When Legal Spam Isn't Spam

Did you recently receive an e-mail demanding that you 'Visit our Web site for an important change in your account terms' (as was stated in a recent message not long ago from a cell-phone service provider)?

Certainly that doesn't seem like the typical spyware or spam message that urges you to 'Click here' for money or prizes, does it? An 'important change in account terms' just doesn't have the sex appeal of a lottery prize, a vacation, a starlet in some stage of undress, or any of the many e-mail come-ons that clutter everyone's Inboxes today. In fact, it isn't even a user-friendly solicitation ' there is no long link of numbers and letters to click on to see the notice; instead, the recipient must independently locate the Web site address. Once on the site, he or she must find the 'terms and conditions' announcement to read and ' if he or she gets that far ' understand it. All this is unlike the typical virus or Trojan horse, when all it takes is a single unwary click to launch a nefarious program.

Yet these demands for consumer 'extra effort' from Web merchants or service providers could become very common after a mid-2007 federal court ruling ' Douglas v. Talk America, Inc., No. 06-75424 (Ninth Cir., July 18, 2007). In that case, a federal appeals court considered what it labeled an 'issue ' of some significance, (which) potentially affects the relationship of numerous service providers with millions of customers: ' whether to enforce a modified contract with a customer where the customer claims that the only notice of the changed terms consisted of posting the revised contract on the provider's Web site.'

Offline, the identical question would seem easy to answer. Who hasn't regularly received fine-print notices of a change in terms from a credit-card company or financial institution, the effectiveness of which no one would dispute? The online equivalent ' without the cost of printing and mailing many notice forms, and without the delay for the time to do so ' would seem to be the relatively inexpensive method chosen by Talk America: a Web site posting.

Yet the court required the vendor to do more, and specifically refused to apply the traditional 'paper notice' rules to an electronic notice. The court first cited (and distinguished) real-world cases in which a customer 'received notice of the modified contract by mail,' or had received notice that 'she could see the contract terms online or call the service provider to learn of the terms.' In contrast, the Douglas court complained that the customer 'could only have become aware of the new terms if he had visited Talk America's Web site and examined the contract for possible changes. Even if Douglas had visited the Web site, he would have had no reason to look at the contract posted there. Parties to a contract have no obligation to check the terms on a periodic basis to learn whether they have been changed by the other side.' (Emphasis added.)

Moreover, in a footnote reminiscent of the 'visit our Web site' e-mail warning described above, the court criticized the impracticality of a unilateral Web site contract amendment, even if the customer continued to use the service after the change (and therefore could be deemed to have implicitly agreed to the change): 'Nor would a party know when to check the Web site for possible changes to the contract terms without being notified that the contract has been changed and how. Douglas would have had to check the contract every day for possible changes. Without notice, an examination would be fairly cumbersome, as Douglas would have had to compare every word of the posted contract with his existing contract in order to detect whether it had changed.' (Emphasis in original.)

Click, or Not;
It Might Not Matter

The Douglas ruling clearly has great implications for e-commerce businesses that rely on such common devices as click-through, clickwrap or browsewrap agreements to establish the terms of service, and who must make changes (such as in address or interest rate), in a world where no physical product exists to carry a traditional shrinkwrap license (see, http://en.wikipedia.org/wiki/Clickwrap). Clearly, after Douglas, simply posting changes online will not be enough to let the vendor enforce them against the customer. Since the question of enforceability will arise only in a dispute, ensuring the effectiveness of the typical types of changes that may occur ' changes to fees or service levels, or seeming boilerplate, such as arbitration or choice of law clauses, becomes critical, because those changes will affect how the dispute will be settled and, if necessary, where a case must be brought.

But Douglas is also typical of a change brewing in Internet law. In the late 1990s, when e-commerce was new and was going to 'change everything,' many KBs of data were spilled speculating whether courts would uphold any business done online. With 20/20 hindsight, however, we see that that concern was clearly misplaced, if not silly. After all, if attorneys had no qualms about the validity of contracts created by fax all the way back in the ancient 1980s, how were contracts negotiated by e-mail, or formed through Web-browser transactions, really any different? While basic contract-formation questions could arise, and would have to be disputed in court (e.g., Who signed? What did they sign? Did anyone actually agree?), those questions also often arose even in paper-and-ink contracts. Now that the legal basis for e-commerce is no longer in doubt, the Douglas amendment and notice issue about how an online contract of adhesion (see, http://dictionary.law.com/definition2.asp?selected=2325) may be amended is typical of today's e-commerce 'contract legality' cases arising with greater frequency. It seems only natural that this trend would follow the trend of e-commerce's explosive growth and, like the tumultuous development of traditional common law, the cases don't always reach the same results.

