Court provides guidance on how to effectively communicate online terms of service

Are online terms of service provided via hyperlink in an email binding on the recipient of that email? The Second Circuit recently addressed that question, and the decision gives guidance on best practices for online providers.

Plaintiff booked a trip to the Galapagos Islands using defendant’s website. When she purchased her ticket, she got a booking information email, a confirmation invoice and a service voucher. (It is not clear how plaintiff got the confirmation invoice and the service voucher – the court’s opinion says they were sent as emails, but the PACER record does not show them as emails. In any event, plaintiff did not dispute that she received all three documents, nor did she dispute all three documents contained a hyperlink to defendant’s “terms and conditions” which were available online.)

One evening during the trip, a tour guide allegedly assaulted plaintiff. She sued defendant for negligently hiring and training that tour guide. Defendant moved to dismiss, pointing to language in the online terms and conditions that called for disputes to be heard in Canadian court. The district court dismissed the action, and plaintiff sought review with the Second Circuit. On appeal, the court affirmed. It held that defendant had reasonably communicated the forum selection clause to plaintiff by using hyperlinks and the appropriate language in the terms and conditions.

Each of the documents contained an underlined hyperlink, and accompanying language advising plaintiff to click on the hyperlink. The booking information email contained a standalone provision with the heading “TERMS AND CONDITIONS”. This section stated that “[a]ll . . . passengers must read, understand and agree to the following terms and conditions.” The hyperlink immediately followed. Both the confirmation invoice and the voucher contained a link to the terms and conditions, preceded by “[c]onfirmation of your reservation means that you have already read, agreed to and understood the terms and conditions. . . .”

The actual structure and language of the terms and conditions also served to reasonably communicate the forum selection clause. The second paragraph stated that the terms and conditions “affect your rights and designate the governing law and forum for the resolution of any and all disputes.” Later in the terms and conditions, a standalone section titled “APPLICABLE LAW” provided that all matters arising from the agreement were subject to Ontario and Canadian law and the exclusive jurisdiction of the Ontario and Canadian courts.

The decision validates the notion that an e-commerce provider can rely on establishing valid and binding contracts with its customers without having to actually transmit a copy of the terms and conditions that would apply to the transaction. Though the facts of this case dealt with email, there is no substantive reason why the best practices revealed by the court’s decision would not apply to providers of mobile apps and other online platforms.

Starkey v. G Adventures, Inc., — F.3d —, 2015 WL 4664237 (2nd Cir. August 7, 2015)

Evan Brown is an attorney in Chicago helping clients manage issues involving technology and new media.

Website terms and conditions were unenforceable because of fraud

Duick v. Toyota Motor Sales, U.S.A., Inc., 2011 WL 3834740 (Cal.App. 2 Dist. August 31, 2011)

Someone signed plaintiff up through a Toyota website to take part in a “Personality Evaluation.” She got an email with a link to a website, and on the second page that she had to click through, she was presented with the well-known check box next to the words “I have read and agree to the terms and conditions.”

Later plaintiff started getting creepy emails from an unknown male calling himself “Sebastian Bowler” who indicated that he was on a cross-country road trip to come and visit plaintiff. He even listed plaintiff’s physical address. One of the emails had a link to Bowler’s MySpace page, which revealed he “enjoyed drinking alcohol to excess.” A few days later plaintiff got another email from someone purporting to be the manager of the hotel in which Bowler had trashed a room, and attempted to bill plaintiff for the damage.

As one would expect, plaintiff was disturbed by these messages. She finally got an email with a link to a video that said Bowler was a fictional character and that the emails were part of an elaborate prank, all to advertise the Toyota Matrix.

Plaintiff sued Toyota for, among other things, infliction of emotional distress. Toyota moved to dismiss the lawsuit, arguing that the online terms and conditions contained an arbitration provision, so the case did not belong in court but before an arbitrator. The court rejected this argument, finding that the terms and conditions were void, because plaintiff’s agreement to them was procured by “fraud in the inception or execution.”

The court found that the terms and conditions led plaintiff to believe that she was going to participate in a personality evaluation and nothing more. A reasonable reader in plaintiff’s position would not have known that she was signing up to be the target of a prank. For example, the terms and conditions were under the heading “Personality Evaluation Terms and Conditions” and made vague and opaque references to terms such as “interactive experience” and a “digital experience.” Simply stated, plaintiff, through no fault of her own, did not know what she was getting herself into.

For these reasons, the court held that the terms and conditions were void, and all the provisions contained in those terms and conditions, including the purported agreement to arbitrate any disputes, did not bind the parties.