Courts generally categorize a website’s terms of use as “clickwraps” or “browsewraps.” A user enters a “clickwrap” agreement when he or she takes an action that clearly indicates his or her agreement to the contract - usually by clicking a button. Courts typically regard “clickwraps” as binding contracts. In a “browsewrap” agreement, the user supposedly agrees to the contract by merely browsing the website. Courts usually do not consider “browsewrap” agreements as binding contracts because the user never makes an affirmative act of consent to the terms of use.

A good example of a court refusing to enforce “browsewrap” agreements comes in the case of In re: Zappos.com Inc., Customer Data Security Breach Litigation. The facts of that case are as such. In January of 2012, a criminal broke into Zappos.com’s (Zappos) online servers, gaining access to the data for 24 million of Zappos’ users. Dozens of class action lawsuits followed, which were consolidated into a single class action lawsuit against Zappos for the breach. Zappos attempted to send the lawsuits to arbitration based on its “terms of service use,” which the company claimed each user had agreed to under its “browsewrap” agreement. The plaintiffs questioned whether any user would have been aware of the existence of the terms of use in merely browsing the website - Zappos had put the terms of use behind a hyperlink at the bottom of the main page. Zappos did not have a “clickwrap” agreement in place prior to the breach.

The Federal judge of In re: Zappos.com rejected Zappos’ arbitration claim holding that the Zappos’ browsewrap agreement did not bind users of Zappos’ website. The judge stated, “A party cannot assent to terms of which it has no knowledge or constructive notice, and a highly inconspicuous hyperlink buried among a sea of links does not provide such notice. Because Plaintiffs did not assent to the terms, no contract exists, and they cannot be compelled to arbitrate.”

The In re: Zappos case illustrates just one of the many complexities of online contracts. With online contracts, the ability to hide potentially hundreds of pages behind hyperlinks creates a very real issue of user acceptance - the more inconspicuous the terms of use are the less likely a court will find the user accepted them. Zappos should have instituted a system where visitors must agree to its terms of use prior to creating an account or purchasing an item. In that situation, the judge might have found that an enforceable “clickwrap” agreement existed sufficient to warrant granting Zappos’ arbitration claim.

Source (Zappos Blog): http://blogs.zappos.com/securityemail

Source (Eric Goldman): http://blog.ericgoldman.org/archives/2012/10/how_zappos_user.htm

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Zappos, Online Contracts, and the Perils of Browsewrap Agreements