In today’s economy more and more goods and services are sold
through the Internet. Your business may increasingly rely on
e-commerce rather than face-to-face transactions. Having a
low-cost method to resolve disputes with these remote, faceless
customers is a business necessity. How do you make sure the
other party agrees to your warranties, disclaimers and even
dispute resolution procedures? One popular method, the browse
wrap agreement, may not be a good choice for companies wanting
to transact business with residents of Massachusetts.
Browse wrap agreements have become ubiquitous on e-commerce
service websites. Visit any services website and you will see
the small link on the bottom of the page that points you to
the website’s terms and conditions. Moving the terms of the
agreement away from the point of sale is a very popular marketing
technique. The fewer things customers have to do to purchase
your products and services, the more likely they are to complete
the purchase. If the customers have to stop to evaluate terms, they
are more likely to abandon the transaction. How far away can
you move the terms and conditions from the point of sale and still
have them be binding on the transaction?
Decades ago, the software industry pioneered the first bold step in
moving the terms away from the point of sale. Software involves
the sale of a license to use intangible property rather than a
tangible good or service. The license agreement is typically long
and verbose. The software vendors began putting the software
license inside the product packaging. Consumers objected to this
practice, stating that they could not possibly have agreed to the
terms because they were unable to read them when the software
was purchased. Courts largely agreed with this position and
allowed consumers a period of time after the purchase of software
to consent to the terms or return the software for a refund of the
purchase price. Despite this pro-consumer ruling, few consumers
would avail themselves of this remedy. Most would continue to
use the software. The “shrink wrap” license agreements proved to
be effective for both marketing and risk prevention purposes.
When the software distribution model moved from physical
media to Internet downloads, the industry reacted with the “click
wrap” agreement. In a click wrap transaction, the purchaser of the
software would be required to review a window or screen showing
the terms and conditions of purchase, and then take some type
of affirmative action, such as a click, to state whether they agreed
to those terms and conditions. Many e-commerce companies
selling goods followed this model. Most courts have upheld click
wrap agreements, and they have become a fixture in e-commerce
product sales.
The click wrap agreement wasn’t an ideal solution for e-commerce
service providers. These companies required longer-term
relationships with customers. Service website transactions were
not discrete, but continuous and spread over time. As the law
progressed, the service website agreement also needed to progress.
The need to constantly update terms led to the birth of the browse
wrap agreement. With the browse wrap, the customers bound
themselves to terms and conditions by performing some action
other than clicking “I Accept.” Most often the terms would be
located on a separate web page with just a hyperlink pointing
to the terms and conditions. Users would purportedly bind
themselves to the terms just by using the website services. Would
the terms of these browse wrap agreements be binding on the
parties? If they are binding, could companies that sell goods use
a similar type of agreement to avoid losing customers during the
“click to assent” stage of a browse wrap agreement?
The answers to these questions will continue to evolve as
lawsuits progress through the courts of each state. However,
the Massachusetts Appeals Court’s recent decision in Ajemian
v. Yahoo makes pure browse wrap agreements inadvisable. In
Ajemian, the estate and siblings of John Ajemian filed suit in
Massachusetts probate court to compel Yahoo to turn over
certain emails from the deceased Ajemain’s email account. Yahoo
asked the court to dismiss the suit because, inter alia, Yahoo’s
terms of service included clauses that (1) removed any right of
survivorship to the account, (2) did not allow any third parties
to bring actions for benefits they may receive from Ajemian’s
account, and (3) required all disputes to be resolved in California
courts. The forum selection clause was in the Terms of Service
on Yahoo’s website at the time Ajemian opened the account, and
the limitation on survivorship and third-party beneficiary clauses
were added to the Terms of Service four years later. The appeals
court denied Yahoo’s request because it found that Yahoo failed to
show that the terms were adequately communicated to Ajemian
or accepted by Ajemian.
When reaching its decision, the Appeals Court was careful to
reaffirm that it does recognize forum selection clauses in click
wrap agreements. More specifically, the Appeals Court searched
for two distinct characteristics to decide whether the agreement
was accepted. First, was the agreement shown to Ajemian.
Second, did Ajemian take an affirmative action such as clicking “I
Accept.”
Because of Ajemian, a company considering moving from a
click wrap agreement model to a browse wrap agreement model
should reconsider its decision. If you already have a viable means to conduct your transactions, you would not want to move to
a model that is less likely to result in an enforceable agreement.
If you already have a browse wrap model and you are able to
transition to a click wrap model, you may find it advisable
to make the switch. If you have a service-based e-commerce
business that doesn’t lend itself to discrete transactions, you may
still want to implement certain aspects of a click wrap model on
certain of your transactions. For instance, you may want to have
all account sign-ups subject to a click wrap rather than a browse
wrap agreement. If you have content that requires disclaimers
or specific types of agreements, you may want to prominently
display the disclaimers in conjunction with the material and
even require a click wrap screen prior to allowing access to
the content. The key will always be to prove that you provided
notice and that the other party agreed to the terms.
Fletcher Tilton can review your e-commerce websites and
provide recommendations on how to include and integrate click
wrap terms and conditions.
