Canada: When Is A Browsewrap Agreement Enforceable?

Last Updated: December 2 2014
Article by John McKeown

A recent U.S. decision provides some interesting discussion concerning the enforceability of a browsewrap agreement.

The Facts

Barnes & Noble is a national bookseller in the US that owns and operates hundreds of bookstores as well as the website. In August 2011, Barnes & Noble liquidated its inventory of a discontinued brand of Touchpads by advertising a "fire sale" at a heavily discounted price.

The plaintiff immediately purchased two units on Barnes & Noble's website and received an email confirming the transaction. The following day, the plaintiff received another email informing him that his order had been cancelled due to unexpectedly high demand.

The plaintiff commenced a class of action involving consumers whose Touchpad orders had been cancelled, alleging that Barnes & Noble had engaged in deceptive business practices and false advertising. Barnes & Noble sought to stay the action and compel arbitration on the basis that that plaintiff was bound by the arbitration agreement in the website's Terms of Use.

The website's Terms of Use were available via a "Terms of Use" hyperlink located in the bottom left-hand corner of every page on the Barnes & Noble website, which appears alongside other hyperlinks labeled among others "Copyright," and "Privacy Policy."

The plaintiff did not click on the "Terms of Use" hyperlink or read the Terms of Use. The plaintiff argued that he was not bound to the arbitration provision because he neither had notice of nor agreed to the Terms of Use. Barnes & Noble argued that the placement of the "Terms of Use" hyperlink on its website put the plaintiff on constructive notice of the arbitration agreement. This notice, combined with subsequent use of the website, was enough to bind him to the Terms of Use. The trial court disagreed, and Barnes & Noble appealed to the United States Court of Appeals for the Ninth Circuit.

The Decision

While electric commerce on the Internet has exposed courts to many new situations, it has not fundamentally changed the principles of contract. One such principle is that a fundamental requirement of an enforceable contract is the mutual manifestation of assent, whether by written or spoken word or by conduct.

Contracts formed on the Internet come primarily in two flavors: "clickwrap" (or "click-through") agreements, in which website users are required to click on an "I agree" box after being presented with a list of terms and conditions of use; and "browsewrap" agreements, where a website's terms and conditions of use are generally posted on the website via a hyperlink at the bottom of the screen.

Unlike a clickwrap agreement, a browsewrap agreement does not require the user to manifest assent to the terms and conditions expressly. Instead the user gives his or her assent simply by using the website. Typically the website will contain a notice that to the effect that by using the services of, obtaining information from, or initiating applications within the website the user is agreeing to and is bound by the site's terms of service. Because no affirmative action is required by the user to agree to the terms of the contract other than his or her use of the website, the determination of the validity of the browsewrap contract depends on whether the user has actual or constructive knowledge of a website's terms and conditions.

U.S. courts have consistently enforced browsewrap agreements where the user had actual notice of the agreement but there was no evidence that the plaintiff had actual knowledge of the agreement. In such a case the validity of the browsewrap agreement turns on whether the website puts a reasonably prudent user on inquiry notice of the terms of the contract. This in turn, depends on the design and content of the website and the agreement's webpage.

Barnes & Noble argued that the placement of the "Terms of Use" hyperlink in the bottom left-hand corner of every page on the Barnes & Noble website, and its close proximity to the buttons a user must click on to complete an online purchase, was enough to place a reasonably prudent user on constructive notice.

The court did not accept this argument. They said that, in keeping with courts' traditional reluctance to enforce browsewrap agreements against individual consumers, where a website makes its terms of use available via a conspicuous hyperlink on every page of the website but otherwise provides no notice to users nor prompts them to take any affirmative action to demonstrate assent, even close proximity of the hyperlink to relevant buttons users must click on—without more—was insufficient to give rise to constructive notice. While failure to read a contract before agreeing to its terms does not relieve a party of its obligations under the contract the onus was on website owners to put users on notice of the terms to which they wish to bind consumers. Given the range of technological savvy of online purchasers, consumers cannot be expected to ferret out hyperlinks to terms and conditions to which they have no reason to suspect they will be bound.

Comment

While the decision is not binding on a Canadian court in any way it is instructive of the approach that would be applied in a similar fact situation. Website owners should carefully consider this decision.

Ontario has passed legislation that provides that any term or acknowledgment in a consumer agreement or a related agreement that requires or has the effect of requiring that disputes arising out of the consumer agreement be submitted to arbitration is invalid insofar as it prevents a consumer from exercising a right to commence an action in the Superior Court of Justice given under Consumer Protection Act. As a result the requirement for arbitration might not be enforceable in this province.

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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