October 03, 2014 Top Story

Website's Hyperlinked Forum Selection Clause Valid

Evidence of notice and acceptance of terms of use are crucial to enforcement

Oran F. Whiting

Hyperlinked terms of use provide sufficient notice to online customers, and the absence of an affirmative denial constitutes acceptance of contractual terms of use. Moretti v. Hertz Corp. Click-through agreements generally require some action, usually clicking a button. Such action unambiguously signifies that online users are assenting to the contract. The court in Moretti granted the defendants’ motion to transfer based on an imbedded or click-through forum selection clause to which the plaintiff agreed to complete the transaction.

Enrico Moretti, an online customer, reserved a car from Hertz and Dollar through the Hotwire travel website. Before completing the reservation, Hotwire required Moretti’s affirmative acceptance of its terms of use, which included a forum selection clause mandating the resolution of disputes in Delaware. Hotwire, via confirming email, specifically represented the total rental fee at an estimated $365.23, including approximated taxes and fees. Neither Hotwire’s website nor its confirming emails notified Moretti of the required purchase of mandatory personal liability insurance from Hertz and Dollar.

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.

The defendants first removed the action to the U.S. District Court for the Northern District Court of California. They then moved to transfer the case to the U.S. District Court for the District of Delaware pursuant to 28 U.S.C. § 1404(a) and on the basis that Moretti agreed to the forum selection clause contained in the website’s terms of use. Hotwire relied on employee declarations establishing that the terms of use included a forum selection clause and that the rental car transaction could not have been completed unless Moretti affirmatively clicked a box accepting the terms of use.

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.

Affirmative Acceptance

Absent an affirmative denial from the customer that he or she did not click to accept the terms of use, courts will deem the customer to have consented to the terms and the forum selection clause contained therein. “There is definitely a trend to enforce click-through agreements,” according to Michael B. de Leeuw, New York, NY, cochair of the ABA Section of Litigation’s Consumer Litigation Committee. “This is an interesting case, as California is a consumer-friendly state. However, the defendants employed a system mandating an affirmative act to accept terms prior to the completion of the reservation, and had prepared affidavits to counter the plaintiff’s allegations about a site malfunction,” de Leeuw opines.

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

Entities should take certain steps when implementing terms of use agreements. “A mandatory act, such as clicking an ‘Accept’ or ‘Agree’ button that unambiguously signifies that they are assenting to the contract, should be built into the site, and the designers should insure that there is no way to circumvent the mandatory act,” advises de Leeuw. Reviewing the user interface implementation across multiple browsers with a variety of settings is also advised. One browser may render the agreement formation process clearly, while another browser may not.

“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.

Keywords: hyperlink, click-through, notice, acceptance, contract, user agreement

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