A way out of arbitration?

A new Ninth Circuit decision points to a possible way to avoid arbitration clauses in the take-it-or-leave-it "adhesion" contracts that electronic retailers post on their websites.

Online vendors want you to accept their terms of service. That way, you will bind yourself to a form contract that mainly favors the website owner. A key clause in the pact will provide that you waive your right to resolve any complaint you may have against the vendors in court or on a class basis.

Arbitration, baby!

"Clickwrap" v. "browsewrap"

You can't avoid doing things the e-tailers' way. But to get you in their clutches they must take steps that enable them to prove that you in fact accepted the online agreement. As the Ninth Circuit explained in a class action relating to a messy fire sale of HP TouchPads by Barnes and Noble:

Contracts formed on the Internet come primarily in two flavors: “clickwrap” (or “click-through”) agreements, in which website users are required to click on an “I agree” box after being presented with a list of terms and conditions of use; and “browsewrap” agreements, where a website’s terms and conditions of use are generally posted on the website via a hyperlink at the bottom of the screen.

Nguyen v. Barnes & Noble, Inc., No. 12-56628, slip op. at (9th Cir. Aug. 18, 2014).

The winner

Guess which approach works better? The one that doesn't require you to do something that shows you agree to the terms of service? Or the one that does?

Bingo:

[W]here, as here, there is no evidence that the website user had actual knowledge of the agreement, the validity of the browsewrap agreement turns on whether the website puts a reasonably prudent user on inquiry notice of the terms of the contract.

Id. at 11-12 (applying New York law).

[W]here a website makes its terms of use available via a conspicuous hyperlink on every page of the website but otherwise provides no notice to users nor prompts them to take any affirmative action to demonstrate assent, even close proximity of the hyperlink to relevant buttons users must click on—without more—is insufficient to give rise to constructive notice.

Id. at 15.

Lesson

Online retailers that rely on the less-intrusive "browsewrap" approach may want to rethink their methodology. "Clickwrap" pacts may annoy customers, but they stand a better chance of passing muster as a binding contract.

Benefits may include avoiding a class action.

Lawyers who represent consumers will also want to take notice of Nguyen v. Barnes & Noble, Inc. That consumer fraud or antitrust case that you turned down because of the online arbitration clause barring class actions? Take a new look at it. If the bad actor use browsewrap instead of clickwrap, your client-in-waiting may have a viable case.

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