Web Site Terms and Conditions

It was Henry Ford, not Marlon Brando or Don Corleone, who once famously said: “The customer can have any color he wants so long as it's black.”

Unfortunately for e-commerce buyers, however, the rules imposed on them by the fine print and deep links usually known as “Terms and Conditions” often leave as little room to negotiate as early Ford buyers once had.

“No deal” is never an option to click on to spur further negotiation when a Web site requires a customer to agree to its Terms and Conditions ' if the customer ever gets such an option (a relative rarity today, as will be discussed below). Instead, an unhappy buyer's only choices are to take his or her business elsewhere, buy offline or just walk away. Even worse, it's a frequent occurrence that the terms a buyer must take, and cannot leave, are far from what he or she would have negotiated, if he or she could have done so. As one scholar recently noted:

But how likely are you to (bargain) over arbitration clauses, choice of law and forum clauses, limitations on consequential damages and items '? And if an audience of law review readers is unlikely to shop these terms, what possible chance is there that non-lawyers will do so? When we move into the twenty-first century and consider the intellectual property arcana included in the typical EULA (End User License Agreement) attached to software that you can't install without clicking on the “Accept” button, the concept of buyers shopping adhesion contract terms becomes ludicrous. (See, Professor Peter Linzer, Symposium: The Enduring Legacy of Wood v. Lucy, Lady Duff-Gordon, 28 Pac L. Review 161-454 (2008). Article: “Implied,” “Inferred,” and “Imposed”: Default Rules and Adhesion Contracts ' the Need for Radical Surgery,” 28 Pace L. Rev. 195, 204-205 (2008).)

In my prior articles on e-commerce Web site terms and conditions (see, “What Your Terms and Conditions Tell Customers,” in the October edition of e-Commerce Law & Strategy; and “I Signed WHAT?!”, in the July edition of e-Commerce Law & Strategy), I examined that boilerplate at the “micro” level, by pointing out particular clauses in actual use that seemed to contradict the business and marketing goals of the site owners. In fact, courts have struck down many of the more aggressive provisions, on an inconsistent basis, on such legal doctrines as unconscionability under Uniform and Commercial Code (“UCC”) Section 2-302, or in a traditional UCC “battle of the forms” under UCC Section 2-207.

I Agree?

But those articles did not address the “macro” question: whether these non-negotiable forms (that are often difficult to find) are enforceable in the first place, especially since many do not even require a click to accept. In other words, how can a customer who did not click “I agree” be bound to legal rules that he or she did not sign, and that he or she may have seen only through a link on the Web site? Was there ever an “agreement” between the e-commerce seller and the e-commerce shopper?

As e-commerce has grown, these contracts have evolved from the original software “shrinkwrap” (opening the package is deemed acceptance of the rules) to “clickwrap” (the customer had to click to agree to terms before proceeding with the transaction) to simply “browsewrap” (using the Web site is deemed to be the customer's agreement to disclosed terms). At each stage, however, the customer had to do less to be legally bound to the non-negotiable terms. (For a more detailed discussion of the case law leading to the enforceability of these types of contracts, beginning with ProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996) and Specht v. Netscape Communications Corp., 306 F.3d 17 (2d Cir. 2002), see, “After the Battle of the Forms: Commercial Contracting in the Electronic Age,” by Francis J. Mootz, III, in 4 ISJLP 271, 280-293 (2008).)

A more recent hybrid variant attempts to give the conservative transactional attorney the comfort of relying on a traditional signature, the “sign wrap.” Described by Professor Mootz as “a variation on the doctrine of incorporation by reference, (t)he sign-wrap situation occurs when parties execute a written agreement that includes a notice that the terms of the agreement include standard terms that are posted at a designated URL. Although the parties are dealing with a paper contract, the referenced 'standard terms and conditions' reside only in cyberspace. Unlike the traditional form contract that presented the standard terms and conditions on the back of the document, the sign-wrap approach permits a party to obtain a signature on a form that contains the agreed material terms and a reference to a URL that purports to incorporate those standard terms into the agreement, despite the other party's potential ignorance of their existence.” 4 ISJLP 271, 287.

A Matter of Form(s)

The same questions, surely, could have been (and were) asked for many years about pre-printed boilerplate found on most credit-card applications, purchase orders, invoices and in the fine print at the end of glossy mail-order catalogs ' yet most of us would not try to avoid paying a credit-card bill by challenging whether a contract to pay existed. For quite some time, courts (and attorneys advising their clients) have routinely upheld these “contracts of adhesion,” almost without regard to the fairness of their terms ' or the process by which they came into force. Typically, courts have held that a contract is not void solely because it is a contract of adhesion, or was not negotiated; instead, courts have tried to make sure that such a contract is not unconscionable, procedurally or substantively, and generally upheld them, particularly in business-to-business (“B2B”) contexts. For example, in Feldman v. Google, Inc., 513 F.Supp.2d 229 (E.D.Pa. 2007), the court stated: “A contract is not necessarily one of adhesion simply because it is a form contract. Courts have recognized the prevalence and importance of standardized contracts in people's everyday lives.”

