Business owners who use the internet as a predominant means of communication should be aware of how their internet contracts are presented in order to ensure that their terms are enforceable. Although webpages may be user-friendly, they may not be court-friendly.
Disputes relating to the enforceability of online contracts are common. In particular, an issue that frequently gives rise to a dispute is whether the terms of the contract is displayed in a manner to create actual or constructive notice of those terms. If someone uses a website to place an order, for example, and the order is subject to terms and conditions that are posted somewhere on the site, that person must have actual or constructive knowledge of the terms and conditions in order for those terms to govern the agreement that reflects the purchase transaction.
For courts, the determining factor for establishing knowledge, including constructive knowledge, is usually whether the person placing the order had reasonable notice of the terms and conditions. As is the case with traditional contract law, the person who has notice of the terms will be generally be deemed to have constructive knowledge of them, even if he or she does not read them. In an exchange of terms and conditions by a buyer and a seller, the party who does not receive reasonable notice of the other party’s terms and conditions will be in a much better position in the event that a “battle of the forms” breaks out. So the question becomes, what is “reasonable notice” and how does one establish that he or she provided “reasonable notice”?
In cases in which users are prompted, before placing an order, with an “I agree” button for the terms, issues rarely arise. But such a mechanism is rarely used in the commercial setting. If there is no record that establishes that the user agrees with the terms and conditions, what can a company do to show the requisite “reasonable notice”?
Unfortunately, there is no magic way to accomplish that. What is fairly clear is that when the terms are located in an inconspicuous area of the website and/or there is no clear statement that the terms apply and where the user will find them, courts are not very sympathetic. For instance, in a case against Amazon, a court would not enforce the arbitration agreement within the company’s terms and conditions because the terms were located in an “obscure” section of the webpage, surrounded by various links, buttons, and promotional advertisements.
Uber found itself in the same predicament earlier this year when a state court would not enforce the arbitration provisions of Uber’s terms and conditions because the layout of its app did not give users reasonable notice of the existence of the terms of using the service. The rationale behind this is simple: courts will not enforce the terms of an agreement if a user is not reasonably made aware of them.
Although there is no magic bullet, reasonable peoples can likely determine if they have made the existence of terms and conditions, and the location of those terms and conditions, readily apparent to anyone who enters into the on-line transaction. If that information is as prominent as other information on the site, there should be little risk that someone will successfully argue that reasonable notice was not provided. On the other hand, “hiding” that information, either by using microscopic font size or burying the information so that it is obscured, will not likely win the day in court.
It is important to bear in mind that the notice need not be on the same page or even the same site as the terms and conditions. In the more traditional commercial purchase transaction in which a purchase order is used, a statement on the purchase order to the effect that the purchaser’s terms and conditions, as published on the purchaser’s website, apply to the transaction can provide adequate notice. Again, all that is required is that the other party be given reasonable notice of the existence of the terms and conditions that are claimed to apply to the transaction. If the purchase order directs the seller to the location of the applicable terms and conditions, even if the seller does not bother going there to read them, in the absence of the seller successfully rejecting those terms and conditions and superseding them with seller’s terms and condition, the seller will likely be bound by purchaser’s terms.
Businesses that post their terms and conditions online must be careful to ensure that other parties, either buyers or sellers, know that the transaction is subject to those terms and conditions and that they can be found at a particular location. Otherwise, they run the risk of having an unenforceable agreement.