YourABA June 2012 Masthead

Are Web-based terms of sale enforceable?

Clients with products and services to sell often post their terms of sale on the Web. But is what's posted online enforceable? GPSolo magazine recently tackled this topic in an edited version of an article from the online publication Business Law Today.

Case law has only begun to address the issue of enforceability and application, according to Raymond Kolak and Ryan Strohmeier, authors of the article who practice at Eckhart Kolak LLC, a Chicago business-law firm. To be enforceable, the contract should make a specific reference to the terms of sale in the contract document itself.

Cases such as Manasher v. NECC (2007) instruct that the plain text of the contract must do more than simply state the existence and location of similar "disclosure and liabilities" sections intended to be incorporated by the seller. The reference in the contract must clearly show that both parties intend to be bound by the Web-based terms. It is vital to state that the terms of sale are "incorporated by this reference and made a part of the agreement between the parties," the authors said.

If possible, obtain customer consent either with a manual signature or through the use of "agree" and "disagree" buttons, also known as a clickwrap agreement, they advised. In Hugger-Mugger v. NetSuite (2005), the court held a customer to be bound to a choice of venue clause contained in a Web-based terms of service because the customer had "agreed. " Courts treat this button as a written signature that will be enough to bind a customer to Web-based terms.

When there is no signed contract or clickwrap agreement, courts will look at other factors, such as the adequacy of notification to the customers affected, wrote Kolak and Strohmeier.

When there is no signed contract or clickwrap agreement, courts will look at other factors, such as the adequacy of notification to the customers affected, wrote Kolak and Strohmeier. In Feldman v. UPS (2008), the shipper of a diamond ring had to print his own shipping label at a UPS store. Because there was proof that the customer clicked a "print" button but not an "agree" button, the court ruled there was a triable dispute as to whether the customer had been given adequate notice of the UPS tariff limiting the company's liability.

Still, what happens when the seller changes the terms: Are all customers bound to the new terms? In Douglas v. United States District Court for the Central District of California (2007), a customer alleged that his phone provider had changed its terms of service without notification. The provider countered that it had posted the changes on its website, which the court held was insufficient notice. Clients who seek to change terms must retain a record of terms posted at their website at the time each contract is changed and maintain a separate URL for each amended terms of service. Ultimately, if a client seeks to alter terms of sale regularly, it may not be feasible for those terms to be solely Web-based.

GP Solo is a publication of the General Practice, Solo and Small Firm Division. Business Law Today is the ABA's Business Law Section's online resource.

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