Of course, these forms quickly came into conflict with each other, long before the Internet ' but the law provided solutions. One scholar described this history in 2006, referring to paper agreements: “As business-to-business commerce became more common in the middle of the twentieth century, companies began putting standard contract terms on the back of their purchase orders and shipment invoices. When each party to a contract used such a form, courts had to confront the question of whose terms controlled. After unsuccessful judicial experimentation with a variety of rules, the [UCC] resolved this 'battle of the forms' by adopting a compromise: if the terms conflict, neither party's terms become part of the contract unless a party demonstrates its willingness to forego the deal over it. Rather, the default rules of contract law apply where the parties' standard forms disagree, but where neither party insists on those terms.” (See, Mark Lemley, “Terms of Use,” 91 Minn. L. Rev. 459, 463 (2006).)

Parsing Popular Practice

Against this “real world” background, several scholars have, in recent years, begun to consider more closely whether e-commerce customers and sellers, individuals or businesses alike, ever really have the proverbial “meeting of the minds” when the terms of the deal may never have been read. One, Professor Mark Lemley (cited above in “Terms of Use”) found the same answer developing for online contracts as the courts had reached for these contracts' paper counterparts:

Every court to consider the issue has found “clickwrap” licenses, in which an online user clicks “I agree” to standard form terms, enforceable. A majority of courts in the last ten years have enforced shrinkwrap licenses, on the theory that people agree to the terms by using the software they have already purchased. Finally, and more recently, an increasing number of courts have enforced “browsewrap” licenses, in which the user does not see the contract at all but in which the license terms provide that using a Web site constitutes agreement to a contract whether the user knows it or not. ' Both the clickwrap and shrinkwrap cases may have conditioned courts to abandon the idea of assent when it comes to browsewraps. Legally, there is a big difference between a unilateral statement of desires and a statement of terms to which the other party has agreed. But once we have expanded agreement to include clicking on a Web site or engaging in conduct that we would expect the buyer to engage in anyway, it seems only a small step to enforce a unilateral statement of terms. As the argument goes, if we refuse to enforce browsewraps, a site owner will simply impose the same restrictions via clickwrap or shrinkwrap. Since no one reads the latter forms of contract anyway, and owners can include whatever terms they want, it seems a sort of formalism to require them to go through the effort of requiring some weak manifestation of assent.” (See, Mark Lemley, “Terms of Use,” 91 Minn. L. Rev. 459-460, 469-470 (2006).) (Emphasis added).

(Professor Lemley noted, however, some courts' reluctance to enforce such contracts against individuals that they would otherwise uphold against corporations.)

To see how far this e-commerce trend to seller-imposed terms has developed, a more recent study of Web-site contracting practices found that only 12% of the 500 largest Internet retail Web sites in its sample required any form of affirmative consent. This was contrary to the authors' expectations, since they had believed that: “A well-advised [W]eb site designer would require some affirmative action from the user, indicative of assent to the document in question, in order to reliably produce a binding contract.” (See, Ronald J. Mann and Travis Siebeneicher, “Just One Click: the Reality of Internet Retail Contracting,” 108 Colum. L. Rev. 984, 993, 998 (2008).) In other words, 88% of Web sites in their sample were content to rely on the traditional model employed by commercial firms in their paper invoices and purchase orders, even though the case law (in the authors' opinion) “(did) not provide any reliable template designing an enforceable browsewrap interface.” 108 Colum. L. Rev. 984, 992. Indeed, the authors found online agreements of Internet retailers to be “surprisingly benign” ' contrary to their assumption that such contracts would be “one-sided” and “obscure(d) with the [W]eb site interface.” 108 Colum. L. Rev. 984, 985, 1000.

Pondering Different Paths

As mentioned earlier, several other scholars and symposia have recently examined the challenges that the practical needs of e-commerce ' such as closing sales, and in great volume ' pose to traditional concepts of a contract or contracts built on mutual agreement. For example, Professor Mootz draws on the experience from the introduction of standard contract forms to urge a “doctrine of reasonable expectations” to “govern commercial parties engaged in electronic contracting,” based on Section 211 of the Restatement (Second) of Contracts:

'211. Standardized Agreements

(1) Except as stated in Subsection (3), where a party to an agreement signs or otherwise manifests assent to a writing and has reason to believe that like writings are regularly used to embody terms of agreements of the same type, he adopts the writing as an integrated agreement with respect to the terms included in the writing.

(2) Such a writing is interpreted wherever reasonable as treating alike all those similarly situated, without regard to their knowledge or understanding of the standard terms of the writing.

(3) Where the other party has reason to believe that the party manifesting such assent would not do so if he knew that the writing contained a particular term, the term is not part of the agreement.