For example, in Cohn v True-beginnings, LLC (California Court of Appeals, No. BC355082, July 31, 2007 (not certified for publication)), the court upheld the increasingly common practice of requiring a click to agree to terms available through one or more hyperlinks from the same page. 'Respondents presented substantial evidence that appellant had to click on the 'continue' button in order to register for his trial membership on the Web site, and that doing so constituted an agreement to the 'Terms of Use' on the Web site. Appellant may not have read the 'Terms of Use,' but they were readily available to him on the True.com Web site if he clicked on the 'Terms of Use' link near the 'Continue' button. Under these circumstances, where appellant obviously had access to the Internet and was entering into a contract on the Internet, there was nothing inherently unfair in requiring him to access contractual terms via hyperlink, which is a common practice in Internet businesses.' (See, http://pub.bna.com/eclr/b190423.pdf.)

In another ruling this year concerning the subject of how to incorporate terms by reference from a Web page, a federal trial court in Michigan refused to uphold an arbitration clause ' in Manasher v. NECC Telecom, No. 06-CV-10749 (E.D. Mich. Sept. 18, 2007, online at http://pub.bna.com/eclr/06cv10749_091807.pdf). The court's criticisms of the incorporation-by-reference procedure included its view that the hyperlink to the online arbitration terms was not conspicuous (it was the last of five statements on the second page of the vendor's invoice), and that it was not mentioned elsewhere in the sale process; therefore, the court ruled, the amendment did not 'clearly indicate' that the terms would be incorporated by reference into the contract. Instead, the court said, they 'merely informed the reader' of where those terms could be found, which the court felt did not meet the traditional contract-law standards for such incorporation by reference.

'The second page of the invoice has five boxes containing five statements. The titles of the five statements are: (1) Recurring Fee; (2) Referral Discount 5%; (3) Preferred Customer Plan PCP, Standard Customer Plan SCP; (4) Rates; and (5) Agreement (Disclosure and Liabilities). The fifth box, containing the statement regarding the Disclosure and Liabilities is at issue. The statement providing 'NECC's Agreement Disclosure and Liabilities can be found online at www.necc.us or you could request a copy by calling us at (800) 766 2642. ' By subscribing to our Services, you are agreeing to abide by the terms and conditions of this Agreement. If you are an existing customer, your continued use of or subscription to our Services represents your acceptance of these terms and conditions of service. If you do not agree to the terms and conditions set forth in this Agreement, please contact us prior to using our Services or as soon as possible thereafter, and cancel your subscription by notifying us at our toll-free customer service number (800) 766-2642. NECC will terminate your ability to make calls using our Service; however, you must make arrangements to switch to a new telephone company for continued long distance service.” (Emphasis added.)

Of equal (and perhaps greater) interest to the e-commerce contract drafter, however, is the court's discussion of several other recent cases that have upheld similar online-contract links ' and how they succeeded where NECC's contract failed. In Treiber & Straub, Inc. v. United Parcel Service, Inc., 474 F.3d 379 (Seventh Cir. 2007), the court relied on the fact that the customer affirmatively had to click two times to agree to the terms and conditions. In Briceno v. Sprint Spectrum, L.P., 911 So.2d 176 (Fla. App. 2005), the court emphasized that the full terms had been provided to the customer, several times, and that a warning about them was given prominently on the first page of an invoice. (The issue in that case also was one of unconscionability, a much lower standard for the drafter to meet than the test of incorporation by reference at issue in Manasher.) In the third case cited by the court, Hugger-Mugger, LLC v. Netsuite, Inc., (No. 2:04-CV-592 TC, D. Utah 2005), the provisions at issue were explicitly incorporated directly into the contract.

But another court's 2005 ruling cited similar factors in upholding an arbitration clause in an online agreement, even without a specific requirement to click 'I agree' for the terms and conditions. That court instead relied on the extensive disclosure given at the seller's Web site, and the fact that the buyer was sophisticated enough to purchase online.

