This article has been written by Niketa Chitnis, pursuing a Diploma in Advanced Contract Drafting, Negotiation, and Dispute Resolution from LawSikho.com. 

Introduction

Every time you access a social media account or use a website or mobile application, you are bound by the terms of such social media platforms or websites. We are very well aware that such online terms of use or terms and conditions for usage of such platforms are one-sided in the favour of the owner/ developer of such platforms. You cannot access such platforms without accepting such terms and conditions. Terms and conditions to access online platforms usually include a condition reserving the right of owner/ developer to review or change any of the conditions at any time and the user on continuing its use assents its acceptance to such changed terms and conditions of the online platform. In this article, we will see the validity of such change in online terms and conditions in a court of law from the USA perspective.

Online terms and conditions

The effect of change of online terms and conditions on its enforceability is based on these three types of website agreements:

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  1. Browsewrap agreements: These agreements have their terms on the website itself. They do not ask you for prior consent. According to Browsewrap Agreements, you simply accept the terms and conditions of the website by continuing to browse the website. For browsewrap agreements, you can continue to browse the website without reading or visiting the actual terms and conditions. Many times users are unaware of the existence of such a page containing terms and conditions for the usage of the website.

Eg: Wikipedia, in this you accept their policies simply by browsing their site.

2. Sign-in wrap agreements: With these agreements, you are notified about the existence of the terms and conditions of the website at the time of signing in and are advised to accept the terms and conditions while registering/ signing up to the site. Users are provided with a hyperlink to the page containing such terms and conditions.

Eg. Gmail, to open a Gmail account one needs to accept its terms and conditions, and the link is provided for the same while signing in.

iii. Clickwrap agreements: These agreements are different from the above agreements, they are designed to ensure that the user has a chance to read the given terms and conditions and they agree to such conditions after being fully aware of them.

Eg. Clickwrap agreements are often used for downloading or installing software. Such agreements are commonly set up through a series of pop-ups on the website. This requires a user to agree to the terms and conditions of the website by clicking the box for “I agree” or “I accept” after they are presented with the terms and conditions or a link leading directly to such terms and conditions.

Legal enforceability of website agreements

Since these terms and conditions are actively agreed upon by the user before any action is taken by him, clickwrap agreements hold better legal enforceability. Sign-in wrap agreements are fact-intensive depending upon whether the user has prior knowledge about the terms and conditions of the website, before continuing to use the site. However, in the case of browsewrap agreements, any action is not required on the part of the user to continue usage of the website. It means the user does not actively accept the terms and conditions of the website after being fully aware of the same. Browsewrap agreements do not hold any strong legal enforceability, unlike clickwrap agreements.