Professor Mootz summarized his proposed test for the enforceability of a non-negotiated online form as whether it “avoid(s) unfair surprise and the evisceration of dickered terms,” and labeled it a “reasonable expectations” rule for Web site contracts. He wrote:

A party is bound to the terms of a standard form when it manifests assent with the knowledge that such a form regularly embodies terms of the agreement, but the terms are interpreted in an objective manner (“treating alike all those similarly situated, without regard to their knowledge or understanding of the standard terms”). However, the reasonable expectations of the party assenting to the form may trump the terms as written when the offering party “has reason to believe that the party manifesting such assent would not do so if he knew that the writing contained a particular term. (See, 4 ISJLP 271, 325.)

Unfortunately for e-commerce sellers, such a subjective rule would not provide them an objective test for designing their sites, much less defeating customers with reasonable but incorrect expectations who choose to sue the Web site owners.

Professor Lemley's analysis, in contrast, would shift the focus away from the parties and their intent; instead, he would acknowledge that online “agreements” are not even that, and rarely involve any bargaining. Indeed, he would govern such relationships with “substantive law,” such as the UCC. 91 Minn. L. Rev. 459, 482-483. Professor Linzer also called for renewed legislative solutions, because of the practical difficulties of the party deemed to agree to adhesion contracts:

I don't find the solutions offered by (other scholars) to be of great practical help to the non-drafting party, since he still has to go to court and litigate the issue against the drafter, who is probably a repeat player and thus has economies of scale and a much greater incentive to litigate the specific issue. The easiest possible way of rebalancing the economies of scale, the class action ' itself more a windfall to lawyers than a device for legal reform ' has been stymied by arbitration clauses in the adhesion contracts themselves. The question, then, is assuming we agree that contracts of adhesion are bad, how can we do something practical about them? The solution, I think, is not to try to deal with all adhesion provisions, but to focus on those that are particularly bad and to make them unenforceable per se; in other words, to make the most important default rules immutable when no real bargaining is possible by imposing an “implied” term on contracts of adhesion that forbids them from changing specific rules. If there is actual bargaining, the parties may do what they want, but when a dominant party imposes its will without real bargaining, the state should override that imposition and return the implied term to power. (See, 28 Pace L. Rev. 195, 206-208.)

From another perspective, Professors Becher and Zarsky believe that the enhanced availability of information about online contracts involving consumers, through “search engines, blogs, message boards and social networks,” will effectively create a market to regulate the excesses of online contracting, and specifically cite the above-referenced Mann and Siebeneicher study as empirical evidence of such a development. (See, Shmuel I. Becher and Tal Z. Zarsky, “E-Contract Doctrine 2.0: Standard Form Contracting in the Age of Online User Participation,” 14 Mich. Telecomm. Tech. L. Rev. 303 (2008).) In other words, customers who learn about the problems of dealing with a seller from other customers through online information sources will simply avoid the offending merchant ' so sellers will not adopt or enforce such terms, lest they drive away potential business.

One recent article even argued that traditional legal analysis based on paper contracts of adhesion should not apply to online contracts, and instead focused on how the particular technology of a Web site could affect the enforceability of a contract found on a particular Web site. Nonetheless, the authors concluded that general challenges to enforceability of Web site terms and conditions are unlikely to succeed because:

(1) [W]eb site owners (are) increasingly carefully and cleverly designing their [W]eb sites for increased enforceability, and (2) judges (are) feeling more at ease with requiring users to apply effort and expertise in accessing the technology to read and assent to the terms as Internet use becomes more commonplace in society. In sum, predictably, Internet users will be increasingly unsuccessful in convincing judges to reject [W]eb site terms on the bases of notice and assent, and their courtroom battlefronts will focus more upon careless or unconventional [W]eb site designs, technological flukes, new technologies, computer bugs and computer-challenged plaintiffs. (See, Ty Tasker and Daryn Pakcyk, “Cyber Surfing on the High Seas of Legalese: Law and Technology of Internet Agreements,” 18 Alb. L.J. Sci. & Tech. 79, 148 (2008).)

They also cautioned, however, that traditional challenges will not go away: “Moreover, various issues involving public policy will long remain vulnerable to litigants' attacks. As aptly stated by a commentator, 'Tomorrow's courts will be required to weigh adhesive conditions in mass contracts against the risk of stifling ecommerce.'”

Other Issues

Problems, and Solutions, Vary

The recent studies pointed out other complications affecting enforceability that go beyond the scope of this article, but that are worth noting in passing. For example, as noted above by Professor Lemley, different rules may be preferred by businesses and courts, depending on whether consumers are involved. A study reported in The New York Times found a preference against arbitration in “big important contracts” with businesses; it may be used simply to “avoid consumer class actions.” (See, www.nytimes.com/2008/10/06/business/06arbitrate.html?scp=1&sq=ware%20eisenberg%20sherwin&st=cse.)

Another legal problem involves whether proper authority exists to enter into Web-site contracts with serious, adverse provisions, whether done automatically by contracting agents or by low-level human beings in the ordinary course of their jobs. In even minimally complex transactions among businesses, many sets of online terms and conditions may apply, making the already complex “battle of the forms” even more of a challenge.

