CHICAGO -- "Always read the fine print" is sound advice, but it may not always be enough for businesses to enforce terms listed near the bottom of scrollable pages.
The U.S. Court of Appeals for the Seventh Circuit in Chicago in late March declined to enforce an arbitration provision in the case of Sgouros v. TransUnion Corp. Chief Judge Diane Wood ruled the “layout and the language of the site” did not provide the user with “reasonable notice that a click” would lead to arbitration assent.
"This is a highly contextual area of the law," said attorney Eric Pearson, senior counsel for Foley & Lardner in Milwaukee. "If other user agreements suffer from the same or similar flaws as those in Sgouros, those agreements aren’t likely to be enforceable. The key for companies is ensuring that the `layout and language of the site' provide the user with `reasonable notice' that a click manifests assent to the terms of an agreement. That’s a facts-and-circumstances type of determination. Sgouros is valuable, because it’s an illustration of what not to do."
Sgouros sued TransUnion over a credit score package he had purchased, claiming that the score TransUnion provided was too high and useless in his negotiations to purchase a car. The district court denied TransUnion's motion to require arbitration.
The dispute centered on a web page that asked Sgouros for an account user name, password and credit card information. The arbitration wording was included in a service agreement on page eight of the 10-page document. A hyperlink to a printable version of the agreement was at the bottom of the page.
According to the court:
• The site did not call the user's attention to the arbitration position in any other way.
• The site did not require the user to scroll to the bottom of the window or to first click on the scroll box.
• It was not clear that the purchase "was subject to any terms and conditions of sale".
• The term "Service Agreement" said nothing "about what the term regulated".
• The bold-faced paragraph was merely an authorization.
The result may have been different if the defendant had “plac[ed] the agreement, or a scroll box containing the agreement, or a clearly labeled hyperlink to the agreement, next to an ‘I Accept’ button that unambiguously pertains to that agreement," the court said. It added that the scrollable window is not, “in itself, sufficient for the creation of a binding contract.”
Pearson said there are ways other companies can avoid the pitfalls that tripped up TransUnion in Sgouros' lawsuit.
"A separate button explicitly stating that the user has read the document in full might do the trick," Pearson said. "But the better and safer solution would be to take the court’s suggestion of placing the agreement, a scroll box containing the agreement or even a clearly labeled hyperlink to the agreement next to an “I Accept' button that unambiguously relates to that agreement."
If nothing else, he said, businesses need to review their web contract language to make sure it is user-friendly and unambiguous
"Businesses should review their digital contracts or user agreements in light of the court’s analysis in Sgouros," Pearson said. "The case doesn’t represent a sea change in the law; the principles governing digital contracts remain the same. Many businesses might find that their agreements don’t require any change at all after this decision. But Sgouros is an important illustration, in a highly contextual area of law, of how one company failed to establish a binding agreement. Others should ensure that their agreements don’t contain the same or similar flaws."