E-contracts: Click Wrap and Browse Wrap Contracts – Illusion of Consent

In today’s time, website usage has increased due to fast and quick access to the information, knowledge, product, etc. Such flexible and approachable way of working has attracted ample of customers and websites have become an effective source of communication, which in turn have introduced non-traditional methods of contracting. Such e – contracts are termed as wrap contracts and are generally preferred in online transaction as it increases speed, suitability and efficiency for engaging the third parties in a contractual relationship.

Wrap contracts are the non-traditional adhesive contracting forms that are not physically signed by the adherent. Courts have categorized such contracts into “clickwraps,” “browsewraps” and “shrinkwraps.” The details, validity and provisions relating to stamping of above mentioned contracts have been mentioned in our previous blog on E – contracts.  We reiterate that there are no concrete judicial precedents on the validity and the necessity of wrap contracts.

Recently in a landmark case, Brett Long v. Provide Commerce, Inc., California Appellate Court laid down the essential ingredients which shall constitute a browse wrap agreement and which might support in proving the validity of such contract in the absence of actual notice. Browse-wrap agreements are commonly used for online market model. It binds the customer under a contract even though he has not referred to the terms of use of that particular website. It is presumed that the customer is aware about the terms of use and has assented to a contract by his/ her use of that particular website.  Wrap contracts permit the online companies to have contracts in place with numerous customers without negotiating with them individually and permits the companies to save electronic signatures.

Glimpse of the Brett Long v. Provide Commerce, Inc. case

Provide Commerce, Inc. (“Respondent”) operates a floral arrangement website, ProFlowers.com, where Brett Long (“Plaintiff”) purchased a flower arrangement that was shown as pre flower arrangement on the website of the Respondent. On the delivery of such flower arrangement, Plaintiff contended that it was do it yourself project, which was contrary to the specifications displayed on the Respondent’s website.  Plaintiff filed a lawsuit in the trial court of California against the Respondent. Respondent petitioned to compel the process of arbitration on the basis of an arbitration clause mentioned in the company’s browsewrap agreement on the ProFlowers.com website instead of litigation as initiated by the Plaintiff.

Browse-wrap contracts does not require users to affirmatively click a button confirming the terms of use, instead user’s assent is inferred from his or her use of website. This browse-wrap agreement was viewable to consumers by clicking a hyperlink entitled “Terms of Use” that was displayed at the bottom of each page of the website. Plaintiff alleged that he was not bound by the provisions of the Respondent’s terms of use as he never agreed upon and he had not read the terms of use before placing his order on the Respondent’s website.

The trial court and California court of appeal granted decisions in favour of Plaintiff and stated that a mere hyperlink to a website’s “Terms of Use” is not sufficiently conspicuous to provide the consumer with notice of the terms. Additionally, any pivotal link i.e. terms of use and privacy policy placed in a submerged screen on the website shall not be deemed to have been accepted by the user’s. The California Appellate Court established that the terms of use hyperlinks were not sufficiently conspicuous to put a “reasonably prudent Internet consumer” on inquiry notice and that the Plaintiff did not manifest his unambiguous assent to be bound. Therefore, the parties in this agreement were not bound by the provision of arbitration or the forum selection clause as specified in terms of use provided on the Respondent’s website. Such a view has a far-reaching effect on the enforcement of e-contracts.

Moreover, the main reference case in the above judgment was of Nguyen v. Barnes & Noble Inc. The emerging concept of bright line rule was referred in this case. The courts were persistent to state that if the users had the knowledge about the terms of use of the website, then the same would be applicable to the users. The courts have specifically established that the browse-wrap agreement shall be considered to have been accepted by the users only if the reasonably prudent user receives an intimation of the terms of use. But mere browsing on the website without the actual notice of the terms of use will not bind the users with the terms of use of the website.

Therefore, it was held 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 then the action of accessing the website won’t bind the users with the terms of use of that particular website. Moreover, even the close proximity of the hyperlink to relevant tabs which does not provide a constructive notice of the acceptance of terms of use to the user is insufficient ground for the enforcement of terms of use of the website. It was also noted that to establish the enforceability of a browse wrap agreement a textual notice should be required, which constitutes assent on continuous use. Therefore, a conspicuous hyperlink alone does not constitute reasonable notice.

Indian Contract Act, 1872 (“Act”):

Indian law has not developed with regards to e-contracts but in the context of recent changes and the legislation leading towards governing unfair terms in contracts, Indian courts are considering the contracts from the view of the weaker party. E – contracts are usually the standard form of contracts i.e. contract on “take it or leave it” basis or contract that cannot be negotiated. In such type of contracts, the other party has no choice but to adhere to the contract without negotiating its terms. See our previous blog on this subject which provides the Indian legal scenario surrounding all e-contracts.

Further, Supreme Court in Central Inland Water Transport Corporation Limited vs. Brojo Nath Ganguly held that an unfair or an unreasonable contract entered between the parties of unequal bargaining power was void under section 23 of the Act. Courts have become conscious and in most cases discharge the weaker party pursuant to the contract which is unfair and unilateral.

However, the courts have suo moto evolved certain principles which are favorable to the weaker party. But this does not take away the principle of “caveat emptor” or “buyer beware”. The customers or consumers continue to be obligated to read and understand the terms of use before accepting the terms on the website.

Additionally, law commission in its 103rd report dated 31st August, 2006, analyzed in detail about the consequences of the unfair terms in the contract and proposed to insert a separate set of general provisions to deal with unfair terms of contracts. Considering the growing demand of e – contracts, the legislators and the judiciary have shown immense interest to stabilizing the situation and are trying to curtail the growth of one-sided contracts having unequal bargaining power. This in turn shall protect the weaker party from being exploited and being forced to adhere to a coercive contract.

Conclusion:

The law in this area is not clear and to establish “consent” in such type of contract is still dicey. It can be noted through the above judgments that the courts, in the browse-wrap contracts have acknowledged that the constructive assent of the user is an essential element for the enforceability of contract and not mere the mention of the hyperlink on the website can be presumed that the users have agreed and accepted the terms of use.

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