In Berman v. Freedom Financial Network LLC, the Ninth Circuit emphasized attention to detail in ensuring that the enforceability of a website’s terms and conditions.
Website terms and conditions are critical to establish the rules governing a website users’ use of the website. The terms and conditions can establish ownership rights to the site and its content, limit the liability of the website’s owner, establish payment terms (if applicable), and set forth alternative dispute resolution processes. But simply having website terms is not enough. Website owners must ensure the enforceability of those terms and conditions. A recent case from the Ninth Circuit is instructive.*
In Berman v. Freedom Financial Network LLC (9th Cir. Apr. 5, 2022), the Ninth Circuit held that the defendant’s arbitration agreement was unenforceable because notice of its terms were not “reasonably conspicuous” and users did not “unambiguously” assent to the terms and conditions.
In that lawsuit, a putative class of users of the Freedom Financial Network website sued the company, alleging that website operators collected users’ contact information for telemarketing, in violation of the Telephone Consumer Protection Act. The website contained a box, asking users to confirm their zip code and to click a large, green “continue” button. In small print, the box also stated: “I understand and agree to the Terms & Conditions which includes mandatory arbitration and Privacy Policy.” To access the lengthy Terms and Conditions, users were required to click the link. Crucially, the website did not inform the users that clicking the big green “Continue” button next to the terms and conditions meant they were agreeing to them.
In assessing the enforceability of the website’s terms, the Court explained that unless the website owner can show the user had “actual knowledge of the terms” (which no party claimed), then:
an enforceable contract will be found based on an inquiry notice theory only if: (1) the website provides reasonably conspicuous notice of the terms to which the consumer will be bound; and (2) the consumer takes some action, such as clicking a button or checking a box, that unambiguously manifests his or her assent to those terms.
Generally speaking, courts tend to divide internet contracts into two categories when applying this standard. “Clickwrap” agreements present users with specified contractual terms on a pop-up screen and users must check a box explicitly stating “I agree” in order to proceed. “Browsewrap” agreements disclose terms through a hyperlink and the user supposedly manifests assent to those terms simply by continuing to use the website. While courts typically enforce “clickwrap” agreements, they are typically more reluctant to enforce “browsewrap” agreements because, in many cases, users are unaware that terms were even offered.
Applying the standard to the case at hand, the Court determined that the website’s notice was not reasonably conspicuous for two reasons. First, the notice was “printed in a tiny gray font considerably smaller than the font used in the surrounding website elements, and indeed in a font so small that it is barely legible to the naked eye.” Second, the hyperlink to the terms was not sufficiently set apart. The Court explained that a website must do more than simply underscore a hyperlink, such as changing the color of the text (often to blue).
The Court also determined that a user clicking the link was not an unambiguous manifestation of assent. The Court explained that a “user’s click of a button can be construed as an unambiguous manifestation of assent only if the user is explicitly advised that the act of clicking will constitute assent to the terms and conditions of an agreement.” Although the notice stated “I understand and agree to the Terms & Conditions,” it did not indicate to the user what action would constitute assent to those terms and condition, and the text of the button did not state that the user would be bound to a contract. The Court further noted that this defect could have been remedied by including language such as “[b]y clicking the continue button you agree to the terms and conditions.”
Though this case did not set new precedent, the Court’s application of the law emphasized the importance that some of the smallest details can carry on a company’s website. The color of text, the size of font, or the inclusion or omission of a few words can carry tremendous legal significance.
If you’re creating a website that needs terms and conditions, or your website’s terms need to be reviewed or updated, don’t hesitate give us a call, or reach out to info@springer-law.com.
*The Court noted that the same conclusion would be drawn under both California and New York law.
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