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Phil Nicolosi Law

Phillip A. Nicolosi, J.D.

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Website Legal Terms

Big Click-Wrap Agreement Lesson Provided By The 7th Circuit!

By Phil Nicolosi, J.D.

Click-wrap agreement

Enforceable Click-Wrap Agreement

If your business operates a website online that uses 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. 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!

When Is A Website Disclaimer Effective?

By Phil Nicolosi, J.D.

Website Disclaimer

A website disclaimer relates to your specific website content. These disclaimers are not generally required under any specific law. But, using the appropriate website disclaimer on your website is necessary to avoid legal liability in many instances. Website disclaimers are essentially used to: i) walk away from some responsibility or potential liability; or ii) to limit or to disclaim some association or affiliation with something or someone.

By including specific language on a website, website visitors may be restricted on what claims they can bring against the site operators. As a practical matter, a website disclaimer is often used by the courts to help determine the intent of your business practices and extent of your liability for your website content. In this sense, you should think of them as legally required. In order to draft an effective disclaimer, you need to determine what legal risks you or your business faces first and foremost. This depends on the website content and site activities.

Does your website provide advice and/or instructional information? This could expose your website to potential claims for reliance upon such information or advice. For example, you could be sued for negligence if someone suffers any damages based upon the advice or information contained on your medical information website.

One of the most important basic disclaimers every website offering information or advice should include relates to the accuracy or reliability of your website content. A basic website use disclaimer should also provide that your website makes no representation regarding the reliability of the site and that the visitors are accepting all risks by using your website.

Disclaiming that no attorney-client relationship exists by viewing the content of my blog is an example of a disclaimer specific to my website activity. Also, stating that all information is general in nature only and should not be taken as legal advice is another example of a specific disclaimer.

But, based upon how you use any given website disclaimer, it may be ineffective!

The value of any website disclaimer depends upon how skillfully they have been drafted and whether proper notice of the disclaimer is provided to website visitors. There is no “standard” language that applies to disclaimers. Each disclaimer you use should be drafted to include precise language that covers your website activities and how any content is intended to be used on your website. This means you should avoid generic language or language borrowed from another website.

Website Disclaimer Placement is Critical

The courts will evaluate your website content and how and where you identify the website disclaimer in relation to that content. This means placement of a website disclaimer is just as important as the language of the disclaimer itself. Your visitors need to have proper notice that the disclaimer exists. An improperly placed website disclaimer is worthless no matter how well it is drafted. All disclaimers should be positioned in connection with the content being disclaimed so it stands out from the rest of the content and is in an obvious location. No single body of law or regulatory agency governs the use or placement of website disclaimers. They are unlike disclosures relating to advertisements and other website content falling under FTC guidelines. No matter what area of law the disclaimer may relate to, however, the courts will always look at the intent behind the placement of any website disclaimer.

Effectiveness Spectrum?

Since there really are no hard and rigid rules, it might be appropriate to think of website disclaimer placement in terms of a liability spectrum. There are the extremes at either end and there are practices that fall somewhere in the middle. The most conservative route is to have all website traffic flow through to a separate webpage, or splash page, containing your disclaimers. Each visitor will have viewed or used the information on your site with full knowledge of the disclaimer before they elect to move forward. You may then be able to argue that the visitor was in full agreement to the disclaimer terms. From a business perspective, this route is not very attractive. Conversion rates can hinge on a single factor, such the increased time it takes for your customers to arrive at what they are looking for.

The most liberal route is to hide any relevant disclaimers by placing them in the website terms of use or on a separate page and using some inconspicuous link buried in your website footer. This can be easily overlooked by your visitors and they would likely have to stumble upon the links to find your disclaimers. This weakens the argument that your business intended to fully disclose or disclaim whatever it is the subject of the website disclaimer. It may defeat the purpose of using a disclaimer altogether in the eyes of the courts. Visitors may not notice the link and never read the disclaimer! Visitors must have proper notice of the existence of any website disclaimers.

The “middle ground” is to somehow identify the existence of any disclaimers to your users prominently on the webpage. Placing a prominent disclaimer link on some immediately visible portion of the website (where your visitors do not have to scroll down to find it) is an example of this route. You could then include the disclaimers on a separate page. Placing a website disclaimer directly on the visible portion of each web page containing the relevant content is probably another example. I say probably because this really is an arbitrary standard I am using. This method applies more to specific websites activities and not to general disclaimers such as content accuracy or liability disclaimers. Finally, you could also include a general website disclaimer in your website terms of use itself. If notice of the website terms is improperly provided, the website disclaimer will be ineffective, however.

The bottom line is your visitors must receive proper notice of the existence of a website disclaimer no matter how you decide to use them!

A Website Disclaimer Is Not A Complete Legal Shield By Itself

Finally, remember that there is absolutely no guarantee any single website disclaimer will shield you or your business from legal liability. No matter how careful you may be, there is no guarantee you or your business will avoid liability by simply having the right disclaimer on your website. This holds true even if you have hired an e-commerce attorney to draft each of your website disclaimers. The facts and circumstances specific to the situation or alleged claim will be evaluated in each determination of liability by a court of law. But using an effective website disclaimer can certainly be a deciding factor!

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Phil Nicolosi Law, P.C.

6735 Vistagreen Way
Suite 210
Rockford, IL 61107

P: (815) 314-0022
F: (815) 516-0395
info@philnicolosilaw.com

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About Phil Nicolosi, J.D.

Proudly Carrying On A Tradition Started In 1948! Philip A. Nicolosi III provides guidance to startups, small and closely held businesses, medium sized businesses, non-profit organizations and individual business owners with a variety of matters. Mr. Nicolosi provides … [Read More...] about About

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Rockford, IL 61107

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