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Terms of Use And Privacy Policy Rules

On Behalf of | Jun 7, 2013 | Business Transactions

In a decision that could significantly affect the enforceability of online contracts, the Massachusetts Appeals Court recently ruled that an email service cannot unilaterally determine the forum in which all claims must be litigated. The case will have significant ramifications for all businesses that use website “terms of service” to regulate their relationships with customers.

In reversing a probate court ruling, the Court held that Yahoo count not enforce the venue requirement without first proving that the terms were “reasonably communicated” to its users, and that its users unambiguously gave their assent. The provision required that all claims be filed within one year, and only in the courts of Santa Clara County, California.

The Court held that because there was no clear evidence of both an “offer” and “acceptance”, there was not an enforceable contract.

The court noted, first, that Yahoo! had not established that it had “reasonably communicated” the forum-selection and limitations provisions to users of its web site prior to use. The mere display the terms of service on the user’s computer screen was held by the court to be insufficient.

Absent evidence of acceptance of the terms and conditions, the court held that there was no contract. The court said that forum-selection clauses were enforced “only where the record established that the terms of the agreement were displayed, at least in part, on the user’s computer screen and the user was required to signify his or her assent by clicking ‘I accept.’”

Such “clickwrap” agreements, the court said, will suffice to create a contract. However, a mere “browsewrap” agreement – where website terms and conditions are posted as a hyperlink at the bottom of the web page – is typically not enforced as a contract, because it’s not sufficiently clear that the user actually saw and “accepted” those provisions.

What should you do?

  • Conspicuously display all of the important terms of the contract, at least in part, on the user’s computer screen at the point of registration.
  • Require that users scroll through the terms and conditions, to the end, before clicking “I accept” in an unambiguous acceptance manner.
  • Make sure the terms bind not simply the “user,” but also his or her administrators, executors, successors, and assigns.
  • If you include forum selection, limitations, and arbitration clauses, draft them as narrowly as possible to address your legitimate business interests.
  • If you later amend your terms and conditions, offer a splash screen telling users about the changes, and requiring them to click through.
  • We would suggest that you work closely with legal counsel skilled in this area of the law when drafting and your terms of service and privacy policies.
    Paul D. Creme is an attorney with Hamblett & Kerrigan PA. His practice is focused on business and corporate law. Of particular interest are the areas of software and emerging technologies. You can reach Attorney Creme at [email protected].