'The blue hyperlink entitled 'Terms and Conditions of Sale' appeared on numerous Web pages the plaintiffs completed in the ordering process. The blue hyperlinks for the 'Terms and Conditions of Sale' also appeared on the defendant's marketing Web pages, copies of which the plaintiffs attached to their complaint. The blue hyperlinks on the defendant's Web pages, constituting the five-step process for ordering the computers, should be treated the same as a multipage written paper contract. The blue hyperlink simply takes a person to another page of the contract, similar to turning the page of a written paper contract. Although there is no conspicuousness requirement, the hyperlink's contrasting blue type makes it conspicuous. Common sense dictates that because the plaintiffs were purchasing computers online, they were not novices when using computers. A person using a computer quickly learns that more information is available by clicking on a blue hyperlink.' Hubbert v. Dell Corp., 2005 Ill. App. LEXIS 808 (Aug. 12, 2005).

A different formation issue arose in a 2007 case that involved a clearly spurious claim for breach of contract by a spurned academic author. The plaintiff had responded to a solicitation for 'news tips' that would be 'investigated for suitability as a news item ' or perhaps even an article' in a scientific journal. The plaintiff's manuscript was rejected. The court harshly rejected his claim that the solicitation was an offer for a contract to publish all submissions. 'Quite simply, the Court finds that the advertisement for 'news tips' on the ScienceNOW Web site cannot be construed as an offer, nor did it in any way create a unilateral contract. ' The Court finds no distinction requiring a different analysis or result merely because the advertisement was soliciting ideas (i.e., 'news tips') rather than goods, or because it was communicated over the Internet as opposed to through television, radio or newspaper advertisement.' (Emphasis added.) Trell vs. American Association of the Advancement of Science, et. al. No. 04-CV-0030E(Sr), W.D. NY (2007).

Looking for Basics
In Clicks and Screens

I suspect that many similar cases may be available to examine online, or are working their way through the judicial pipeline. I've cited those listed above not because they are exceptional, but because they are typical of the interpretive disputes that now arise in the normal ebb and flow of e-commerce litigation, now that the fundamental legal basis of electronic and online contracts has been settled. In each of these cases, the court was applying traditional rules of Contracts 101, in an unfamiliar setting, to see whether the parties had actually agreed on terms ' or even knew what they were ' in a world in which face-to-face (or even human-to-human) interaction never occurred. As a result, the court must divine 'intent' and 'agreement' from a pattern of clicks, and the screens that engendered them. Clearly, the answers in each case depended on the particular terms of each contract, as well as on the facts of each dispute ' the equities of a particular decision may not lead to the best overall rule for future cases. Given the way the common law of contracts developed in the past with paper contracts, there is no reason to expect anything different in the Electronic Age. As a result, imposing order or logic on the cases to provide rules for drafting future contracts cannot give certainty or comfort to anyone.

Nonetheless, even though a checklist of black-letter rules on creating an enforceable online e-commerce agreement may not be possible, several organizations have created their lists of 'best practices' that will put anyone who relies on them in a good position to succeed in any disputes or litigation. The earliest version was the FTC's 'Dot Com Disclosures' (www.ftc.gov/bcp/conline/pubs/buspubs/dotcom/), a 2000 explanation of how the FTC would apply its traditional advertising rules to the then-burgeoning e-commerce marketplace. At that time, the FTC put emphasis on the general principle of 'clear and conspicuous' disclosure of terms. That principle remains valid, and, indeed, was cited in many of the cases listed above. Of course, to paraphrase a clich', both 'clear' and 'conspicuous' are in the eyes of the beholder, and may look very different to a Web retailer trying to attract browsers and to compete in a highly competitive marketplace than the terms might look to a customer who feels wronged.

In mid-2007, however, the American Bar Association's Cyber- space Law Committee presented a seminar on the state of the art in Web site contracts, titled 'I Didn't Agree to Those Terms, Did I?' (www.abanet.org/media/youraba/200708/webterms_08.html). As summarized at the Web site, the committee's conclusion provided no more certainty for e-commerce firms (http://aba-cyberspace.blogspot.com/2007/08/committee-forum-website-agreements-i.html): 'The cases are still in flux, but we see trends that tell us that principles of 'notice' and basic fairness still apply,' the committee notes state. Interestingly, but consistent with pre-Internet and pre-e-commerce case law, the committee specifically states in its presentation: 'As in paper transactions, (the) User need not actually read the terms, nor does (the) User have be to be able to negotiate the terms.'