Plenty of Room to Explore

So what should one actually in the marketplace make of the current debate on legal philosophies about boilerplate terms and conditions, be it from the perspective of the customer with no choice of whether to accept or reject them, or the lawyer or site designer for an e-commerce firm? Clearly, despite the large amount of scholarly attention given to terms and conditions, and the consensus that they will generally be enforceable, there remains enough uncertainty to keep lawyers and professors fully employed in arguing over whether particular clauses will be respected ' usually the ones that matter most in a dispute, such as arbitration, or choice of law or forum. Nonetheless, the movement of forms online has not changed the perspective of contract law luminary Karl Llewellyn, on the advent of form agreements: “I know of few 'private' law problems which remotely rival the importance, economic, governmental, or 'law'-legal, of the form-pad agreement; and I know of none which has been either more disturbing to life or more baffling to lawyers.” (See, Karl N. Llewellyn, The Common Law Tradition: Deciding Appeals 362 (1960), and cited by Mootz.)

The Market Forum vs. the Courtroom Forum

Outside academia, no lawyer working by the hour wants to leave his or her client unprotected with a weaker agreement than he or she could create. That practical reality of the legal business (rather than profession) would explain the persistence of the strong form. But e-commerce firms have to deal with customers, in the real world, whom they presumably want to return to buy again, and again, and which the customers may not do if the site is too difficult to use, or the legal warnings too obnoxious. The full disclosure of risks familiar to the corporate securities attorney does not play well in retail.

There's Followup and There's Follow-through '

Therefore, whatever the terms and conditions may say, the e-commerce firm could simply choose, as a business decision, to enforce them only selectively ' or not at all. The recent studies also bear that out. Commenting on their analysis of actual contracts in the automobile-manufacturing industry in the United States, Professors Ben-Shahar and White wrote:

Of course, contract terms do not always reflect actual practices. The actual behavior under the contract may not vary as much as the variation in contract language. There is some indication that OEMs [original equipment manufacturers] may not enforce inefficient one-sided terms. For example, in a section titled “Supplier Frequently Asked Questions” appended to its Global Terms and Conditions, Ford explains that one of the most troubling new provisions in this form, the setoff term, was never used literally and only infrequently used at all. So it is possible that the inefficiency of some terms is only on paper and that in practice, the OEMs apply systematic “tailored forgiveness” of some of the harsher provisions. (See, Ben-Shahar and White, “Boilerplate and Market Power: Boilerplate and Economic Power in Auto Manufacturing Contracts,” 104 Mich. L. Rev. 953, 963-964 (2006) (emphasis added).)

And here's some hind- and foresight to consider: Recognizing the interdependent relationships in today's economy that can make a firm a buyer and seller in the same markets, the authors also inferred that a “golden rule” of boilerplate exists ' do not use terms as a seller that one would not accept as buyer. 105 Mich. L. Rev. 9533, 973.

It's Sales, After All

As I have suggested in my prior articles on terms and conditions, the ultimate decision-maker may not be the general counsel, but the marketing department. Even though it is widely acknowledged that terms and conditions are rarely read, but could be made clearly enforceable through a click-wrap structure, e-commerce firms choose not to do so, most likely because such extra steps might deter customers. Again, to cite Mann and Siebeneicher:

It seems that for the great majority of [I]nternet retailers, the ease of the shopping experience is more important than concerns about possible future liability. Thus, few retailers ' only about 6% in our population ' use contracting interfaces sufficiently robust to make it reasonable to expect that their contracts are enforceable against their customers. Even more surprisingly, the contracts found on [I]nternet retailers' [W]eb sites contain the standard, pro-seller boilerplate provisions ' arbitration, disclaimers of consequential damages, and the like ' much less frequently than would be expected. No such clauses appear in the contracts for more than half of the retailers that we studied. We attribute the appearance of the clauses in almost half of the contracts to the conflict between two motivations: the desire to have terms that appear to be benign and the desire to have terms (albeit not in a binding form) to which consumers will accede in the event of a dispute. (See,108 Colum. L. Rev. 984, 1000 (at note 57), and 1011 (emphasis added).)

And, in another look at the matter: “In the rare cases in which the unscrupulous seller is brought to court, we may find that the fine print proves ineffective, as considerable discretion is embedded in virtually all legal rules.” (See, Douglas G. Baird, “Boilerplate and Market Power: The Boilerplate Puzzle,” 104 Mich. L. Rev. 933, 937 (2006).)

Look at it this way: Making the sale, and not setting up legal obstacles ' even as minor as an additional click, to accept binding terms that admittedly won't be read ' may ultimately be more important for a successful e-commerce site than achieving certain legal protection that harsh but typical terms and conditions that will be enforceable. And e-commerce marketers don't need a lawyer or law professor to tell them how to sell ' especially when a lawyer's idea of salesmanship is to deny the customer any choice and impose contract terms that are effectively hidden on the Web site.

