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Federal District Court Articulates Criteria for Effective Presentation of Electronic Contracts
In Berkson v. Gogo LLC, 2015 WL 1600755 (E.D. NY 2015), the Eastern District of New York denied a motion to dismiss and compel arbitration filed by an in-flight wifi provider. The provider was accused in a class action suit of duping customers into signing up for a monthly service without their knowledge. The plaintiffs alleged that the graphics and text of the website misled them to believe that they were purchasing only a single month of use, while concealing that the agreement was actually a subscription agreement for monthly services and a recurring monthly charge. At issue in the motion to dismiss was the enforceability of two separate agreements used to enroll customers, and in particular terms in those agreements related to mandatory arbitration and exclusive venue, which the defendant sought to invoke. The first contract presented a “Clickwrap” agreement—whereby the consumer checked a box presented next to the phrase “I accept the terms of use.” The second contract presented a “Signwrap” agreement—whereby the consumer clicked a sign-in button presented below a statement indicating that by signing in, the consumer agreed to the “terms of use.” In both instances, the phrase “terms of use” was a hyperlink presented in plaintext that would take the consumer to the contract terms, if clicked. Also in both cases, the actual button used to enroll customers was considerably larger than the hyperlink and presented in color. The plaintiffs argued that the agreements should not be enforced because the website pages on which they appeared were designed so that the terms were deliberately hidden and were never seen or agreed to by them.
As part of its analysis, the court reviewed a number of prior judicial decisions involving electronic consumer contracts, which closely scrutinized the manner in which agreement terms are disclosed to consumers on electronic platforms. The court also reviewed a number of empirical studies analyzing viewing and reading behavior (including eye tracking patterns) where consumers were presented with materials on a computer screen. The court concluded that in general an electronically presented agreement will be enforceable if (i) the website presenting the agreement puts a reasonably prudent user on inquiry notice of the terms of the contract; (ii) the user is encouraged by the design and content of the website and webpage to examine any agreement terms that are made available via a hyperlink; and (iii) the link to the agreement is placed where the user is likely to see it.
The court also observed that in this case the agreements qualified as “contracts of adhesion”, and so should also not be enforced unless it could be demonstrated that the user was, by virtue of the design of the agreement pages on the website, given adequate warning of adverse terms in the agreements, such as mandatory arbitration or exclusive venue.
Based on its analysis and review of the web pages presenting the agreements at issue, the court denied the defendant’s motion, concluding that the Signwrap agreement was unenforceable because the design and content of the web page did not make the agreement readily and obviously available, and its importance was obscured by the process (which involved clicking a button labeled “sign in,” rather than one labeled “accept” or “I agree”), and the defendant had not demonstrated that the Clickwrap agreement actually required the consumer to check the “I agree” box before enrolling the consumer in monthly services. The court also noted that the plaintiffs were not given an opportunity to retain a copy of the agreement, nor was one automatically provided to them.