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Weekly UpdatesWhen goods and services (including software) sold over the internet supplanted items in boxes, purchasers no longer had an opportunity to read terms and conditions through a package's shrink wrap. Establishing agreement to terms and conditions was still desirable for sellers, and so to ensure that the consumer had provided the necessary assent and agreement to the terms and conditions, contracts known as "click wrap" came into use. According to Moringiello and Reynolds (2005, 464),
By clicking the "I agree" button, the consumer has agreed and assented to all of the terms and conditions listed, and there exists documentation that the assent has been given. If the purchaser will not click the "I agree" button, the sale does not proceed.
Enforcement of "Click Wrap" Contracts
While courts now routinely enforce most shrink wrap contracts, court decisions have also evolved to enforce most click wrap contracts, again, unless the terms are considered to be unconscionable. Most of the terms and conditions in click wrap contracts do not become viewable by the consumer until the consumer is ready to purchase the product or service and form the contract. It is usually the last item that is completed before the contract is created and the consumer's credit card is charged.
In an early click wrap case, Decker and Decker v. Circus Circus Hotel, a New Jersey guest had made his Las Vegas reservation on the internet using his computer in New Jersey. He clicked an "I agree" button that included a forum selection provision requiring that any suits be brought in the Nevada state or federal courts. After he was injured in the Las Vegas hotel and filed suit in New Jersey, the court required that the suit be brought in Nevada, holding, "The defendant's internet site contains a forum selection clause requiting that by making a reservation over the internet, customers agree to have their disputes settled in Nevada state and federal courts. This forum selection clause ought to be enforced." (7)
A more recent case that is representative of the current judicial opinions and thinking involving crick wrap agreements is Novak v. Overture Services, Inc., decided in 2004. The plaintiff, Novak, entered into a contract over the internet, and he clicked the required "I accept" button without reading or viewing the terms and conditions. Those terms and conditions included a forum selection provision. When a dispute arose, the plaintiff filed suit in his home state on the basis that he had never read the terms and conditions and had not assented to them. The court upheld the click wrap agreement and the terms and conditions, including the forum selection provision:
"Browse Wrap" Internet Contracts and Their Enforcement
Browse wrap is a variant of click wrap in which the customer can complete the transaction without expressly clicking assent to the terms and conditions presented on the website. The noted legal scholar Karl Llewellyn (1960/1996, 370) concluded in The Common Law Tradition,
Most courts today are reluctant to enforce a forum selection provision or an arbitration provision contained in an online browse wrap contract where there is no "I accept" button, but merely a hyperlink to the terms and conditions located at the bottom of each web page. Only after clicking the hyperlink and only after reading through numerous pages will the consumer become aware of all of the terms. I believe that most people have absolutely no interest in viewing or reading the terms and conditions, and do not usually bother to do so. (Wagner and Kupriyanova [2007] found similar reactions to privacy statements regarding use of personal data.) The courts must be satisfied that there exists manifestation of assent to the terms and conditions, and the ability to prove mutual assent to the court can be formidable. Sandeen (2003, 550) warned,
In the widely quoted U.S. Court of Appeals case of Specht v. Netscape Communications Corp., Specht was a first-time user of the Netscape website who entered into an online contract by clicking a "download now" button. Further down the page and below the "download now" section, there was reference to the terms and conditions of use for the site, which were available as a hyperlink. The plaintiff claimed that while he did scroll below the "download now" section, he was not aware of the terms and conditions, and he never assented to the arbitration provision found there. The court ruled that the arbitration provision should not be enforced:
In a 2004 Rhode Island case where the user also was not a frequent user, Defontes v. Dell Computers Corporation, the court concluded,
An important distinction continues to evolve in the enforcement of terms and conditions contained in browse wrap agreements. In Register.com, Inc. v. Verio, Inc., the defendant Verio had visited the Register.com website on numerous occasions and was aware of the terms and conditions before entering into the contract. The court upheld the browse wrap agreement containing a forum selection provision. In reaching its decision, the same court that had decided the Specht v. Netscape case made the following clarification:
The court concluded that by being a daily user of the Register.com website and aware of the terms, "silence and inaction operate as an acceptance ... where an offeree takes the benefit of offered services with reasonable opportunity to reject them and reason to know that they were offered with the expectation of compensation." (12)
In a 2005 case decided by the California United States District Court for the Northern District, Cairo, Inc. v. CrossMedia Services, Inc., every page of the Cross Media website had language that stated, "By continuing past this page and/or using this site, you agree to abide by the Terms of Use for this site, which prohibit commercial use of any information on this site." (13) After clicking the link to the "Terms of Use," the website user would see a statement that read, "These terms of use constitute a binding legal agreement (the 'Agreement') between the user and CrossMedia Services, Inc., the owner and operator of the website. If you do not accept the terms stated here, do not use the website." (14) The court enforced the Cross Media forum provision selection, imputing assent to Cairo, based upon the warning contained on each page regarding the terms of use and the repeated use by Cairo of the website.
When reading all of the cases, I note that while some courts may enforce provisions contained in hyperlinked terms and conditions, others will not. The area of law is presently unsettled and, as a result, poses a significant problem for lodging companies that wish to impose enforceable forum selection and choice of law provisions. The courts must determine that there exists adequate notice and assent before agreeing to enforce a browse wrap internet contract containing a forum selection or arbitration provision.
International Standards and Third-Party Sites
While the examination of international standards for the enforcement of shrink wrap, click wrap, and browse wrap contracts are beyond the scope of this article, the reader should be aware that the standards will vary from region to region or country to country. Moringiello and Reynolds (2005, 443) asserted, "European courts will look to the actual substance of those clauses and invalidate them if they are 'unfair.'" In addition, the use by many people of sites maintained and operated by third parties, including all of the travel booking sites, creates additional issues beyond the scope of this article as to the enforcement and interaction of terms and conditions contained on lodging company websites.
Suggestions to Ensure Enforcement
Most lodging companies today use websites that are the browse wrap type, where the user can complete a reservation without clicking through to the terms and conditions of the contract. Some sites carry notices in large, bold type that inform the user to go to links for more information for additional information, while some do not. Likewise, some of the links to the terms and conditions are clearly visible and some are not. The actual language of the terms and conditions are located one click away on some sites, but two clicks away on others. Indeed, I found some sites that suggest that the user click to other sites that do not exist. It is clear, however, that a first-time user of a site or a person who is not familiar with online purchasing might easily skip or miss the terms and conditions completely. If litigation occurs, the ability of the lodging companies to prove that the user was aware of the terms and assented to the terms might or might not be successful.
Implementation of some of the following suggestions would greatly improve the likelihood of a court's enforcing the terms and conditions contained on a lodging firm's website.
1. Require all guests who attempt to reserve a room to click an "I agree" button prior to completing the reservation showing affirmative assent to the terms and conditions. All such information should still be available at any time by clicking a prominent hyperlink. If the user does not agree, then the reservation cannot be completed. This should not impair reservation volume. Many sites operated by other vendors use the legally reliable click wrap approach, and the presence of click wrap on these sites does not usually impede the easy and quick formation of the contract.
2. Display a prominent notice at the top of each page stating that by continuing to use the site, the user is agreeing to the terms and conditions and that the terms and conditions apply to the resolution of disputes. (15) Especially if the website does not use the click wrap approach, the placement of these notices would have to be done in a manner that a court would be able to conclude that a typical, reasonably prudent user has been made aware of the existence of terms and conditions before actually making a reservation.
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