The recent decision in In re Zappos.com Inc., Customer Data Security Breach Litigation is an important reminder to online businesses that rely on browsewrap agreements to ensure that they effectively bind their end users to a terms of use agreement. As the Zappos decision reflects, companies using browsewrap agreements (i.e., by merely posting a link to the terms of use on the site, without requiring a click-through or other expression of agreement) need to make certain that such agreements are, at a minimum, conspicuous enough to put users on notice that use of the site is subject to the company's terms of use. Otherwise, companies risk losing the protection of their terms of use.
After a cyber attack in mid-January 2012 in which a hacker attempted to access personal account information of Zappos.com end users, end users filed a number of class action lawsuits against Zappos.com, Inc. (a subsidiary of Amazon.com) for damages resulting from the security breach. Zappos moved to compel arbitration of these actions based on an arbitration clause contained in the "Dispute" section of its online terms of use. The court denied Zappos' motion on the grounds that Zappos and its users had not formed a binding, enforceable contract. The court held that the Zappos.com terms of use, which were implemented as a "browsewrap agreement," did not create an enforceable contract with end users. In particular, the court focused on the fact that website users were not required to take any affirmative action to agree to the terms of use. In addition, the court noted that even if the end users had assented to the terms, the contract may not have been enforceable given that Zappos had reserved the unilateral right to change the terms at any time.
Browsewrap vs. Clickwrap Agreements
Website operators typically choose between so-called "browsewrap" and "clickwrap" agreements to form binding contracts with their users. As explained in Zappos, "with a browsewrap agreement, a website owner seeks to bind website users to terms and conditions by posting the terms somewhere on the website, usually accessible through a hyperlink at the bottom of the home page; in contrast, a 'clickwrap' agreement requires users to expressly manifest assent to the terms by, for example, clicking an 'I accept' button."
Because they require express, affirmative consent, clickwrap agreements typically are recognized as valid, enforceable agreements so long as the substantive terms are not...
