Internet contracts – beyond clickwrap and browserwrap | Kilpatrick Townsend & Stockton LLP

Take away: Technology advances. Business processes are changing. Internet transactions are becoming increasingly ubiquitous. Contract formation, however, remains an outdated concept. An Internet consumer must, at a minimum, be aware of the Terms to be bound by them. In terms of contract formation, courts have generally divided Internet contracts into two categories: (1) “clickwrap”, where a consumer must click “I agree” after receiving the terms to continue, and (2) ” browsewrap”, where the consumer has the option of accessing the conditions by hypertext link, but is not required to do so before proceeding with the transaction. While courts generally enforce “clickwrap” agreements, the enforceability of “browsewrap” generally depends on visibility. See Internet Terms of Use: Ninth Circuit Enforces Arbitration Agreement Accessible via Hyperlink Browsing (August 31, 2020). In a recent case, Berman v Freedom Financial Network, LLC— F.4th —-, No. 20-16900, 2022 WL 1010531 (9th Cir. April 5, 2022), a Ninth Circuit panel found the Internet contract at issue to be unenforceable because the contract terms – including an arbitration clause and class action waiver – were not sufficiently obvious to a reasonable consumer.

In a concurring opinion, Mr. Miller Baker, an international trade judge sitting by designate, looked to California law to discuss four types of internet contracts and their enforceability under California law. To see 2022 WL 1010531, at *8 (Baker, J., concordant). Judge Baker based his analysis on two Internet contract formation cases by the California Court of Appeals, long c. Provide Commerce, Inc., 245 Cal. App. 4th 855, 200 Cal. Rptr. 3d 117 (2d Dist. 2016), and Sellers v JustAnswer LLC, 73 Cal. App. 5th 444, 289 cal. Rptr. 3d 1 (4th Arr. 2021), petition for review filed, No. S273056 (Cal. Feb. 8, 2022). the Sellers the decision in turn relied on a “scientific opinion” by Judge Jack B. Weinstein in another internet contract case, Berkson v Gogo LLC, 97 F. Supp. 3d 359, 394–401 (EDNY 2015).

According to Judge Baker, the cleanest Internet contracts involve “clickwrap” and “scrollwrap” agreements. “A ‘clickwrap’ agreement is an agreement in which an Internet user accepts the terms of use of a website by clicking on an ‘I accept’ or ‘I accept’ button, with a link to the agreement readily available A “scrollwrap” agreement is like a “clickwrap”, but the user is presented with the agreement and must physically scroll to the bottom to find the “I accept” or “I accept” button. WL 1010531, at *12 (citing Sellers, 289 Cal. Rptr. 3d to 15). According to Judge Baker, “the clickwrap and scrollwrap agreements are presumptively enforceable” under California law. ID. to *14.

Browsewrap chords are at the other end of the spectrum. “A ‘browsewrap’ agreement is an agreement in which an Internet user accepts the terms of use of a website simply by browsing the site.” ID. to *12 (quoting Sellers, 289 Cal. Rptr. 3d to 15). According to Judge Baker, “navigation agreements are unenforceable per se” under California law. ID. to *14.

“Connection envelopes” occupy the “grey area” in between. ID. to *14. “‘Sign-in wrap’ agreements are those in which a user registers to use an Internet product or service, and the registration screen indicates that acceptance of a separate agreement is required before the user can access the service. Although a link to the separate agreement is provided, users are not required to indicate that they have read the terms of the agreement before signing up. ID. to *12 (quoting Sellers, 289 Cal. Rptr. 3d to 15). According to Judge Baker, the “executory force [of sign-in wraps] requires a prominent text notice that completion of a transaction or registration signifies consent to the site’s terms and conditions. Whether such a notice is sufficiently visible will depend on the transactional context, the size of the notice in relation to other text on the site, the proximity of the notice to the relevant button or box on which the user must click to complete the transaction or register for the service, and whether the hyperlinks in the notice are easily identifiable. ID. to *14.

Categorizing the Internet contract at issue as a “loopback”, Judge Baker agreed with the majority that the contract was unenforceable because (among other reasons) the website’s notice of the contract terms was “insufficiently conspicuous” and ” confusingly placed” on the website. ID. at *15-16.

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