It was Henry Ford, not Marlon Brando or Don Corleone, who once famously said: “The customer can have any color he wants so long as it's black.”

Unfortunately for e-commerce buyers, however, the rules imposed on them by the fine print and deep links usually known as “Terms and Conditions” often leave as little room to negotiate as early Ford buyers once had.

“No deal” is never an option to click on to spur further negotiation when a Web site requires a customer to agree to its Terms and Conditions ' if the customer ever gets such an option (a relative rarity today, as will be discussed below). Instead, an unhappy buyer's only choices are to take his or her business elsewhere, buy offline or just walk away. Even worse, it's a frequent occurrence that the terms a buyer must take, and cannot leave, are far from what he or she would have negotiated, if he or she could have done so. As one scholar recently noted:

But how likely are you to (bargain) over arbitration clauses, choice of law and forum clauses, limitations on consequential damages and items '? And if an audience of law review readers is unlikely to shop these terms, what possible chance is there that non-lawyers will do so? When we move into the twenty-first century and consider the intellectual property arcana included in the typical EULA (End User License Agreement) attached to software that you can't install without clicking on the “Accept” button, the concept of buyers shopping adhesion contract terms becomes ludicrous. ( See , Professor Peter Linzer, Symposium: The Enduring Legacy of Wood v. Lucy, Lady Duff-Gordon , 28 Pac L. Review 161-454 (2008). Article: “Implied,” “Inferred,” and “Imposed”: Default Rules and Adhesion Contracts ' the Need for Radical Surgery,” 28 Pace L. Rev. 195, 204-205 (2008).)

In my prior articles on e-commerce Web site terms and conditions (see, “What Your Terms and Conditions Tell Customers,” in the October edition of e-Commerce Law & Strategy; and “I Signed WHAT?!”, in the July edition of e-Commerce Law & Strategy), I examined that boilerplate at the “micro” level, by pointing out particular clauses in actual use that seemed to contradict the business and marketing goals of the site owners. In fact, courts have struck down many of the more aggressive provisions, on an inconsistent basis, on such legal doctrines as unconscionability under Uniform and Commercial Code (“UCC”) Section 2-302, or in a traditional UCC “battle of the forms” under UCC Section 2-207.

I Agree?

But those articles did not address the “macro” question: whether these non-negotiable forms (that are often difficult to find) are enforceable in the first place, especially since many do not even require a click to accept. In other words, how can a customer who did not click “I agree” be bound to legal rules that he or she did not sign, and that he or she may have seen only through a link on the Web site? Was there ever an “agreement” between the e-commerce seller and the e-commerce shopper?

As e-commerce has grown, these contracts have evolved from the original software “shrinkwrap” (opening the package is deemed acceptance of the rules) to “clickwrap” (the customer had to click to agree to terms before proceeding with the transaction) to simply “browsewrap” (using the Web site is deemed to be the customer's agreement to disclosed terms). At each stage, however, the customer had to do less to be legally bound to the non-negotiable terms. (For a more detailed discussion of the case law leading to the enforceability of these types of contracts, beginning with ProCD, Inc. v. Zeidenberg , 86 F.3d 1447 (7th Cir. 1996) and Specht v. Netscape Communications Corp. , 306 F.3d 17 (2d Cir. 2002), see , “After the Battle of the Forms: Commercial Contracting in the Electronic Age,” by Francis J. Mootz, III, in 4 ISJLP 271, 280-293 (2008).)

A more recent hybrid variant attempts to give the conservative transactional attorney the comfort of relying on a traditional signature, the “sign wrap.” Described by Professor Mootz as “a variation on the doctrine of incorporation by reference, (t)he sign-wrap situation occurs when parties execute a written agreement that includes a notice that the terms of the agreement include standard terms that are posted at a designated URL. Although the parties are dealing with a paper contract, the referenced 'standard terms and conditions' reside only in cyberspace. Unlike the traditional form contract that presented the standard terms and conditions on the back of the document, the sign-wrap approach permits a party to obtain a signature on a form that contains the agreed material terms and a reference to a URL that purports to incorporate those standard terms into the agreement, despite the other party's potential ignorance of their existence.” 4 ISJLP 271, 287.

A Matter of Form(s)

The same questions, surely, could have been (and were) asked for many years about pre-printed boilerplate found on most credit-card applications, purchase orders, invoices and in the fine print at the end of glossy mail-order catalogs ' yet most of us would not try to avoid paying a credit-card bill by challenging whether a contract to pay existed. For quite some time, courts (and attorneys advising their clients) have routinely upheld these “contracts of adhesion,” almost without regard to the fairness of their terms ' or the process by which they came into force. Typically, courts have held that a contract is not void solely because it is a contract of adhesion, or was not negotiated; instead, courts have tried to make sure that such a contract is not unconscionable, procedurally or substantively, and generally upheld them, particularly in business-to-business (“B2B”) contexts. For example, in Feldman v. Google, Inc. , 513 F.Supp.2d 229 (E.D.Pa. 2007), the court stated: “A contract is not necessarily one of adhesion simply because it is a form contract. Courts have recognized the prevalence and importance of standardized contracts in people's everyday lives.”

