Hyperlinked Contract Terms Are Enforceable

from the even-if-not-visited? dept

There have been plenty of questions over the years about the enforceability of online contracts, especially of the "clickwrap" variety. However, a recent ruling apparently says that contract terms are acceptable even if hidden behind a hyperlink. Apparently, the court found that because the link to the terms is "highlighted" in a different color, it's consider conspicuous enough that a reader should have clicked on it and read it.

Now, that's interesting to me, because I'd just been reading law professor Peter Friedman's blog post for his first year Contracts law class, where he talks about how few people actually read online agreements, and how many people probably agree to things they didn't think they had agreed to:

65 out of my 66 students (law students in a contracts class!) admitted in our first class they rarely or never read the online agreements they "agree" to. The only empirical survey I am aware of regarding consumer behavior in connection with online agreements found the following 7 years ago:

• 50% of the respondents said that they sometimes read online agreements and 40% never read them;
• Thus, only 10% of the respondents always read the online agreements that they encountered;
• Well over half of the respondents (64%) always click the Accept button and most of the others (35%) some times Accept;
• More than half of the respondents (55%) didn't believe that they were entering into a legally binding and enforceable contract even after clicking I Accept;
• Most (79%) never ever kept a copy of any click-wrap agreement that they entered into;
• The majority of respondents (90%) indicated that they never completely read shrink-wrap agreements;
• 38% of the total respondents came from the IT/Internet/E-commerce industries.

Andrew Gatt, "Electronic Commerce -- Click-Wrap Agreements: The Enforceability of Click-Wrap Agreements," doi:10.1016/S0267-3649(02)01105-6 (2002).

We've seen similar things in experiments that offered prizes within the clickwrap agreements, to see if anyone claimed them -- and it took four months and 3,000 downloads for anyone to claim the prize. In many ways, this actually reminds me of an old story about Van Halen's concert contracts with local promoters and venues, that was getting lots of attention last month, after it was featured on an episode of This American Life. Many people have heard the story of how the band had a rider in its contract demanding a bowl of M&M's backstage with all the brown ones removed. And most people who heard that story assumed it was a sign of rockstar divas with ridiculous demands. However, the true story is that it was actually in there to see if the people setting things up had actually read the details of the contract:

Van Halen was the first band to take huge productions into tertiary, third-level markets. We'd pull up with nine eighteen-wheeler trucks, full of gear, where the standard was three trucks, max. And there were many, many technical errors -- whether it was the girders couldn't support the weight, or the flooring would sink in, or the doors weren't big enough to move the gear through.

The contract rider read like a version of the Chinese Yellow Pages because there was so much equipment, and so many human beings to make it function. So just as a little test, in the technical aspect of the rider, it would say "Article 148: There will be fifteen amperage voltage sockets at twenty-foot spaces, evenly, providing nineteen amperes . . ." This kind of thing. And article number 126, in the middle of nowhere, was: "There will be no brown M&M's in the backstage area, upon pain of forfeiture of the show, with full compensation."

So, when I would walk backstage, if I saw a brown M&M in that bowl . . . well, line-check the entire production. Guaranteed you're going to arrive at a technical error. They didn't read the contract. Guaranteed you'd run into a problem. Sometimes it would threaten to just destroy the whole show. Something like, literally, life-threatening.

And, indeed, what the band found out is that the contract is just as enforceable whether or not you read the contract -- and that appears to be the result online too. While I have heard of a few cases of courts rejecting clickwrap agreements, it certainly sounds like more and more are considering them to be viable, legally-binding contracts.

Filed Under: contract, eula, hyperlink