United States: Another Example Of Why Online-Only Agreements Are Preferable

Richard Raysman is a Partner in the New York office.

Despite the increasing propensity of clickwrap agreements to include boilerplate language alongside the icon or button to be clicked, such as "By signing this form, you agree to all Terms and Conditions associated therewith," some entities continue to, whether intentionally or not, refuse to fall in line. As the following case illustrates, the absence of both this language and of an online-only user approval process can doom the enforceability of other contracts referenced by the clickwrap agreement. See Holdbrook Pediatric Dental, LLC v. Pro Computer Service, LLC, No. 14-6115 (NLH/JS), 2015 WL 4476017 (D.N.J. July 21, 2015)

Facts

Holdbrook Pediatric Dental, LLC (Holdbrook) operates a pair of pediatric dental practices in New Jersey. In April 2014, Holdbrook entered into an agreement with Pro Computer Service, LLC (PCS), whereby the latter would provide IT services to Holdbrook in exchange for a monthly fee.

On July 24, 2014, a representative of Holdbrook informed PCS that the company was displeased with PCS' services. Approximately 15 minutes later, PCS allegedly remotely accessed Holdbrook's computers and created new network passwords that it would not thereafter provide to Holdbrook. As a result, Holdbrook was locked out of its server, and despite a demand to PCS, Holdbrook's network was not restored until the next day. Holdbrook averred that while it was locked out of its network, it could not access its electronic records, including patient files, thereby forcing it to cancel 83 previously scheduled appointments for that day and the next.

In October 2014, Holdbrook sued PCS in part pursuant to the Computer Fraud and Abuse Act (CFAA), 18 U.S.C. § 1030 et seq., based upon its contention that PCS knowingly transmitted into its network a "program, information, code, or command" that intentionally caused damage without authorization to a protected computer. Five days subsequent to the filing of this action, PCS filed a demand for arbitration with the American Arbitration Association (AAA). PCS claimed that the Managed Support Plan (the Plan) signed by Holdbrook ante to the beginning of the relationship included a mandatory arbitration clause.

The Plan did not itself include such a provision, and instead, the mandatory arbitration provision is contained in an independent Terms and Conditions document (the Terms). PCS argued that the Terms were automatically integrated into the Plan. Schematically, the Plan had been sent to Holdbrook in electronic form, and the Terms were attached as a clickable hyperlink to the last page of the Plan. The hyperlink, which included the text "Download Terms and Conditions," was located directly above the line where the Holdbrook signatory would signal assent to the Plan. Specifically, Paragraph 12 of the Terms stated that:

Mandatory Arbitration: Any controversy or claim arising out of [the Plan], or relating to it, including any statutory claims, will be settled by arbitration administered by the American Arbitration Association.... PCS and [Holdbrook] are choosing arbitration instead of litigation to resolve its disputes and VOLUNTARILY AND KNOWINGLY WAIVE A RIGHT TO A JURY TRIAL." (emphasis added)

Holdbrook countered that it did not agree to the separate Terms, and could thus not be bound by the arbitration clause contained therein.

In a unique circumstance, the representative from Holdbrook received the Plan electronically but subsequently printed it so as to affix a signature, as was necessary to validate the agreement. Put another way, the document could not be signed electronically.

As anyone who has ever printed an electronic document has discovered, sometimes the document will print in a form noticeably different from how it appears in an electronic format. In this instance, whereas the electronic version of the Plan contained the "Download Terms and Conditions" text in a hyperlink, the printed version included only the HTML coding for the link. Here is how the printed version presented the link:

This difference proved to be important, as will be discussed below. The printed version of the Plan was signed by the Holdbrook representative, and neither party contested the legitimacy of Holdbrook's assent to the terms of the Plan.

PCS filed a motion to dismiss, or alternatively, a stay to the litigation and to compel arbitration, which is currently pending before the AAA. Only the adjudication of PCS' motion to dismiss is discussed here. As the claim arose under the CFAA, the District Court for New Jersey exercised subject matter jurisdiction in consonance with 28 U.S.C. § 1331.

