ARE YOU AN ONLINE SHOPPER? RECENT COURT CASE SUGGESTS THAT SALES AGREEMENTS SHOULD INCORPORATE TERMS AND CONDITIONS

Sellers who want to protect themselves from being sued by disgruntled customers should carefully design their websites to validly incorporate the terms and conditions that they would like to impose in the transaction. The validity of an online seller’s “terms and conditions” is critical to determine the rights and obligations of the seller and buyer in the event of litigation arising out of the parties’ transaction. Sellers who successfully incorporate their terms and conditions into their online transaction can, among other things, force buyers to arbitrate, have claims litigated in certain forums, and limit their exposure. Thus, Florida businesses that engage in e-commerce should look at the Fourth District Court of Appeal’s recent decision in Vitacost.com, Inc. v. McCants, 210 So. 3d 761 (Fla. 4th DCA 2017), for guidance.

In McCants, the appellate court examined the validity of an arbitration clause that was purportedly incorporated into an online purchase agreement. The court began its assessment by noting that there are generally two types of agreements online purchase agreements: “browsewrap” agreements and “clickwrap” agreements. See id. at 762. Clickwrap agreements are generally enforceable because they require buyers to click a box to acknowledge that they read the seller’s terms and conditions. See id. Whereas, “browsewrap” agreements simply provide a link to the terms and conditions and does not require the buyer to click an acknowledgement of the seller’s terms and conditions during the checkout process. See id. “Browsewrap” agreements have been enforced when the purchaser has actual knowledge of the terms and conditions or when the hyperlink to the terms and conditions is conspicuous enough to put a reasonably prudent person on inquiry notice. Id. (citing Nguyen v. Barnes & Noble Inc., 763 F.3d 1171, 1176 (9th Cir. 2014).

“Uniformly, courts have declined to enforce “browsewrap” agreements when the hyperlink to the terms and conditions is buried at the bottom of the page, and the website never directs the user to review them. Id. at 765. In McCants, an online retailer argued that an arbitration clause was incorporated into the purchase agreement because a browsewrap agreement that contained the terms and conditions of the sale was displayed during the transaction. See id. However, in this case, the browsewrap agreement was found not to be “conspicuous enough to put a reasonably prudent person on inquiry notice.” Id. The court reminded potential litigants that to incorporate a collateral document into an agreement, Florida contract law mandates that the agreement must: “(i) specifically provide that the collateral document is being incorporated; and (ii) sufficiently describe the collateral document being incorporated.” Id.

“While new commerce on the Internet has exposed courts to many new situations, it has not fundamentally changed the principles of contract.” Id. (citing Register.com, Inc. v. Verio, Inc., 356 F.3d 393(2d Cir. 2004)). In reaching its conclusion that the browsewrap was not sufficiently incorporated, the court examined the webpage and relied on an affidavit of the buyer. See id. The hyperlink to the browsewrap agreement was found to be at the very bottom of the seller’s webpage throughout the purchase process. See id. Additionally, the buyer filed an “affidavit asserting that he did not have actual knowledge of the terms and conditions of the sale” See id. The court found the browsewrap agreement to be insufficiently incorporated because the seller’s website allowed purchasers “to select a product and proceed to check-out without seeing the hyperlink to the “terms and conditions” because the hyperlink was buried at bottom of the page. See id. at 765.

Therefore, sellers who engage in online commerce should use clickwrap agreements to ensure that their terms and conditions are incorporated into the sale agreement. However, if sellers opt for browsewrap agreements the link to the agreement should be highly visible throughout the sale process. Moreover, a seller’s webpage should explicitly advise the buyer that their purchase is subject to the terms and conditions of the sale and put the buyer on inquiry notice. See id. at 765–66.

The Mavrick Law Firm has successfully defended businesses against fraud claims and in non-competition covenant litigation. This article is not a substitute for legal advice tailored to a particular situation. Peter T. Mavrick can be reached at: Website: www.mavricklaw.com; Telephone: 954-564-2246; Address: 1620 West Oakland Park Boulevard, Suite 300, Fort