Some Keys to Unlocking the Answer

The committee made several key recommendations for online contracts, resonant of the case law discussions above, and that were explained in greater detail in the materials from that program and that are available online at www.abanet.org/buslaw/newsletter/0064/materials/pp2.pdf. Some of the key recommendations follow:

• The user must get 'adequate notice' that the proposed terms exist (unlike, for example, the 'hidden' notice in the Douglas case);
• The user must get a 'meaningful opportunity to review the terms';
• The user must get 'adequate notice' that taking a specified but optional action manifests assent to those terms; and
• The user must take that action.

The analysis of each of these points then went into detail about the specific contract terms discussed by the courts, such as:

• Physical presentation and visibility;
• Placement and timing of the notice; and
• The effective blocking of software and 'pop up' boxes with contract terms and agreement buttons.

From an evidentiary viewpoint ' being able to prove that the customer did 'agree,' should a dispute arise ' the committee also recommended that e-commerce firms retain 'old versions' of the Web site, and that the customer's assent to the online terms be affirmative, rather than by 'silence or inaction.'

I Think It's Only Fair

Certainly, the pronouncements of an ABA committee will not limit or determine what courts will do in live cases, especially when those cases are a battle between large vendors on one side, with contracts written by expensive lawyers who read newsletters like this one, and individual customers who feel they have been wronged and were able to convince a lawyer to take the case. But nonetheless, the combination of the developing case law and the professional commentary should remind anyone drafting an e-commerce contract of the overarching importance of the two principles identified by the ABA committee: notice and fairness. If an e-commerce vendor wants its contract to be honored in court, it should draft it to be fair, and not with the killer instinct used to craft a corporate-takeover agreement or proxy-fight solicitation.

To paraphrase the timeless advice of Forrest Gump's Mama, 'Fairness is as fairness does,' a court can be 'fair' only if the e-commerce contract before it is fair itself to begin with. Perhaps recent e-commerce converts The Beatles (see, www.reuters.com/article/internetNews/idUSN1531275020071115) put it even better: 'The love you take is equal to the love you make.' When courts are willing to enforce even harsh contract terms (as in the bricks-and-mortar and paper worlds) because 'nothing is inherently unfair,' then attention to fairness and notice in the way an e-commerce contract is presented and drafted has become as important online as the law itself.

Did you recently receive an e-mail demanding that you 'Visit our Web site for an important change in your account terms' (as was stated in a recent message not long ago from a cell-phone service provider)?

Certainly that doesn't seem like the typical spyware or spam message that urges you to 'Click here' for money or prizes, does it? An 'important change in account terms' just doesn't have the sex appeal of a lottery prize, a vacation, a starlet in some stage of undress, or any of the many e-mail come-ons that clutter everyone's Inboxes today. In fact, it isn't even a user-friendly solicitation ' there is no long link of numbers and letters to click on to see the notice; instead, the recipient must independently locate the Web site address. Once on the site, he or she must find the 'terms and conditions' announcement to read and ' if he or she gets that far ' understand it. All this is unlike the typical virus or Trojan horse, when all it takes is a single unwary click to launch a nefarious program.

Yet these demands for consumer 'extra effort' from Web merchants or service providers could become very common after a mid-2007 federal court ruling ' Douglas v. Talk America, Inc., No. 06-75424 (Ninth Cir., July 18, 2007). In that case, a federal appeals court considered what it labeled an 'issue ' of some significance, (which) potentially affects the relationship of numerous service providers with millions of customers: ' whether to enforce a modified contract with a customer where the customer claims that the only notice of the changed terms consisted of posting the revised contract on the provider's Web site.'

Offline, the identical question would seem easy to answer. Who hasn't regularly received fine-print notices of a change in terms from a credit-card company or financial institution, the effectiveness of which no one would dispute? The online equivalent ' without the cost of printing and mailing many notice forms, and without the delay for the time to do so ' would seem to be the relatively inexpensive method chosen by Talk America: a Web site posting.

Yet the court required the vendor to do more, and specifically refused to apply the traditional 'paper notice' rules to an electronic notice. The court first cited (and distinguished) real-world cases in which a customer 'received notice of the modified contract by mail,' or had received notice that 'she could see the contract terms online or call the service provider to learn of the terms.' In contrast, the Douglas court complained that the customer 'could only have become aware of the new terms if he had visited Talk America's Web site and examined the contract for possible changes. Even if Douglas had visited the Web site, he would have had no reason to look at the contract posted there. Parties to a contract have no obligation to check the terms on a periodic basis to learn whether they have been changed by the other side.' (Emphasis added.)

