"Great Fun" is a service offered by a company called
Trilegiant. Trilegiant offers certain discounts to Great Fun
members based on a monthly membership fee. Problem is, some members
didn't realize they were members until they saw the
membership fee on their credit card statement. In Schnabel v. Trilegiant Corporation &
Affinion, Inc. , Court of Appeals, 2nd Circuit
(September 2012), the court considered whether terms could be
considered enforceable if the terms were sent by
email after the formation of
the online contract.
In this case, there were online terms in the sign-up
page, but for a variety of reasons, Trilegiant couldn't
rely on these terms, and was obliged to argue that the emailed
terms were binding. Trilegiant asserted that the members
assented to an arbitration clause by signing up, and receiving the
emailed terms at a later date, and then failing to cancel their
membership during the "free trial period". The Second
Ciruit Court of Appeals took a dim view of this approach. In
the U.S., a consumer may receive "actual notice" of the
online terms, or "inquiry notice". "Inquiry
notice" occurs when the consumer has actual notice of
circumstances where a prudent person would be on guard to the
existence of terms. It's a stretch, but can still result in
enforceable terms. The court concluded that neither "actual
notice" nor "inquiry notice" were provided by means
of the emailed terms. The court concluded:
"We do not think that an unsolicited email from an online
consumer business puts recipients on inquiry notice of the terms
enclosed in that email and those terms' relationship to a
service in which the recipients had already enrolled, and that a
failure to act affirmatively to cancel the membership will, alone,
Lessons for business? Get advice on your online terms and
sign-up process for any online contracting: including
cloud-computing contracts, software-as-a-service, online products
sales, license agreements and terms-of-use.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The recent decision of the Ontario Court of Appeal in BMW Financial Services Canada, a Division of BMW Canada Inc. v. McLean provides some useful insight into the relationship between automobile dealers and the financing arms of the manufacturers for whom those dealers are franchisees.
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