Thursday, September 17, 2009

The Duty to Read and Another Case Invalidating an Online Agreement

Just 3 days ago I wrote about two conflicting decisions concerning the enforceability of online contract provisions that do not require consumers to affirmatively click an “I agree” button. Well, today techdirt points me to a new court decision invalidating such a provision: according to MediaPost, the court “ruled that Internet retailer Overstock can’t enforce the manadatory arbitration agreement set out in its online terms and conditions because there is no evidence that consumers read the policy.” According to the decision, the plaintiff  ”lacked notice of the terms and conditions because the website did not prompt her to review the terms and conditions and because the link to the terms and conditions was not prominently displayed.”

As I wrote the other day, under all the court decisions I am aware of online sellers can ensure that their contracts are not invalidated on these grounds merely by requiring the affirmative act of clicking on an “I agree” button. As I read all of these decisions, online agreements that require the consumer to click “I agree” are enforceable despite the fact that consumers generally do not read the agreements.

To rule otherwise would overturn ages of decisions imposing on the consumer a “duty to read” that binds them to agreements they express agreement to even if they don’t understand what they are agreeing to. It would also leave open to dispute any online transaction that the consumer decided he or she didn’t like, a result that would mire our economy and courts in a mess to deep to contemplate.

There is a solution, however, and it’s one that hit a high gear 50 years ago only to peter out in the wake of our more recent passion for unregulated free markets — consumer protection laws that dictate what terms can and cannot be imposed on consumers. As the situation now stands, we are left with a patchwork effort to find traditional contract rules to come up with fair results (such as invalidating mandatory arbitration clauses that deprive consumers of any meaningful remedies for wrongdoing by online sellers).
In the meantime, I can only repeat what I wrote the other day:
Online sellers: if you want to be maximize the likelihood your agreements are enforceable, do what most online sites do — require your customers to click on a button that expresses their agreement before the transaction is complete.

Online buyers: be careful. Don’t believe that you’re getting what you think you’re getting. You’re only getting what the fine print says you’re getting. But if you do get screwed, remember too that even when you sign something it might be so unfair it is unenforceable.


  1. I cant recall exactly what site I was on but when it came to the terms and conditions I could not just click the I agree button it made me open up the actual terms and conditions and then scroll all the way to the bottom and click that I had read it then I could click agree. I think that more sites should do that if they want to enforce the online contracts. By making the online buyer actually open the terms and scroll through them maybe just maybe more people would read them.
    R. Shefferly

  2. This posting (specifically the link to your blog post: The Argument for Judicial Power to Void Mandatory Arbitration Agreements and Class Action Waivers on State Public Policy Grounds) got me thinking. You posed the question, “Why should the law prefer justifications based on strained interpretations of contract theory originating centuries ago over justifications based on the real world consequences underlying that theory?”

    I believe it all goes back to when you spelled out your thoughts on the lifecycle of a legal innovation. Couldn’t eventually those “strained interpretations of contract theory” become public policy over time, as the “legal innovation” develops and progresses through the lifecycle? By legal innovation, you were referring to mandatory arbitration clauses and class action waivers, right? We’re only in the relative infancy of online consumerism, so perhaps, the online consumer market will be instrumental in, as you said, “distinguishing between the productive uses [of mandatory arbitration clauses and class action waivers] and the unscrupulous uses.”

    Just a small thought on a very complex issue.

  3. I think the page Rachel is referring to is your Master Promissory Note, where they require you to do that.