Zappos Lawsuit: “Browsewrap” Agreement Unenforceable

Zappos.com, owned by Amazon, is a large online retailer of shoes, clothing, and accessories.  In early 2012, Zappos announced that the company had suffered a major security breach when a successful cyber attack exposed  24 million customers’ information.  Consequently, these customers began filing lawsuits to recover damages resulting from the security breach.

Zappos, relying on the arbitration provision in its Terms of Use argued that these lawsuits were improper.  According to the Terms of Use, customers agreed to settle any disputes with Zappos in a binding arbitration proceeding in Nevada.  

However, the U.S. District Court in Nevada recently held that the Zappos customers never agreed to the Terms of Use.  See In re Zappos.com, Customer Data Sec. Breach Litig., 893 F. Supp. 2d 1058 (D. Nev. 2012).  Zappos included a link to the Terms of Use on each page, but the link was in the same font and color as the rest of the page and did nothing compel users to view or agree to its terms.  This type of online contract has been termed a “browsewrap” agreement, which purports to bind the user of the website to the terms of use without requiring the user to ever indicate his or her assent to the terms or even view the terms. In contrast, a “clickwrap” or “clickthrough” agreement requires that the customer click a button or perform some other affirmative act to indicate that he or she has read and agrees to the terms of the contract.  

There has been some debate over whether these “browsewrap” agreements are enforceable.  For example, in December 2009, a Missouri court held that a similar “browsewrap” agreement was enforceable in Major v. McCallister, 302 S.W.3d 227.  Some critics also question whether the Zappos ruling might have been different if the issue at hand had been less impactful than forcing 24 million customers to individually arbitrate in Nevada.  Regardless, the Zappos case should serve as a warning to online businesses against relying on “browsewrap” agreements. “[T]he advent of the Internet has not changed the basic requirements of a contract, and there is no agreement where there is no acceptance, no meeting of the minds, and no manifestation of assent. A party cannot assent to terms of which it has no knowledge or constructive notice, and a highly inconspicuous hyperlink buried among a sea of links does not provide such notice. Because Plaintiffs did not assent to the terms, no contract exists, and they cannot be compelled to arbitrate.” In re Zappos.com, 893 F. Supp. 2d at 1066.

Properly implemented “clickthrough” agreements are generally enforceable and incredibly simple to implement.  For example, at the checkout stage, Zappos could have included a link to the Terms of Use with a statement saying that clicking the purchase button indicated that the customer had read those Terms of Use.  Another example would be to insert a check box next to a link to the contract terms and refuse to allow a purchase to go through unless the box has been checked.

Note:  The District Court also held that the Zappos arbitration provision was illusory because in another provision Zappos reserved the unilateral right to amend the Terms of Use at any time.

Sources:

http://www.forbes.com/sites/ericgoldman/2012/10/10/how-zappos-user-agreement-failed-in-court-and-left-zappos-legally-naked/2/

http://www.austintechnologylawblog.com/2013/08/articles/zappos-gets-zapped-browsewrap-agreements-are-collateral-damage/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+AustinTechnologyLawBlog+%28Austin+Technology+Law+Blog%29

http://www.austintechnologylawblog.com/2010/03/articles/browsewrap-agreements/browsewrap-agreements-the-contract-you-never-see/

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s