase” or “Service Agreement,” but rather just “Printable Version.” And . . . the visible words “This Service Agreement . . . contains the terms and . . . conditions upon which you . . . may access and use . . . ” fall short of providing notice that the purchase of a consumer credit score is subject to the agreement.

On these facts, the Seventh Circuit held that Sgouros’s click on the “I Accept & Continue to Step 3” button did not bind Sgouros to the arbitration provision in the terms of use because “this type of electronic ‘click’ can suffice to signify the acceptance of a contract” only “as long as the layout and language of the site give the user reasonable notice that a click will manifest assent to an agreement.” The opinion also notes that “[n]o court has suggested that the presence of a scrollable window containing buried terms and conditions of purchase or use is, in itself, sufficient for the creation of a binding contract.”

Sgouros is not the first case to demonstrate how crucial it is to implement website terms of use in a way that clearly connects the user’s affirmative actions to acceptance of the terms. The user must know exactly what he or she is doing by clicking the button or checking the box. Transunion had a terms of use, and Transunion required the user to click a button. But Transunion’s implementation failed to clearly connect those two things:

[W]hat cinches the case for Sgouros is the fact that TransUnion’s site actively misleads the customer. The block of bold text below the scroll box told the user that clicking on the box constituted his authorization for TransUnion to obtain his personal information. It says nothing about contractual terms. No reasonable person would think that hidden within that disclosure was also the message that the same click constituted acceptance of the Service Agreement.

Accordingly, the court denied Transunion’s motion to compel arbitration, adding one more entry to the list of companies that have lost the protection of their carefully crafted terms of use solely due to a poorly-implemented website checkout process.