Effect of change of terms provided on the enforceability of these agreements

  • During recent times, there has been a rise in litigation due to changes in mandatory arbitration provisions contained in these online terms and conditions, subjecting to its effect on the enforceability of these user agreements. One of the recent cases highlighting this issue is Stover v. Experian Holdings Inc., No. 19- 55204 (9th Cir. 2020).
  • In June 2014, Rachel Stover purchased a service called “Experian Credit Score,” which provides subscribers with their credit score. She agreed to the terms and conditions existing at the time of purchasing this service. The 2014 terms stated that all claims arising out of the transaction were subject to arbitration “to the fullest extent permitted by law,” and that Stover was waiving her right to be part of a class action. The 2014 terms also contained a change-of-terms provision stating that “[e]ach time” Stover “accessed . . . the . . . Product Website,” she would be manifesting assent to “the then-current” terms of the agreement.
  • Stover alleges that Experian fraudulently marketed the credit score as information that lenders review while determining consumers’ creditworthiness. Stover canceled her subscription to the Experian credit score service in July 2014 and accessed the website in 2018 a day before filing the complaint. However, in 2018 the arbitration provisions in the terms of Experian website had been changed accommodating a carve-out for disputes “arising out of or relating to the Fair Credit Reporting Act (FCRA) or other state or federal laws relating to the information contained in your consumer disclosure or report, including but not limited to claims for alleged inaccuracies in your credit report or the information in your credit file.” All other claims remained subject to arbitration “to the fullest extent permitted by law.”
  • Stover filed a putative case in 2018, alleging various claims including violation of the Fair Credit Reporting Act, against Experian. The District Court granted the motion, stating that the terms of 2018 were applied, because the 2014 terms which the Stover agreed to, included a clause stating continuous use of the website constituted an agreement to any changes or modifications to the terms at any time.
  • In an appeal, Experian challenged the decisions of the District Court to enforce 2018 terms, stating that a “mere website visit” after the parties terminated their business relationship is not enough to “activate” a change in terms, because Stover had no opportunity to review the new terms prior to her website visit and be bound by them. The 9th Circuit agreed to this claim explaining, “Stover had no obligation to investigate whether Experian issued new terms without providing notice to her that it had done so. Indeed, the opposite rule would lead to absurd results: contract drafters who included a change-of-terms provision would be permitted to bind individuals daily, or even hourly, to subsequent changes in the terms.”
  • The contract allows for judicial settlement of public injunction claims, but Stover has not claimed Article III supporting such claims. Therefore, the McGill Rule does not exempt Stover from binding arbitration rights for her claims against Experian. The Judgement of the district court is affirmed. To bind parties to new terms subject to change of terms provision, consistent with basic principles of contract law, both parties shall be aware of such change and shall also have an opportunity to review these changes.
  • In a similar case in Harris v. BlockBuster, Inc., Facebook had an Agreement in which its customers renting videos from Blockbuster would find their choices broadcast to that customer’s Facebook friends. Plaintiff sued, claiming this practice to be a violation of her privacy right under the federal Video Privacy Protection Act. Blockbuster attempted to invoke an arbitration clause in its terms and conditions already accepted by the Customer, which included rights of Blockbuster to modify the terms and conditions at any time, with or without notice, which are immediately effective on posting such modifications on the website. Court refused to enforce the arbitration provision, considering it to be “illusory.” Miracle Pond v. Shutterfly, Inc., decided by the Northern District of Illinois in May 2020, addresses similar issues. Miracle Pond created a Shutterfly account in August 2014 and agreed to its terms and conditions by Clickwrap Agreement while registering. 
  • The agreement included that the products ordered or services used through their site are governed by these terms and Shutterfly can modify these terms at any time. User signifies his assent to the terms and privacy policy by visiting any of their Sites and Apps. The continued use of their Sites and Apps after posting changes will bind the user with modified terms and conditions. In addition, it is presumed that the user has read and reviewed the terms entirely if the user orders a product from their Sites or App or uses their services. In 2015, Shutterfly added arbitration provisions to the terms of use. Miracle Pond continued accessing her account and placed orders in 2015, 2017, 2018, and 2019. Miracle Pond filed a putative case against Shutterfly in 2019. Shutterfly moved to compel arbitration as per the revised terms of use.
  • Miracle Pound challenged the revised terms and conditions stating them as unenforceable as they constituted a Browsewrap Agreement. However, the court held Shutterfly’s agreement to be a valid Clickwrap Agreement as Miracle Pond registered with a valid Clickwrap Agreement.
  • Generally, courts uphold the terms and conditions whenever an online platform requires its user to click an “I agree” or “I accept” button. It is presumed that the user has read these terms and conditions. 
  • Although it is not mandatory to give notice of changes in terms and conditions, most sites give notice of material changes in terms and conditions. The question remains as to what is considered as material. Since the changes in online terms and conditions are not made very often, there should be no harm in making such notice of changes as an embedded requirement. It may be a small step, but it will surely be effective to reduce disputes related to such change in online terms and conditions.
  • In the final analysis, the understanding, and expectations of average users for what they are signing up for should matter. At the very least, it should include knowing even the slightest changes in the online terms and conditions.

Conclusion

As opposed to California and Illinois, Texas Law prohibits parties from retaining unrestrained right to unilaterally modify arbitration agreements retroactively and without notice. Such arbitration agreements are unenforceable. The majority of cases addressing the effect of change of terms provisions in online terms of use do so in the context of arbitration. A federal court applying Texas Law has held the unilateral modifications of terms and conditions that gave an unrestrained right to the operator, as void. As online terms and conditions are displayed on the website and the user agrees to them, with free consent along with a declaration of being competent to enter a contract, such terms and conditions are termed as valid contracts. Accordingly, users shall accept the online terms and conditions again in case of any modifications in the same.

References

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