Hertz and Dollar subsequently charged Moretti $683.59 for the rental, which included the daily rental fee for the rental term, airport fees, insurance, and tax. Moretti alleged the defendants overcharged and misinformed him and routinely did so to similarly situated individuals as a regular business practice.
Moretti filed a four-count putative class action in San Francisco Superior Court against Hertz, Dollar, and Hotwire for violations of: (1) California Business and Professions Code Section 17500; (2) California Civil Code Section 1750; and (3) California Business and Professions Code Section 17200. He alleged a classic bait and switch. The defendants allegedly violated state common and statutory law for fraud, deceit, and misrepresentation by advertising a low rental car rate and then charging a higher rate; failing to disclose the mandatory purchase of insurance at the time of rental; and inflating foreign exchange rates at the time of payment.
Lack of Affirmative Denial Constituted Acceptance
Applying ordinary state-law principles governing the formation of contracts, the district court determined that a valid forum selection clause existed within the contract on the Hotwire site, and that the parties agreed to the clause. According to the court, a binding contract is created if the user both has access to the terms of service in a hyperlink and clicks “accept,” even if the terms are not on the same page as the acceptance button.
A forum selection clause is unenforceable if a plaintiff does not have sufficient notice of the clause prior to entering into the contract. The district court found that if the forum selection clause provides adequate notice of an agreement to the jurisdiction cited in the contract, an adhesion contract is enforceable even if the plaintiff does not read it.
De Leeuw sees no difference between a customer’s responsibility to review the language on a website and that in a paper contract: “The consumer must be educated. You have to dig in and find out what you are bargaining for.”
“It’s a dangerous area—dangerous for enforceability. You may be forced to subsequently show whether the terms and conditions were or were not present which could affect the sanctity of the agreement,” counters Horace W. Jordan, Jr, Chicago, IL, member of Council, Section of Litigation. Jordan, general counsel of a leasing company, is admittedly old fashioned, respecting the history of secured transactions in which the paper itself must reflect and contain all facets of the transaction.
Notice and Acceptance Are Vital
Courts in multiple jurisdictions enforce venue selection clauses but emphasize the crucial importance of both notice and acceptance. In Schnabel v. Trilegiant Corp., the U.S. Court of Appeals for the Second Circuit rejected an arbitration provision emailed to parties after the parties enrolled in an online service, and held that a failure to cancel enrollment in defendants’ service did not constitute acceptance. “[T]he mere acceptance of a benefit . . . may constitute assent, but only where the ‘offeree makes a decision to take the benefit with knowledge [actual or constructive] of the terms of the offer.’”
The appellate court in Specht v. Netscape Communications Corp. acknowledged the possibility that a click-through agreement is not enforceable if its terms are not reasonably apparent to the user. That court noted that it was unreasonable to expect a user casually downloading free software to search for such an agreement if not immediately available and obvious.
Conversely, in Dunstan v. comScore, Inc., the U.S. District Court for the Northern District of Illinois disregarded a “check-the-box agreement” and refused to enforce a forum selection clause. The court in Dunstan declined to infer that clicking a box acknowledging that a user read an agreement indicates that the agreement was reasonably available to the user, particularly when the hyperlink to the agreement was not clearly visible. A comScore vice president testified that a customer must “click the box acknowledging” that the customer read and agreed to the terms before he or she could install software. The court in Dunstan, however, accepted the plaintiffs’ claim that the forum selection clause was not apparent when they downloaded the software and that the terms of service were obscured during the installation process.
Lessons for Implementing User Agreements
“Parties must be prepared to produce evidentiary records to defend agreements. Keeping copies of screenshots is especially helpful,” according to de Leeuw. A party should be prepared to present a reliable chain of evidence to show (1) the agreement’s terms on any specific date, and (2) what user interactions were technologically required to manifest assent on that date.
“Interestingly, this case may have legs in any jurisdiction, as it appears that a classic bait and switch occurred,” opines de Leeuw.
Browsewraps are user agreements purporting to bind users simply because users browse the website. These types of user agreements are usually not treated as contracts by courts. Unilateral amendment clauses should also be avoided. If changing the user agreement only for new users entering into the contract, then there is no need to inform them that the terms have been amended. The users are automatically bound to the current terms by clicking through.
Oran F. Whiting is an associate editor for Litigation News.