The McAllister case
• There was no “I agree” checkbox confirming her assent to them.
The Overstock case
In another US case, a court came to a different outcome based on different facts.
“[The plaintiff] lacked notice of the Terms and Conditions because the website did not prompt her to review the Terms and Conditions and because [the link] was not prominently displayed so as to provide reasonable notice”.
Reasonable notice and agreement
These two cases illustrate the importance of reasonable notice and agreement in online contracts. In short, a user must have “reasonable notice” of the terms, and there must be some form of agreement by the user, before a contract can be formed.
Although online contracts are a recent phenomenon, these requirements have long been recognised as fundamental in earlier, analogous situations.
For example, when a customer drives into a pay-and-display carpark, there is usually a sign at the entrance (in very small print) listing the terms and conditions of parking there. In such situations, the displayed terms form a binding contract, provided reasonable notice and agreement is given (and other legal requirements are met).
The same principles apply to online contracts. As the court said in the McAllister case:
“The legal effect of online agreements may be an emerging area of the law, but courts still apply traditional principles of contract law and focus on whether the plaintiff had reasonable notice of and manifested assent to the online agreement.”
It is also relevant that:
• A contract can be made regardless of whether a party actually reads the terms or not; and
• No particular form of acceptance is required.
As long as the parties do something that signifies acceptance (for example, parking in the car-park; completing an online purchase), a contract can be formed.
What is “reasonable notice”?
In contrast, in the Overstock case, the link to the terms (at the bottom of each page) was found not to be reasonable notice in those particular circumstances. There was no instruction to the user to read them prior to buying something on the site, and nothing to cause the user to scroll down to find them herself.
In the Overstock case, the restocking fee in the terms may have been a factor counting against the court finding them enforceable.
Key requirements for online terms
• The link should be prominently displayed on all relevant pages;
• There should be sufficient documentation so it can be proved at a future date that a certain form of terms and conditions (and notice of them) was in place; and
• The terms and conditions themselves should be “reasonable” in the circumstances.
It is good practice to require users to expressly agree to additional terms, covering the additional services provided to registered users, in a registration process. Having the additional terms in a separately agreed contract has the benefits of:
• Recording the express agreement;
• Under contract law, enabling a court to interpret disclaimer terms more favourably to the website operator than if they were contained in general website terms.
There has yet to be a New Zealand court case directly on this issue. However, as the cases discussed show, the legal principles relating to online contracts are generally settled. By being aware of those straight-forward principles, website operators can take steps to ensure their online terms are enforceable.
This article provides general information and does not constitute advice. Professional advice should be sought on specific matters. Burgess is a lawyer specialising in IT law at Clendons barristers and solicitors.
He can be reached at firstname.lastname@example.org