If your business operates a website online that contains a click-wrap agreement, you should pay close attention to the recent decision reached in the Seventh Circuit Federal Court of Appeals.  In Sgouros v. TransUnion Corp., No. 15-1371, 2016 WL 1169411 (7th Cir. March 25, 2016), the Court invalidated the arbitration clause contained on TransUnion’s Service Agreement since it did not provide users with adequate notice of the clause. The Agreement used by TransUnion on its website was a click-wrap agreement, which requires the user to click a button to affirm assent to the agreement’s terms. (As I have always told my clients, having the website user perform some affirmative action to manifest assent to terms and conditions is far safer than using a browse-wrap agreement.)

TransUnion was sued in a putative class action lawsuit by a plaintiff who purchased a “credit score package” on the TransUnion website that turned out to be an incorrect report of his credit score. The TransUnion Service Agreement contained an arbitration clause and TransUnion argued that the plaintiff should have been compelled to go to arbitration based on his agreement of that clause. The way in which TransUnion gave notice of this provision and other important terms contained in its Service Agreement on its website was the central focus of the Court in devising its opinion.

Essentially, the plaintiff/user had to click through three separate webpages in order to purchase a credit report. The user was required to enter some identifying information on the first page and then select “Yes” or “No” in response to “Please send me helpful tips & news about my service, including special offers from TransUnion and trusted partners!” Next, the user was to click a large, orange button labeled “Submit & Continue to Step 2.”

The second webpage was the critical page at issue in this case (Here is a screenshot you can view from the Court’s opinion). The user had to create an account user name and password and provide his or her credit card information on this page. This webpage also contained a scroll box at the bottom of the page which shows the first few lines of the Service Agreement. Below the scrollable window was a hyperlink to a printable version of the agreement and a paragraph in bold with an “authorization” to obtain credit information. An “I Accept & Continue to Step 3″ button was also located at the bottom of the page. The Court noted that above the button there was a paragraph stating:

You understand that by clicking on the “I Accept & Continue to Step 3” button below, you are providing “written instructions” to TransUnion Interactive, Inc. authorizing TransUnion Interactive, Inc. to obtain information from your personal credit profile from Experian, Equifax and/or TransUnion.  You authorize TransUnion Interactive, Inc. to obtain such information solely to confirm your identity and display your credit data to you.

 

The Court concluded that the webpage did not require the plaintiff/user to click on the Service Agreement, scroll down to view the entire Service Agreement, or otherwise call the plaintiff’s attention to the Service Agreement. Specifically, the Court noted that the arbitration clause was not visible in the window and the existence of the arbitration clause was not signified to the user in any way.  The plaintiff/user was only required to click the “I Accept & Continue to Step 3” button. The plaintiff/user would have had to scroll down the window to page 8 of the 10-page agreement just to find the arbitration clause. The Court even stated that the language directly above the “I Accept” button was actually misleading since the user authorized TransUnion to obtain information, but did not expressly agree to the terms of the Service Agreement.

Since the case was governed by Illinois contract law, the Court applied a modified version of the “reasonable communicativeness” test that Illinois courts have used in the context of cruise-ship tickets.  The Court restated that the test in the internet context as “whether the web pages presented to the consumer adequately communicate the terms and conditions of the agreement, and whether the circumstances support the assumption that the purchaser receives reasonable notice of those terms.

 

What Is The Bottom Line For Businesses Operating Online? 

The Court had a big problem with the presentation of the scrollable window. It pointed out the following: 1) the arbitration clause was not visible in the scrollable window; 2) the user’s attention was not called to the existence of the arbitration clause in any way; 3) the user was not required to acknowledge the terms in the scrollable window (e.g., scroll to the bottom of the window or click on the scroll box); 4) the hyperlink to the printable version of the Service Agreement stated “Printable Version” rather than “Terms of Use,” “Purchase,” or “Service Agreement”; and 5) the paragraph in bold contained only an authorization, not an actual acceptance of the terms. (The Court cited Hubbert v. Dell Corp., 835 N.E.2d 113 (Ill. Ct. App. 2005), where the subject website informed users that transactions were subject to the Service Agreement, in contrast to the subject webpage.)

TransUnion argued that clicking on the button that said “I Accept & Continue to Step 3” by was sufficient to bind the plaintiff. But, ultimately, the Court stated that “we cannot presume that a person who clicks on a box that appears on a computer screen has notice of all contents not only of that page but of other content that requires further action (scrolling, following a link, etc.).” The scrollable window is not, the Seventh Circuit held, “in itself, sufficient for the creation of a binding contract.”

The bottom line is that the Court refused to enforce the arbitration clause because it found that the layout of the site and the language used did not provide the plaintiff/user with reasonable notice that clicking the button would manifest an assent to agree to arbitration. Therefore, this case suggests it may be wise to avoid a scrollable window altogether in favor of a pop-up window that notifies the user of important terms where specific assent to the provision(s) is obtained by an affirmative action, such as by checking a box. The use of a scrollable window should be accompanied by a visible, prominent notification on the webpage itself that important terms exist that should be read by the user.

This case also supports an important recommendation I often make to my own clients: require the user to scroll through the entire window before they can accept the terms and before they provide their credit card information and complete the purchase. 

Recent court decisions seem to be trending towards rejection of the enforceability of both browse-wrap and click-wrap agreements, especially when fundamental rights are being waived like the right to a jury trial. Website operators should take this opportunity to review and retool their terms and conditions accordingly!