In our last article (click here) we looked at the controversy created by Facebook when it attempted to implement unilateral changes to its Terms of Use agreement. Consumers balked at some of these one-sided changes. Since then, Facebook has involved users in an online vote regarding changes to its Statement of Rights and Responsibilities. The Facebook controversy has reignited the debate over the enforceability of online agreements, both legally and from a consumer acceptance viewpoint.

Website Terms of Use agreements generally come in two flavours: “click-wrap” and “browse-wrap.”

Click-wrap agreements require the user to do something active, such as click an icon or selection box, to indicate their acceptance of the agreement. A browse-wrap agreement assumes that by browsing a website the user has accepted the agreement, regardless of whether the terms are brought to the user’s attention.

It is fairly settled that click-wrap agreements are enforceable; however, despite being so common, the enforceability of browse-wrap agreements remains debatable. Recent case law has focused on a few issues to keep in mind. [1]

With respect to browse-wrap agreements, courts are more likely to find unilateral changes to such agreements acceptable when they affect business-to-business relationships as opposed to business-to-consumer. Courts have also looked more favourably upon unilateral changes when they give the consumer an opt-out period.

Regardless of how they are implemented, courts have struck out clauses in terms of use agreements that allow for the agreement to be unilaterally and retroactively changed. Regardless of whether a company is even attempting to apply the term retroactively in any given case, the mere contractual possibility that it could typically invalidate such amendments.

Enforcing a Terms of Use agreement also may be difficult to the extent that consumer protection legislation is overridden. For example, care must be taken when drafting arbitration clauses not to preclude the consumer’s right to bring an action as is often provided for in consumer protection laws.

The technical language used in online agreements can also have significant implications for copyright owners. For example, it has been held that if a term within a software license is merely a promise and not a condition of the license, then if the licensee violates the license, the copyright owner has no claim for copyright infringement, just breach of contract. Using precise language, such as “provided that…”, however, can make terms "conditions" of the license and, therefore, enforceable under both copyright and contract law claims.

While the law governing online agreements remains unsettled, there are a few tips for website owners to remember:

  • Consider the nature of the parties entering into the agreement. Courts are more likely to find unilateral amendments unfair for consumers but less likely for businesses.
  • Provide an opt-out period for consumers when implementing unilateral amendments within which they can choose to reject the changed agreement.
  • Ensure that consumer protection legislation is not overridden, especially by mandatory arbitration or jurisdiction clauses.
  • Make it clear unilateral modifications to terms of use are only effective after customers have received adequate notice and changes will only apply going forward.
  • Draft copyright licenses using the term “provided that...” in order to permit remedies for breach under both copyright and contract.