A recent US decision, which found that the terms of a ‘browsewrap’ licence were not enforceable against the user of a prominent online sales portal, is a timely reminder that the law of contract still applies to online transactions.
In Nguyen v Barnes & Noble Inc. 2014 WL 405649 (9th Cir. Aug. 18, 2014) the Ninth Circuit Court refused to enforce the browsewrap terms of Barnes & Noble (B&N), a popular online books and gifts retailer.
Nguyen purchased a heavily discounted tablet device from the B&N website, but B&N later cancelled the transaction because it ran out of stock due to unexpectedly high demand.
Nguyen sued B&N for deceptive practices and false advertising, and B&N argued that the proceedings should be dismissed because the arbitration clause in the browsewrap terms (which prohibited a party from bringing proceedings) should apply instead.
This argument raised the important question of whether B&N had done enough to give Nguyen notice of the browsewrap terms and the arbitration clause in particular.
Consumers need notice of terms and must positively accept them
In order for a browsewrap licence to be enforceable, US courts have generally required vendors to give consumers proper notice of the licence, and for consumers then to positively assent to its terms. Typically, this means that a customer must click ‘I accept’ or take some other positive step after being made aware that the taking of that positive step (for instance, continuing to use the service) will constitute acceptance of the terms.
The Ninth Circuit held that these principles were to be strictly applied before a court would enforce a browsewrap agreement against an individual consumer.
In Nguyen’s case, B&N included a prominent link to its browsewrap licence on every page of its website, and the licence stated that a consumer would be deemed to have accepted the licence by the mere act of visiting the website, purchasing a product or creating an account.
However, B&N’s customers had to click on the link in order to read and understand that deemed acceptance provision, and B&N had not taken any other steps to prompt the user to read or accept the terms. A user who did not click on the link and read the terms was therefore unaware that by using the site, the browsewrap licence purported to deem them to have accepted its terms.
The Court held that this arrangement did not provide users of adequate notice of the terms, nor did it do enough to establish the consumer had positively accepted them.
Australian consumers need notice too
The approach of the US Courts is consistent with the position in Australia.Going back to the ‘ticket cases’ and the enforceability of car park terms, Australian courts have held that consumers must be given an opportunity to review and accept terms before they will be bound by them.
In the online context, this principle is just as important.
Businesses should carefully consider how they present terms to their customers, and in particular, critically analyse whether they do give consumers adequate notice of terms and require a positive acceptance of them. In our experience, designing your sign-up or check-out processes so that consumers are required to scroll through the terms in full, before being required to positively click ‘I accept’, is best practice and will give you the best chance of establishing that your customer was bound to your terms and not ‘just browsing’.