Moreover, in a footnote reminiscent of the 'visit our Web site' e-mail warning described above, the court criticized the impracticality of a unilateral Web site contract amendment, even if the customer continued to use the service after the change (and therefore could be deemed to have implicitly agreed to the change): 'Nor would a party know when to check the Web site for possible changes to the contract terms without being notified that the contract has been changed and how. Douglas would have had to check the contract every day for possible changes. Without notice, an examination would be fairly cumbersome, as Douglas would have had to compare every word of the posted contract with his existing contract in order to detect whether it had changed.' (Emphasis in original.)

Click, or Not;
It Might Not Matter

The Douglas ruling clearly has great implications for e-commerce businesses that rely on such common devices as click-through, clickwrap or browsewrap agreements to establish the terms of service, and who must make changes (such as in address or interest rate), in a world where no physical product exists to carry a traditional shrinkwrap license (see, http://en.wikipedia.org/wiki/Clickwrap). Clearly, after Douglas, simply posting changes online will not be enough to let the vendor enforce them against the customer. Since the question of enforceability will arise only in a dispute, ensuring the effectiveness of the typical types of changes that may occur ' changes to fees or service levels, or seeming boilerplate, such as arbitration or choice of law clauses, becomes critical, because those changes will affect how the dispute will be settled and, if necessary, where a case must be brought.

But Douglas is also typical of a change brewing in Internet law. In the late 1990s, when e-commerce was new and was going to 'change everything,' many KBs of data were spilled speculating whether courts would uphold any business done online. With 20/20 hindsight, however, we see that that concern was clearly misplaced, if not silly. After all, if attorneys had no qualms about the validity of contracts created by fax all the way back in the ancient 1980s, how were contracts negotiated by e-mail, or formed through Web-browser transactions, really any different? While basic contract-formation questions could arise, and would have to be disputed in court (e.g., Who signed? What did they sign? Did anyone actually agree?), those questions also often arose even in paper-and-ink contracts. Now that the legal basis for e-commerce is no longer in doubt, the Douglas amendment and notice issue about how an online contract of adhesion (see, http://dictionary.law.com/definition2.asp?selected=2325) may be amended is typical of today's e-commerce 'contract legality' cases arising with greater frequency. It seems only natural that this trend would follow the trend of e-commerce's explosive growth and, like the tumultuous development of traditional common law, the cases don't always reach the same results.

For example, in Cohn v True-beginnings, LLC (California Court of Appeals, No. BC355082, July 31, 2007 (not certified for publication)), the court upheld the increasingly common practice of requiring a click to agree to terms available through one or more hyperlinks from the same page. 'Respondents presented substantial evidence that appellant had to click on the 'continue' button in order to register for his trial membership on the Web site, and that doing so constituted an agreement to the 'Terms of Use' on the Web site. Appellant may not have read the 'Terms of Use,' but they were readily available to him on the True.com Web site if he clicked on the 'Terms of Use' link near the 'Continue' button. Under these circumstances, where appellant obviously had access to the Internet and was entering into a contract on the Internet, there was nothing inherently unfair in requiring him to access contractual terms via hyperlink, which is a common practice in Internet businesses.' (See, http://pub.bna.com/eclr/b190423.pdf.)

In another ruling this year concerning the subject of how to incorporate terms by reference from a Web page, a federal trial court in Michigan refused to uphold an arbitration clause ' in Manasher v. NECC Telecom, No. 06-CV-10749 (E.D. Mich. Sept. 18, 2007, online at http://pub.bna.com/eclr/06cv10749_091807.pdf). The court's criticisms of the incorporation-by-reference procedure included its view that the hyperlink to the online arbitration terms was not conspicuous (it was the last of five statements on the second page of the vendor's invoice), and that it was not mentioned elsewhere in the sale process; therefore, the court ruled, the amendment did not 'clearly indicate' that the terms would be incorporated by reference into the contract. Instead, the court said, they 'merely informed the reader' of where those terms could be found, which the court felt did not meet the traditional contract-law standards for such incorporation by reference.