Of course, these forms quickly came into conflict with each other, long before the Internet ' but the law provided solutions. One scholar described this history in 2006, referring to paper agreements: “As business-to-business commerce became more common in the middle of the twentieth century, companies began putting standard contract terms on the back of their purchase orders and shipment invoices. When each party to a contract used such a form, courts had to confront the question of whose terms controlled. After unsuccessful judicial experimentation with a variety of rules, the [UCC] resolved this 'battle of the forms' by adopting a compromise: if the terms conflict, neither party's terms become part of the contract unless a party demonstrates its willingness to forego the deal over it. Rather, the default rules of contract law apply where the parties' standard forms disagree, but where neither party insists on those terms.” (See, Mark Lemley, “Terms of Use,” 91 Minn. L. Rev. 459, 463 (2006).)

Parsing Popular Practice

Against this “real world” background, several scholars have, in recent years, begun to consider more closely whether e-commerce customers and sellers, individuals or businesses alike, ever really have the proverbial “meeting of the minds” when the terms of the deal may never have been read. One, Professor Mark Lemley (cited above in “Terms of Use”) found the same answer developing for online contracts as the courts had reached for these contracts' paper counterparts:

Every court to consider the issue has found “clickwrap” licenses, in which an online user clicks “I agree” to standard form terms, enforceable. A majority of courts in the last ten years have enforced shrinkwrap licenses, on the theory that people agree to the terms by using the software they have already purchased. Finally, and more recently, an increasing number of courts have enforced “browsewrap” licenses, in which the user does not see the contract at all but in which the license terms provide that using a Web site constitutes agreement to a contract whether the user knows it or not. ' Both the clickwrap and shrinkwrap cases may have conditioned courts to abandon the idea of assent when it comes to browsewraps. Legally, there is a big difference between a unilateral statement of desires and a statement of terms to which the other party has agreed. But once we have expanded agreement to include clicking on a Web site or engaging in conduct that we would expect the buyer to engage in anyway, it seems only a small step to enforce a unilateral statement of terms. As the argument goes, if we refuse to enforce browsewraps, a site owner will simply impose the same restrictions via clickwrap or shrinkwrap. Since no one reads the latter forms of contract anyway, and owners can include whatever terms they want, it seems a sort of formalism to require them to go through the effort of requiring some weak manifestation of assent.” (See, Mark Lemley, “Terms of Use,” 91 Minn. L. Rev. 459-460, 469-470 (2006).) (Emphasis added).

(Professor Lemley noted, however, some courts' reluctance to enforce such contracts against individuals that they would otherwise uphold against corporations.)

To see how far this e-commerce trend to seller-imposed terms has developed, a more recent study of Web-site contracting practices found that only 12% of the 500 largest Internet retail Web sites in its sample required any form of affirmative consent. This was contrary to the authors' expectations, since they had believed that: “A well-advised [W]eb site designer would require some affirmative action from the user, indicative of assent to the document in question, in order to reliably produce a binding contract.” (See, Ronald J. Mann and Travis Siebeneicher, “Just One Click: the Reality of Internet Retail Contracting,” 108 Colum. L. Rev. 984, 993, 998 (2008).) In other words, 88% of Web sites in their sample were content to rely on the traditional model employed by commercial firms in their paper invoices and purchase orders, even though the case law (in the authors' opinion) “(did) not provide any reliable template designing an enforceable browsewrap interface.” 108 Colum. L. Rev. 984, 992. Indeed, the authors found online agreements of Internet retailers to be “surprisingly benign” ' contrary to their assumption that such contracts would be “one-sided” and “obscure(d) with the [W]eb site interface.” 108 Colum. L. Rev. 984, 985, 1000.

Pondering Different Paths

As mentioned earlier, several other scholars and symposia have recently examined the challenges that the practical needs of e-commerce ' such as closing sales, and in great volume ' pose to traditional concepts of a contract or contracts built on mutual agreement. For example, Professor Mootz draws on the experience from the introduction of standard contract forms to urge a “doctrine of reasonable expectations” to “govern commercial parties engaged in electronic contracting,” based on Section 211 of the Restatement (Second) of Contracts:

'211. Standardized Agreements

(1) Except as stated in Subsection (3), where a party to an agreement signs or otherwise manifests assent to a writing and has reason to believe that like writings are regularly used to embody terms of agreements of the same type, he adopts the writing as an integrated agreement with respect to the terms included in the writing.

(2) Such a writing is interpreted wherever reasonable as treating alike all those similarly situated, without regard to their knowledge or understanding of the standard terms of the writing.

(3) Where the other party has reason to believe that the party manifesting such assent would not do so if he knew that the writing contained a particular term, the term is not part of the agreement.

