Creating Binding Browsewrap Agreements for Companies Providing Internet-Based Consumer Products or Services

In a published decision filed last month, the New Jersey Appellate Division held in Wollen v. Gulf Stream Restoration and Cleaning, LLC that an internet-based company providing home-improvement services failed to establish that plaintiff knew about the arbitration provision included in the hyperlinked “Terms and Conditions” on the company’s website. The Terms and Conditions required consumers to give up their rights to a judge or a jury trial in case of a dispute and, instead, any dispute was to be decided through arbitration. The Terms and Conditions also barred class actions, class arbitration, or other representative actions or proceedings.

Plaintiff’s counsel maintained that the arbitration clause in the Terms and Conditions did not apply because Plaintiff never assented to the agreement and, consequently, to the arbitration clause. The court agreed with Plaintiff, stating that the hyperlink containing the Terms and Conditions was “vague, ambiguous and misleading,” and therefore did not create a binding agreement. The court also noted that the website did not require consumers to affirmatively click to accept the Terms and Conditions as part of the submission process.

The court reaffirmed the validity of browsewrap agreements in general. Unlike “clickwrap” agreements where users are required to click on a dialog box on the screen to consent to any terms or conditions when conducting an online transaction, a “browsewrap” agreement does not require such an action by the user; instead, the concept is that an agreement is formed by the mere act of the user’s use of the site as constituting assent to the terms of use. While courts initially rejected these online contracting notions as not constituting traditional “bargained-for exchanges,” courts, recognizing that these online agreements have become an increasingly large portion of the economy, have come to see them as binding agreements, but with a lot of caveats. Particularly with respect to browsewrap agreements (which, as noted above, do not require any specific assent to the terms), courts are loathe to enforce provisions seen as overreaching or otherwise not clearly communicated to the user.

In this case, the issue was whether a mandatory arbitration clause in a browsewrap agreement should be enforced. The court took a fact-intensive inquiry, following the approach taken by many state and Federal courts in deciding disputes over browsewrap agreements, focusing on defendants’ method of communicating the arbitration provision in the Terms and Conditions. After reviewing the facts in the case, the court held that the Terms and Conditions were not communicated in a way that would create mutual assent between the parties. Hence, the arbitration clause was unenforceable.

This decision, while not necessarily making any new law, is a good reminder to website and e-commerce companies seeking to ensure their browsewrap terms of use are enforceable - that those terms must be written clearly and conspicuously and require the consumer to take some form of action or acknowledgment to “expressly manifest consent” to such agreements. For example, the court stated that enforceable browsewrap agreements should require the consumer to click on the hyperlink that contains the agreement (e.g., “click to accept”) or to scroll through the terms and conditions of an agreement prior to submitting a request for services.

This decision also serves as a reminder for website and e-commerce companies, and especially those providing consumer-based services or products, that merely including a hyperlink to their terms and conditions may not be enough to create an enforceable contract between the company and its customers. This is all the more important where the terms and conditions contain arbitration provisions, class-action waivers, and limitations of liability.

Whether on paper or on the internet, enforceable contracts have two traditional and longstanding legal elements: offer and acceptance. The timing, manner, and method of offering and—critically—accepting contracts over the internet are some of the most decisive factors in finding a binding agreement. Additionally, the “take it or leave it” nature of such agreements could be seen as contracts of adhesion and, as a consequence, the overreaching terms (e.g., limitation of liability, exclusive jurisdiction clauses, etc.) could cause those provisions to be invalidated or, even worse, the courts could find the entire agreement to be unenforceable. Web-based companies should make themselves fully aware of the nuances and legal requirements to create binding, enforceable browsewrap agreements that will preserve their rights as intended.