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US court dumps on “browserwrap” T&Cs

Zappos’ customer contract tossed

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A Nevada court ruling against Zappos has reiterated what companies the world over should have worked out for themselves: “browserwrap” terms and conditions aren’t worth the paper they’re not written on.

Zappos is being sued over a data breach which earlier this year exposed millions of customers’ names, e-mail addresses, phone numbers, password hashes and home addresses. The Amazon subsidiary tried to fend off a class-action lawsuit by sending the matter to arbitration, citing its terms of service.

Unfortunately for Zappos, the court says the agreement is unenforceable.

Zappos.com’s terms and conditions had tried to demand that disputes had to go to arbitration in Nevada – hence the jurisdiction of this decision – and, as is all too common, asserted the right to “change this site and these terms and conditions at any time”.

If you wish to swim through the entire judgement, the PDF is here, with an analysis by Eric Goldman at his Technology and Marketing Law Blog here.

The short version is that the users now suing Zappos didn’t agree to the terms and conditions, so there wasn’t an enforceable contract in place. This isn’t a new legal principle: this decision cites cases as far back as 2002’s Specht vs. Netscape decision: “Because no affirmative action is required by the website user to agree to the terms of a contract other than his or her use of the website, the determination of the validity of a browserwrap contract depends on whether the user has actual or constructive knowledge of a website’s terms and conditions”.

In this case, the court found that Zappo’s terms and conditions link was, in essence, hidden away where nobody read it – and since the users didn’t know the document existed, they weren’t bound by it.

Moreover, the court decided that Zappo’s attempt to give itself the right to change the T&Cs at any time and without notification rendered the contract “illusory”: “the agreement allows Zappos to hold its customers and users to the promise to arbitrate while reserving its own escape hatch”.

Zappo’s “highly inconspicuous hyperlink buried among a sea of links” did not bind users to arbitrate, the court found.

So be reminded: if your customers don’t have to consent to the terms and conditions, US courts won’t consider them enforceable.

As for the Zappos case: since arbitration isn’t available, the company will either have to settle with its plaintiffs, or let the case go to court. ®

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