Arbitration/Nonsignatories: Ninth Circuit Raps Browsewrap Contract, Affirming Order Denying Motion To Compel Arbitration

A Progression:  From Shrink Wrap To Browsewrap To Clickwrap Contracts 

     Above:  Shrink wrapped helicopters to be shipped to Iraq.  US Navy photo, Bart Jackson.  Wikimedia Commons.

     In a case that will be important to e-commerce merchants, and on-line consumers, a Ninth Circuit panel holds that Barnes & Noble’s website provided insufficient notice of its Terms of Use, and thus, insufficient notice of an agreement to arbitrate claims.  Kevin Khoa Nguyen v. Barnes & Noble Inc., No. 12-56628 (9th Cir. Aug. 18, 2014) (Noonan, Wardlaw, Silver). 

     The Terms of Use, available via a hyperlink in the corner of every page of the Barnes & Noble website, was part of a “browsewrap” agreement.  The Court explains that contracts formed on the Internet “come primarily in two flavors” – “clickwrap” and “browsewrap.”  With a clickwrap agreement, the user affirmatively consents to the terms and conditions of use by clicking on an “I agree” box.  With a browsewrap agreement, however, “a website’s terms and conditions of use are generally posted on the website via a hyperlink at the bottom of the screen.”

     The Court does not exactly chuck browsewrap agreements out the window, because it explains that “the validity of the browsewrap agreement turns on whether the website puts a reasonably prudent user on inquiry notice of the terms of the contract.” 

     “[P]roximity or conspicuousness of the hyperlink alone is not enough to give constructive notice,” explains the Court.  Instead, something more is needed, “to capture the user’s attention and secure her assent.”  Fn. 1.  Here, even though the website link to Terms of Use may have been conspicuous, “there is no evidence that the website user had actual knowledge of the agreement . . . “

     The Court holds, “in keeping with courts’ traditional reluctance to enforce browsewrap agreements against individual consumers”, that:

“where a website makes its terms of use available via a conspicuous hyperlink on every page of the website but otherwise provides no notice to users nor prompts them to take any affirmative action to demonstrate assent, even close proximity of the hyperlink to relevant buttons users must click on – without more – is insufficient to give rise to constructive notice.”

      NOTE:  This case should help e-commerce merchants see the benefits of clickwrap over browsewrap agreements.