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Enforceability Requires Reasonable Notice
Simply posting terms and conditions on your website is not enough, even if you provide a link on every page. That’s the take away from the Ninth Circuit’s opinion on Monday in the case of Nguyen v. Barnes & Noble. Essentially, the court said that “close enough” was not enough when it comes to agreeing to terms and conditions. The case arose when Nguyen filed suit over a purchase dispute. Barnes & Noble responded by claiming that Nguyen was bound by the site’s terms and conditions, which had a choice of law provision and an arbitration clause. Nguyen never read the terms, and claimed not to be bound.
Judge Noonan wrote the opinion, which stated, “the proximity or conspicuousness of the hyperlink alone is not enough to give rise to constructive notice.” She distinguished this case which included a “browsewrap” agreement with those upholding “click-wrap agreements.” It is also a distinction between what we call actual knowledge verses constructive knowledge. Constructive knowledge is where a person is legally assumed to know something, even if they don’t actually know it. It arises when the information is presented in such a way that the user should have known it. Actual knowledge is exactly what it sounds like.
Click-wrap agreements require the user to actually affirm that they have read the terms and conditions, even if they haven’t. This is usually done by presenting a link to the terms, or the terms themselves, along with a checkbox stating that the user has read them. If they click the box then the courts will generally uphold those terms as a binding contract. Essentially, the court will say that the user has constructive knowledge of the terms and has consented to be bound.
Browsewrap agreements, on the other hand, claim that merely using the website is agreement to the terms, even if the user has not read them or even visited the terms and conditions page. The courts have been very reluctant to uphold these. However, they will be upheld if there is evidence that the user did have actual knowledge of the terms, by reading them or being presented with them.
Ultimately, the Ninth Circuit held that Nguyen was not bound by the terms and conditions of the Barnes & Noble website. The takeaway for online businesses is that terms and conditions need to be obvious and provide “reasonable notice.” Remember, your terms and conditions are your most important legal document, since they control most of your interactions with your customer. Bad terms lead to bad business.
Here are some best practices:
- Make sure your terms and conditions are easy to read so that anyone (not just lawyers) can understand them.
- Make sure that your terms and conditions actually reflect how you want to interact with your customers. Too often, companies don’t understand their own terms (especially when they are copied from the internet), and are surprised to learn of weird provisions after the fact.
- Use click-wrap agreements any time the user is providing personally identifiable information or making a purchase. These are easy to make, and there are many pre-made widgets that can be plugged into your website.
Read the Case – Nguyen v. Barnes & Noble