Professor Mootz summarized his proposed test for the enforceability of a non-negotiated online form as whether it “avoid(s) unfair surprise and the evisceration of dickered terms,” and labeled it a “reasonable expectations” rule for Web site contracts. He wrote:

A party is bound to the terms of a standard form when it manifests assent with the knowledge that such a form regularly embodies terms of the agreement, but the terms are interpreted in an objective manner (“treating alike all those similarly situated, without regard to their knowledge or understanding of the standard terms”). However, the reasonable expectations of the party assenting to the form may trump the terms as written when the offering party “has reason to believe that the party manifesting such assent would not do so if he knew that the writing contained a particular term. (See, 4 ISJLP 271, 325.)

Unfortunately for e-commerce sellers, such a subjective rule would not provide them an objective test for designing their sites, much less defeating customers with reasonable but incorrect expectations who choose to sue the Web site owners.

Professor Lemley's analysis, in contrast, would shift the focus away from the parties and their intent; instead, he would acknowledge that online “agreements” are not even that, and rarely involve any bargaining. Indeed, he would govern such relationships with “substantive law,” such as the UCC. 91 Minn. L. Rev. 459, 482-483. Professor Linzer also called for renewed legislative solutions, because of the practical difficulties of the party deemed to agree to adhesion contracts:

I don't find the solutions offered by (other scholars) to be of great practical help to the non-drafting party, since he still has to go to court and litigate the issue against the drafter, who is probably a repeat player and thus has economies of scale and a much greater incentive to litigate the specific issue. The easiest possible way of rebalancing the economies of scale, the class action ' itself more a windfall to lawyers than a device for legal reform ' has been stymied by arbitration clauses in the adhesion contracts themselves. The question, then, is assuming we agree that contracts of adhesion are bad, how can we do something practical about them? The solution, I think, is not to try to deal with all adhesion provisions, but to focus on those that are particularly bad and to make them unenforceable per se; in other words, to make the most important default rules immutable when no real bargaining is possible by imposing an “implied” term on contracts of adhesion that forbids them from changing specific rules. If there is actual bargaining, the parties may do what they want, but when a dominant party imposes its will without real bargaining, the state should override that imposition and return the implied term to power. (See, 28 Pace L. Rev. 195, 206-208.)

From another perspective, Professors Becher and Zarsky believe that the enhanced availability of information about online contracts involving consumers, through “search engines, blogs, message boards and social networks,” will effectively create a market to regulate the excesses of online contracting, and specifically cite the above-referenced Mann and Siebeneicher study as empirical evidence of such a development. (See, Shmuel I. Becher and Tal Z. Zarsky, “E-Contract Doctrine 2.0: Standard Form Contracting in the Age of Online User Participation,” 14 Mich. Telecomm. Tech. L. Rev. 303 (2008).) In other words, customers who learn about the problems of dealing with a seller from other customers through online information sources will simply avoid the offending merchant ' so sellers will not adopt or enforce such terms, lest they drive away potential business.

One recent article even argued that traditional legal analysis based on paper contracts of adhesion should not apply to online contracts, and instead focused on how the particular technology of a Web site could affect the enforceability of a contract found on a particular Web site. Nonetheless, the authors concluded that general challenges to enforceability of Web site terms and conditions are unlikely to succeed because:

(1) [W]eb site owners (are) increasingly carefully and cleverly designing their [W]eb sites for increased enforceability, and (2) judges (are) feeling more at ease with requiring users to apply effort and expertise in accessing the technology to read and assent to the terms as Internet use becomes more commonplace in society. In sum, predictably, Internet users will be increasingly unsuccessful in convincing judges to reject [W]eb site terms on the bases of notice and assent, and their courtroom battlefronts will focus more upon careless or unconventional [W]eb site designs, technological flukes, new technologies, computer bugs and computer-challenged plaintiffs. (See, Ty Tasker and Daryn Pakcyk, “Cyber Surfing on the High Seas of Legalese: Law and Technology of Internet Agreements,” 18 Alb. L.J. Sci. & Tech. 79, 148 (2008).)

They also cautioned, however, that traditional challenges will not go away: “Moreover, various issues involving public policy will long remain vulnerable to litigants' attacks. As aptly stated by a commentator, 'Tomorrow's courts will be required to weigh adhesive conditions in mass contracts against the risk of stifling ecommerce.'”

Other Issues

Problems, and Solutions, Vary

The recent studies pointed out other complications affecting enforceability that go beyond the scope of this article, but that are worth noting in passing. For example, as noted above by Professor Lemley, different rules may be preferred by businesses and courts, depending on whether consumers are involved. A study reported in The New York Times found a preference against arbitration in “big important contracts” with businesses; it may be used simply to “avoid consumer class actions.” (See, www.nytimes.com/2008/10/06/business/06arbitrate.html?scp=1&sq=ware%20eisenberg%20sherwin&st=cse.)

Another legal problem involves whether proper authority exists to enter into Web-site contracts with serious, adverse provisions, whether done automatically by contracting agents or by low-level human beings in the ordinary course of their jobs. In even minimally complex transactions among businesses, many sets of online terms and conditions may apply, making the already complex “battle of the forms” even more of a challenge.

