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Ninth Circuit Clarifies Notice Requirements for
Browse-Wrap Agreements

August 28, 2014
David F. Katz , Daniel C. Lumm

A panel for the United States Court of Appeals for the Ninth Circuit recently held, in Nguyen v. Barnes & Noble, Inc.,[1] that a website user did not agree to Barnes & Noble’s website browse-wrap agreement, where the site failed to provide sufficient notice of its Terms of Use containing an arbitration clause. Specifically, the panel determined that a conspicuous hyperlink located at the bottom of every webpage near important navigational buttons and other hyperlinks, is insufficient to give rise to constructive notice where the website fails to otherwise provide notice of the agreement or require an affirmative user action to demonstrate assent. As a result, the Court held that the plaintiff did not enter into the site’s agreement and was therefore not required to arbitrate his case.

Fundamental Contract Principles Govern Online Agreements

Despite the fact that online commerce provides many new and novel ways to transact business, the underlying principles of contract remain unchanged and still require a mutual manifestation of assent. Online agreements typically come in one of two forms, “click-wrap” (or “click-through”) and “browse-wrap.” In the click-wrap context, a website user is presented with an agreement and required to take an affirmative action to demonstrate her assent, such as clicking a button or providing a digital signature. In a browse-wrap context, the agreement is available on a website, usually via hyperlink in a common section, like a footer, and the user can view its terms but is not required to do so in order to use to the website and be bound by those terms. While equally valid and perhaps more convenient to implement, browse-wrap agreements tend to be more difficult to enforce because a user’s assent must be inferred or implied as opposed to being demonstrated through an overt act.

Browse-Wrap Agreement Elements for Assent

Courts generally consider three closely-related elements of assent when determining the enforceability of a browse-wrap agreement: opportunity, notice, and demonstration. Opportunity is arguably the simplest and most straightforward of these elements and is often satisfied by making an agreement available for viewing on a website, usually via a hyperlink. However, opportunity becomes moot if a user is not aware of the agreement or otherwise put on notice that that certain conduct, such as continued use of a website or placement of an online order, will serve as implicit assent to website’s Terms of Use. Notice is critical because it provides the means by which a user can demonstrate assent. This element of notice can be provided in two forms, actual and constructive. The former involves a user having actual knowledge of an agreement, either through admission or explicit notification like a cease and desist letter. Courts consistently enforce browse-wrap agreements where the user has actual knowledge. Constructive notice is more difficult to establish and requires a more in-depth analysis.

Further Guidance Regarding Constructive Notice

The Ninth Circuit panel in Nguyen examines this constructive notice issue and provides helpful guidance regarding the factors and considerations used to determine whether a user assents to a browse-wrap agreement. The Court explains that the browse-wrap standard for notice in the absence of actual knowledge is whether the website puts a reasonably prudent user on inquiry notice of the agreement’s terms. Inquiry notice involves three general factors: conspicuousness and placement of “Terms of Use” hyperlinks, other notices given to users, and the website’s overall design. Specifically, the Court considered the location of Terms of Use hyperlinks on specific pages, proximity to other hyperlinks, whether agreement hyperlinks could be viewed without scrolling, and whether the website contained any form of explicit textual notice that continued use of the website constituted a manifestation of assent. While there is no specific formula for inquiry notice, the Court makes clear that the conspicuousness and placement of Terms of Use hyperlinks near other important links, like “shopping cart” or “check out” buttons, alone will not suffice.

In Nguyen, Barnes & Noble’s browse-wrap agreement involved Terms of Use hyperlinks displayed in contrasting, underlined, green typeface, at the bottom of every webpage in the online checkout process, often viewable without scrolling, and also in close proximity to other hyperlinks including those for the site’s “Copyright” and “Privacy Policy.” The Court held that these characteristics failed to provide constructive notice where the website did not provide any other form of notice or prompt users to make an affirmative action demonstrating assent. The Court further explained that website owners bear the burden to put users on notice of the terms to which they seek to bind those users and that users cannot be expected to “ferret out” hyperlinks to binding terms without receiving such notice.

Recommendations for Website Owners

As a matter of contract law, browse-wrap agreements will ultimately be analyzed under guidelines that may vary by state. For example, although the underlying contract principles will be the same, one state’s standard for what constitutes a “conspicuous” hyperlink may be different from that of another state. As such, the Nguyen decision will not necessarily become a national standard; however, it provides excellent guidance for establishing minimum notice requirements for website owners that choose to utilize browse-wrap agreements.

The bottom line is that website owners employing browse-wrap agreements should abide by the guidance set forth in Nguyen regardless of their jurisdiction. In addition to being a smart business practice by serving to minimize legal issues, employing Nguyen standards also helps ensure transparency regarding online agreements and helps promote user awareness for more informed assent. Website owners should avoid burying Terms of Use. Instead, they should ensure their sites provide easily-identifiable hyperlinks to their terms in logical locations on as many of their sites’ individual webpages as possible. Additionally, website owners should employ a clear form of notice, informing users that their continued use of the site serves as a demonstration of assent to its browse-wrap agreement. This can be accomplished with minimal disruption to the website’s design through a banner or something as simple as a “review terms” step or section in the checkout out process.

It is almost always the safer practice to err on the side of consumer protection. Courts have demonstrated a clear hesitation to enforce browse-wrap agreements against consumers and this position is unlikely to change. When utilizing browse-wrap agreements, website owners should consider – do users have an opportunity to view or access the site’s Terms of Use; are the terms easy to identify; is it clear to users that continued use of the site serves as a manifestation of assent? These simple considerations will greatly aid in keeping website owners and users on the same page and also in avoiding enforceability disputes.

[1] No. 12-56628, 2014 WL 4056549 (9th Cir. Aug. 18, 2014).

David Katz is a partner in Nelson Mullins Riley & Scarborough's Atlanta office where he leads the Privacy and Information Security Practice Group.

Daniel Lumm is an associate in the Columbia office of Nelson Mullins Riley & Scarborough LLP where he practices in the areas of corporate law, contracts, technology law, Internet and privacy law.

For more information on the Nelson Mullins privacy and security practice, click here.