Legal Analysis/Conclusions

The court first observed that the case presented a "unique scenario because it involved mixed media," as the Holdbrook representative had received the Plan electronically, but then printed it to sign it (as was required to effectuate the agreement).

PCS maintained that because the Plan was sent in electronic form with a clickable hyperlink to the Terms, the Holdbrook signatory should have been on notice of the existence of the Terms and assented to such terms, irrespective of whether the printed version of the Plan did not display a clickable link. Holdbrook countered that the Terms were not incorporated into the Plan, as the version endorsed by its representative contained only the coding for the Terms, and not the accompanying link. Therefore, according to Holdbrook, "it was not abundantly clear that there was a hyperlink which contained additional terms of the contract."

The court agreed with Holdbrook. It held that at the motion to dismiss stage, the Plan, which the court characterized as a "modified" clickwrap agreement, could not have afforded a signatory adequate notice that the Terms were part of the overall contractual relationship with PCS, and thus, there could not have been assent to the arbitration clause contained therein.

As background, a "pure" clickwrap agreement is an electronic agreement in which "all terms ... are collected in a dialog box and a user must click on an icon that affirmatively demonstrates assent to be bound" to those terms.  A "modified" clickwrap agreement requires the user to take an affirmative action designed to manifest intent to be bound, but it does not present the entirety of the terms to the user at such time. Rather, this "modified" version often includes only a conspicuous link to the relevant terms. Such link is often supplemented by language (often referred to as a "call-to action") situated close to it which further informs the user that clicking the icon is a sign that the user has read and agreed to the terms. This language, or lack thereof, is often dispositive when determining the validity of the agreement.

All told, the governing standard for assent to terms contained in hyperlink is that the user must be provided with "reasonable notice" that such additional terms apply to the agreement.

Notwithstanding the acknowledgement earlier in the opinion that the instant case presented a "unique scenario," the court concluded that "nonetheless" the Plan was "much like" the "modified" clickwrap agreements evaluated in other cases.  Instead of clicking a button, the Plan required the Holdbrook representative to affix a signature, and it also included a hyperlink to the Terms.

As referenced above, in some of the notable cases which have approved such a "modified" clickwrap agreement, the icon to be clicked to indicate assent is accompanied with text reiterating that the user is accepting the hyperlinked terms, e.g., "By clicking Sign Up, you are indicating that you have read and agreed to the Terms of Service").  See Fteja v. Facebook, Inc., 841 F. Supp. 2d 829 (S.D.N.Y 2012).

In contrast, the hyperlink on the Plan existed in isolation, bereft of any text designed to point the user to the reality that assent to the Plan incorporated of the separate provisions of the Terms. Specifically, the Plan neither contained a statement that signing evinced approval of the Terms, nor did it include an instruction to sign the Plan only if Holdbrook's representative agreed to the additional terms. The omission of such instructions was considered insufficient to demonstrate that Holdbrook had reasonable notice that the Terms were part of the Plan.

What the court may be deeming unique is that the Plan could not be accepted in electronic form, and instead must be printed. Such a protocol meant that the Holdbrook signatory did not need to read the electronic version to accept, and therefore could have easily missed the hyperlinked Terms and Conditions. Finally, the distortion of the Terms and Conditions text when printed further indicated that a hyperlink referencing the Terms was not explicitly included.

Conclusion

The court denied PCS' motion to dismiss based on the arbitration clause, albeit without prejudice.

As for lessons going forward, this is yet another case which shows that even one sentence guiding the user to the implications of signing a wrap agreement would likely have been sufficient to convince a court to validate it. It further indicates that a failure to use an online-only agreement process is mystifying in light of the ease with which such agreements can be memorialized without printing and affixing a manual signature. Finally, incorporating the Terms into the Plan itself would have made it more difficult for Holdbrook to disclaim the pertinence of the material located in the same file.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions