It is common today for a vendor to post its terms of service or terms of sale on its website. It is less common for individual consumers to take the trouble to view those terms posted at the time of contracting. Still less likely are customers to notice changes in website terms after the business relationship has commenced. Given that it is unlikely that an actual "meeting of the minds" occurs merely because vendors change their posted terms, when are such web-posted changes in terms of service or sale enforceable against the consumer?
This issue squarely arose in two recent cases. The determining factor in each case was the adequacy of the notice provided of the existence and significance of the new web-posted terms. These cases suggest that vendors should review their practices to ensure that the contractual terms upon which they seek to rely are adequately presented to consumers.
Ninth Circuit - Mere Posting Not Notice
In Douglas v. Talk America, Inc., 495 F.3d 1062 (9th Cir. 2007) (per curiam), plaintiff sought to bring a class action lawsuit against a long distance telephone company challenging several new provisions that were posted in a revised contract on the carrier's website but, allegedly, without other prior notice to the plaintiff. One of the new terms was an arbitration clause, which defendant had successfully invoked to secure dismissal of the lawsuit in the district court. The case went to the Ninth Circuit on writ of mandamus.
As the Ninth Circuit recognized, this issue could affect the relationships of numerous service providers with millions of customers: "This is the first time any federal court of appeals has considered whether to enforce a modified contract with a customer where the customer claims that the only notice of the changed terms consisted of posting the revised contract on the provider's website." The Ninth Circuit held the revised contract unenforceable due to lack of notice.
First, the court found that the plaintiff, who paid his bill automatically by credit card, had no occasion to visit the carrier's website to find the revised terms, nor was there any evidence that defendant had otherwise notified him that the terms were changed or in what manner. Second, the court, noting that a party cannot unilaterally change a contract, held that the plaintiff's continued use of the service after the changes cannot be deemed to be "consent" if the plaintiff was never informed of the changes. An "offeree cannot actually assent to an offer unless he knows of its existence." The court distinguished other cases in which the service provider had taken steps to notify customers by mail of changed terms. Accordingly, the Court of Appeals ruled that the district court had committed "clear error," granted the writ of mandamus and vacated the arbitration order.
Different Result Where Actual Knowledge Shown