Plenty of Room to Explore

So what should one actually in the marketplace make of the current debate on legal philosophies about boilerplate terms and conditions, be it from the perspective of the customer with no choice of whether to accept or reject them, or the lawyer or site designer for an e-commerce firm? Clearly, despite the large amount of scholarly attention given to terms and conditions, and the consensus that they will generally be enforceable, there remains enough uncertainty to keep lawyers and professors fully employed in arguing over whether particular clauses will be respected ' usually the ones that matter most in a dispute, such as arbitration, or choice of law or forum. Nonetheless, the movement of forms online has not changed the perspective of contract law luminary Karl Llewellyn, on the advent of form agreements: “I know of few 'private' law problems which remotely rival the importance, economic, governmental, or 'law'-legal, of the form-pad agreement; and I know of none which has been either more disturbing to life or more baffling to lawyers.” (See, Karl N. Llewellyn, The Common Law Tradition: Deciding Appeals 362 (1960), and cited by Mootz.)

The Market Forum vs. the Courtroom Forum

Outside academia, no lawyer working by the hour wants to leave his or her client unprotected with a weaker agreement than he or she could create. That practical reality of the legal business (rather than profession) would explain the persistence of the strong form. But e-commerce firms have to deal with customers, in the real world, whom they presumably want to return to buy again, and again, and which the customers may not do if the site is too difficult to use, or the legal warnings too obnoxious. The full disclosure of risks familiar to the corporate securities attorney does not play well in retail.

There's Followup and There's Follow-through '

Therefore, whatever the terms and conditions may say, the e-commerce firm could simply choose, as a business decision, to enforce them only selectively ' or not at all. The recent studies also bear that out. Commenting on their analysis of actual contracts in the automobile-manufacturing industry in the United States, Professors Ben-Shahar and White wrote:

Of course, contract terms do not always reflect actual practices. The actual behavior under the contract may not vary as much as the variation in contract language. There is some indication that OEMs [original equipment manufacturers] may not enforce inefficient one-sided terms. For example, in a section titled “Supplier Frequently Asked Questions” appended to its Global Terms and Conditions, Ford explains that one of the most troubling new provisions in this form, the setoff term, was never used literally and only infrequently used at all. So it is possible that the inefficiency of some terms is only on paper and that in practice, the OEMs apply systematic “tailored forgiveness” of some of the harsher provisions. (See, Ben-Shahar and White, “Boilerplate and Market Power: Boilerplate and Economic Power in Auto Manufacturing Contracts,” 104 Mich. L. Rev. 953, 963-964 (2006) (emphasis added).)

And here's some hind- and foresight to consider: Recognizing the interdependent relationships in today's economy that can make a firm a buyer and seller in the same markets, the authors also inferred that a “golden rule” of boilerplate exists ' do not use terms as a seller that one would not accept as buyer. 105 Mich. L. Rev. 9533, 973.

It's Sales, After All

As I have suggested in my prior articles on terms and conditions, the ultimate decision-maker may not be the general counsel, but the marketing department. Even though it is widely acknowledged that terms and conditions are rarely read, but could be made clearly enforceable through a click-wrap structure, e-commerce firms choose not to do so, most likely because such extra steps might deter customers. Again, to cite Mann and Siebeneicher:

It seems that for the great majority of [I]nternet retailers, the ease of the shopping experience is more important than concerns about possible future liability. Thus, few retailers ' only about 6% in our population ' use contracting interfaces sufficiently robust to make it reasonable to expect that their contracts are enforceable against their customers. Even more surprisingly, the contracts found on [I]nternet retailers' [W]eb sites contain the standard, pro-seller boilerplate provisions ' arbitration, disclaimers of consequential damages, and the like ' much less frequently than would be expected. No such clauses appear in the contracts for more than half of the retailers that we studied. We attribute the appearance of the clauses in almost half of the contracts to the conflict between two motivations: the desire to have terms that appear to be benign and the desire to have terms (albeit not in a binding form) to which consumers will accede in the event of a dispute. (See,108 Colum. L. Rev. 984, 1000 (at note 57), and 1011 (emphasis added).)

And, in another look at the matter: “In the rare cases in which the unscrupulous seller is brought to court, we may find that the fine print proves ineffective, as considerable discretion is embedded in virtually all legal rules.” (See, Douglas G. Baird, “Boilerplate and Market Power: The Boilerplate Puzzle,” 104 Mich. L. Rev. 933, 937 (2006).)

Look at it this way: Making the sale, and not setting up legal obstacles ' even as minor as an additional click, to accept binding terms that admittedly won't be read ' may ultimately be more important for a successful e-commerce site than achieving certain legal protection that harsh but typical terms and conditions that will be enforceable. And e-commerce marketers don't need a lawyer or law professor to tell them how to sell ' especially when a lawyer's idea of salesmanship is to deny the customer any choice and impose contract terms that are effectively hidden on the Web site.