'The second page of the invoice has five boxes containing five statements. The titles of the five statements are: (1) Recurring Fee; (2) Referral Discount 5%; (3) Preferred Customer Plan PCP, Standard Customer Plan SCP; (4) Rates; and (5) Agreement (Disclosure and Liabilities). The fifth box, containing the statement regarding the Disclosure and Liabilities is at issue. The statement providing 'NECC's Agreement Disclosure and Liabilities can be found online at www.necc.us or you could request a copy by calling us at (800) 766 2642. ' By subscribing to our Services, you are agreeing to abide by the terms and conditions of this Agreement. If you are an existing customer, your continued use of or subscription to our Services represents your acceptance of these terms and conditions of service. If you do not agree to the terms and conditions set forth in this Agreement, please contact us prior to using our Services or as soon as possible thereafter, and cancel your subscription by notifying us at our toll-free customer service number (800) 766-2642. NECC will terminate your ability to make calls using our Service; however, you must make arrangements to switch to a new telephone company for continued long distance service.” (Emphasis added.)

Of equal (and perhaps greater) interest to the e-commerce contract drafter, however, is the court's discussion of several other recent cases that have upheld similar online-contract links ' and how they succeeded where NECC's contract failed. In Treiber & Straub, Inc. v. United Parcel Service, Inc. , 474 F.3d 379 (Seventh Cir. 2007), the court relied on the fact that the customer affirmatively had to click two times to agree to the terms and conditions. In Briceno v. Sprint Spectrum, L.P. , 911 So.2d 176 (Fla. App. 2005), the court emphasized that the full terms had been provided to the customer, several times, and that a warning about them was given prominently on the first page of an invoice. (The issue in that case also was one of unconscionability, a much lower standard for the drafter to meet than the test of incorporation by reference at issue in Manasher.) In the third case cited by the court, Hugger-Mugger, LLC v. Netsuite, Inc., (No. 2:04-CV-592 TC, D. Utah 2005), the provisions at issue were explicitly incorporated directly into the contract.

But another court's 2005 ruling cited similar factors in upholding an arbitration clause in an online agreement, even without a specific requirement to click 'I agree' for the terms and conditions. That court instead relied on the extensive disclosure given at the seller's Web site, and the fact that the buyer was sophisticated enough to purchase online.

'The blue hyperlink entitled 'Terms and Conditions of Sale' appeared on numerous Web pages the plaintiffs completed in the ordering process. The blue hyperlinks for the 'Terms and Conditions of Sale' also appeared on the defendant's marketing Web pages, copies of which the plaintiffs attached to their complaint. The blue hyperlinks on the defendant's Web pages, constituting the five-step process for ordering the computers, should be treated the same as a multipage written paper contract. The blue hyperlink simply takes a person to another page of the contract, similar to turning the page of a written paper contract. Although there is no conspicuousness requirement, the hyperlink's contrasting blue type makes it conspicuous. Common sense dictates that because the plaintiffs were purchasing computers online, they were not novices when using computers. A person using a computer quickly learns that more information is available by clicking on a blue hyperlink.' Hubbert v. Dell Corp., 2005 Ill. App. LEXIS 808 (Aug. 12, 2005).

A different formation issue arose in a 2007 case that involved a clearly spurious claim for breach of contract by a spurned academic author. The plaintiff had responded to a solicitation for 'news tips' that would be 'investigated for suitability as a news item ' or perhaps even an article' in a scientific journal. The plaintiff's manuscript was rejected. The court harshly rejected his claim that the solicitation was an offer for a contract to publish all submissions. 'Quite simply, the Court finds that the advertisement for 'news tips' on the ScienceNOW Web site cannot be construed as an offer, nor did it in any way create a unilateral contract. ' The Court finds no distinction requiring a different analysis or result merely because the advertisement was soliciting ideas (i.e., 'news tips') rather than goods, or because it was communicated over the Internet as opposed to through television, radio or newspaper advertisement.' (Emphasis added.) Trell vs. American Association of the Advancement of Science, et. al. No. 04-CV-0030E(Sr), W.D. NY (2007).

Looking for Basics
In Clicks and Screens

I suspect that many similar cases may be available to examine online, or are working their way through the judicial pipeline. I've cited those listed above not because they are exceptional, but because they are typical of the interpretive disputes that now arise in the normal ebb and flow of e-commerce litigation, now that the fundamental legal basis of electronic and online contracts has been settled. In each of these cases, the court was applying traditional rules of Contracts 101, in an unfamiliar setting, to see whether the parties had actually agreed on terms ' or even knew what they were ' in a world in which face-to-face (or even human-to-human) interaction never occurred. As a result, the court must divine 'intent' and 'agreement' from a pattern of clicks, and the screens that engendered them. Clearly, the answers in each case depended on the particular terms of each contract, as well as on the facts of each dispute ' the equities of a particular decision may not lead to the best overall rule for future cases. Given the way the common law of contracts developed in the past with paper contracts, there is no reason to expect anything different in the Electronic Age. As a result, imposing order or logic on the cases to provide rules for drafting future contracts cannot give certainty or comfort to anyone.

