It is a familiar issue. When should a consumer “be on the hook” for all of the terms and conditions in a company’s agreement accompanying its product or service?

The permeations relating to this problem are extensive. Are all of the terms buried in the fine print enforceable?  Does the consumer ignore such terms at his or her peril when the consumer fails to read the agreement?  Is it enough that the customer was given a chance to read the terms at the time of purchase? What manner or degree of consent is enough to bind the consumer to the letter of the written terms?  These are all problems of contract formation.  The question of acceptance of terms and conditions is especially tricky in the context of online commerce.

The California Court of Appeal (Second District) recently considered this issue as it relates to the “terms and conditions” or “terms of use” to which users are often asked to agree as part of an online purchase. The court’s decision in Long v. Provide Commerce, Inc., dealt with an appeal by Provide Commerce, Inc., the operator of ProFlowers.com.  See Long v. Provide Commerce, Inc. (Cal. Ct. App. Mar. 17, 2016) 2016 WL 1056555, at *1.  After a customer sued over an online purchase, the Internet-based flower purveyor sought to enforce a clause in the company’s “Terms of Use” that required its customer to arbitrate disputes, including a waiver of the right to a jury trial.

The type of online terms and conditions used by ProFlowers is often known as a “browsewrap” agreement. With that type of agreement, a user does not have to affirmatively click anything to signal his or her consent to the terms of the company’s written agreement.  Rather, “a user’s assent is inferred from his or her use of the website.” Long, supra, at *1.

At the time the plaintiff placed his order, the website’s “Terms of Use” could be found by clicking on a capitalized and underlined hyperlink at the bottom of each web page on the ProFlowers.com site. The court noted that the “hyperlink was displayed in what appears to have been a light green typeface on the website’s lime green background, and was situated among 14 other capitalized and underlined hyperlinks of the same color, font and size.” Long, supra, at *2.  The “Terms of Use” were also accessible by a hyperlink embodied in an email order confirmation, though the link was in small grey font toward the very bottom of the email and relatively obscured by other information and links.

The court observed that while Internet commerce presents new issues, it does not fundamentally alter the key requirement that for a party to be bound by a contractual provision, there must be a sufficient manifestation of consent. In the context of a “browsewrap” agreement, the courts have held that “the determination of the validity of the browsewrap contract depends on whether the user has actual or constructive knowledge of a website’s terms and conditions.” Long, supra, at *4 (quoting the federal Ninth Circuit Court of Appeal’s decision in Nguyen v. Barnes & Noble Inc. [(9th Cir. 2014) 763 F.3d 1171]).  In the absence of actual notice, the validity of the browsewrap agreement “turns on whether the website puts a reasonably prudent user on inquiry notice of the terms of the contract.” Id.

The court noted the elements that the courts have considered in deciding whether to conclude that a website design puts the user on sufficient notice of the company’s terms and conditions, including the proximity of the hyperlink (linking to the written terms) to the areas likely to be in view of the user as he or she interacts with the website and completes the transaction and whether the website design includes “something more to capture the user’s attention and secure her assent” to the terms and conditions. Long, supra, at *5.

Here, the court found that the hyperlinks and the overall design of the ProFlowers.com website failed to put a reasonably prudent Internet user on notice of the company’s Terms of Use. The court found that the placement, color, size and other qualities of the hyperlinks to the Terms of Use were too inconspicuous, relative to the overall website design.  Most of the user’s interactions were in a separate bright white box in the center of the page that contrasts sharply with the lime green background.  To find the Terms of Use hyperlinks on various pages, the user must look below the area that has the information fields and the buttons he or she must otherwise click to proceed with the transaction.  Even then, the hyperlinks themselves are buried below multiple other links and in a light green font that blends in with the lime green background of the website.

The lesson for the day is that conspicuousness means conspicuousness. If no affirmative user click is required demonstrating the user’s consent to the terms and conditions, the website design should ensure that a link to a terms and conditions page will be hard to miss.  The visual prominence of the link is key.  Avoid having the link situated in a submerged page (i.e., where the user must scroll down to see it).  Certainly avoid having the link be in a font difficult to distinguish from the webpage background.  The link should be in what one would expect to be the plain view of the user as he or she interacts with the site.

As is obvious from our many posts on the subject, we here at IP Legal Forum are big fans of the show “Silicon Valley.” That said, its season finale could have used more Jared Dunn (can we give him a spin-off already?), as well as some legal real-talk, both of which I present to you now:

Hooli’s employment contract, including the clause assigning Hooli IP rights, is entirely unenforceable because of a bad non-compete clause. 

Really?  Standard “boilerplate” clauses in contracts are standard for a reason: they are often absolutely necessary. And one such necessary boilerplate provision is a saving/severability clause. This provision essentially says, “If any part of this contract is void or unenforceable under the law, that part can be ignored, but the rest of this contract is still enforceable and binding on the parties.” These clauses are ubiquitous, so I find it extremely difficult to believe that Hooli, with its huge team of lawyers, failed to insert a severability clause into its employment contracts. If the contract didn’t include the provision, it looks like Hooli needs to hire new counsel, and Hooli’s old counsel should contact their malpractice carriers. If Hooli’s employment contract did, in fact, include a severability provision and the arbitrator ignored it, well, this leads me to my next issue with this episode…

Arbitrators gonna arbitr-hate, and Hooli accepts that without pursuing any further litigation.

As Gavin Belson found out the hard way, even if you think your case is a slam dunk, the decision to submit a matter to binding arbitration is always a risky one, as you generally have no recourse if the arbitrator screws up; even if the arbitrator’s decision is factually or legally flawed. Unlike a bad decision by a judge or jury, an arbitrator’s decision is final and the courts will not second guess the decision unless (A) the arbitration agreement expressly permits it, or (B) extreme circumstance, like fraud or misconduct by the arbitrator. Not having read the arbitration agreement here, it’s hard to know whether Hooli could have persuaded the court to disregard or set aside the arbitrator’s decision. Maybe Gavin ultimately thought it would have been futile, but given his arrogance and deep pockets, I’m surprised he, or his lawyers, didn’t even try.

Lessons to be learned:

-Make sure your contracts include the necessary “boilerplate” language, especially a saving/severability clause.

-Final binding arbitration is almost always final and binding, so when you draft your contract, think long and hard about whether you are ready for that kind of commitment.