Nonetheless, even though a checklist of black-letter rules on creating an enforceable online e-commerce agreement may not be possible, several organizations have created their lists of 'best practices' that will put anyone who relies on them in a good position to succeed in any disputes or litigation. The earliest version was the FTC's 'Dot Com Disclosures' (www.ftc.gov/bcp/conline/pubs/buspubs/dotcom/), a 2000 explanation of how the FTC would apply its traditional advertising rules to the then-burgeoning e-commerce marketplace. At that time, the FTC put emphasis on the general principle of 'clear and conspicuous' disclosure of terms. That principle remains valid, and, indeed, was cited in many of the cases listed above. Of course, to paraphrase a clich', both 'clear' and 'conspicuous' are in the eyes of the beholder, and may look very different to a Web retailer trying to attract browsers and to compete in a highly competitive marketplace than the terms might look to a customer who feels wronged.

In mid-2007, however, the American Bar Association's Cyber- space Law Committee presented a seminar on the state of the art in Web site contracts, titled 'I Didn't Agree to Those Terms, Did I?' (www.abanet.org/media/youraba/200708/webterms_08.html). As summarized at the Web site, the committee's conclusion provided no more certainty for e-commerce firms (http://aba-cyberspace.blogspot.com/2007/08/committee-forum-website-agreements-i.html): 'The cases are still in flux, but we see trends that tell us that principles of 'notice' and basic fairness still apply,' the committee notes state. Interestingly, but consistent with pre-Internet and pre-e-commerce case law, the committee specifically states in its presentation: 'As in paper transactions, (the) User need not actually read the terms, nor does (the) User have be to be able to negotiate the terms.'

Some Keys to Unlocking the Answer

The committee made several key recommendations for online contracts, resonant of the case law discussions above, and that were explained in greater detail in the materials from that program and that are available online at www.abanet.org/buslaw/newsletter/0064/materials/pp2.pdf. Some of the key recommendations follow:

• The user must get 'adequate notice' that the proposed terms exist (unlike, for example, the 'hidden' notice in the Douglas case);
• The user must get a 'meaningful opportunity to review the terms';
• The user must get 'adequate notice' that taking a specified but optional action manifests assent to those terms; and
• The user must take that action.

The analysis of each of these points then went into detail about the specific contract terms discussed by the courts, such as:

• Physical presentation and visibility;
• Placement and timing of the notice; and
• The effective blocking of software and 'pop up' boxes with contract terms and agreement buttons.

From an evidentiary viewpoint ' being able to prove that the customer did 'agree,' should a dispute arise ' the committee also recommended that e-commerce firms retain 'old versions' of the Web site, and that the customer's assent to the online terms be affirmative, rather than by 'silence or inaction.'

I Think It's Only Fair

Certainly, the pronouncements of an ABA committee will not limit or determine what courts will do in live cases, especially when those cases are a battle between large vendors on one side, with contracts written by expensive lawyers who read newsletters like this one, and individual customers who feel they have been wronged and were able to convince a lawyer to take the case. But nonetheless, the combination of the developing case law and the professional commentary should remind anyone drafting an e-commerce contract of the overarching importance of the two principles identified by the ABA committee: notice and fairness. If an e-commerce vendor wants its contract to be honored in court, it should draft it to be fair, and not with the killer instinct used to craft a corporate-takeover agreement or proxy-fight solicitation.

To paraphrase the timeless advice of Forrest Gump's Mama, 'Fairness is as fairness does,' a court can be 'fair' only if the e-commerce contract before it is fair itself to begin with. Perhaps recent e-commerce converts The Beatles (see, www.reuters.com/article/internetNews/idUSN1531275020071115) put it even better: 'The love you take is equal to the love you make.' When courts are willing to enforce even harsh contract terms (as in the bricks-and-mortar and paper worlds) because 'nothing is inherently unfair,' then attention to fairness and notice in the way an e-commerce contract is presented and drafted has become as important online as the law itself.