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July 14, 2016Download PDF

Click-Wraps, Browse-Wraps And Arb Traps: What Rights Are You Giving Up When You Purchase Products Or Services Online?

If you’ve ever bought a product or signed up for a service online (and, given the fact that you’re reading this blog post right now and/or have not been living under a rock for the last decade, you probably have) you’ve almost certainly bound yourself to terms and conditions you never read and in all likelihood never even knew existed.

Modern websites continue to get more sophisticated in how they engage and interact with customers. The monetization of the internet has led to many advances in how people buy goods, do business online, and enter licensing agreements regarding the use of software. However, the rapid evolution of the internet as a medium for entering into contracts and purchasing products has left open certain legal problems when a customer manifests his or her assent to a contract or terms and conditions online.

Generally there are two types of agreements on websites used to contract with customers: “browse-wrap” and “click-wrap” agreements.

A browse-wrap agreement is one where the terms of an agreement are located on a website, but are often connected to the main web page of the product by a hyperlink to another web page that contains the contracts terms and conditions. Normally there is no affirmative manifestation of assent necessary to agree with the terms located on the linked web page. The customer must also affirmatively click the hyperlink to even access and become aware of the terms of the agreement.

By contrast a click-wrap agreement is one where the website requires the customer or user to affirmatively review the terms of an agreement through a series of pop-up windows that ask for the customers to click a button showing that they agree to the conditions. Under a click-wrap agreement the website puts the terms of the agreement directly in front of the user and requires them to show that they affirmatively accept the terms by clicking a button.

Though courts are generally inclined to uphold click-wrap agreements, which actually place the relevant terms in front of the customers, more often than browse-wrap agreements, in either case those customers, by the simple click of a button, are arguably agreeing to a set of conditions that will govern nearly every aspect of their future relationship with the seller. One of the most frequently-included conditions – in fact, a staple of nearly every consumer contract today – is an “Agreement to Arbitrate,” whereby the customer gives up all rights to pursue any legal claim against the seller in court and agrees to submit the claim to arbitration, a non-judicial dispute resolution mechanism. Such agreements also typically require the customer to give up the right to bring such claims, whether in court or through arbitration, as part of a class action.

Arbitration agreements, if found to be enforceable, are an effective tool for companies to limit their potential liability for false advertising, fraud, and defective products: when the dollar amounts in dispute are relatively small (as is the case with most consumer transactions), the only practical method for seeking consumer redress is through a class action. After all, who would bring an individual lawsuit, or be willing to go through the arbitration process, over a $10 or $20 purchase? A savvy and suitably unscrupulous company, through an arbitration agreement and class-waiver buried in terms and conditions customers may never see, can therefore immunize itself from consumer fraud lawsuits knowing that it can chip away a dollar here or a dollar there, make a false statement here or a misleading statement there, generating millions of dollars in revenue and leaving its customers without any viable mechanism to stop it.

What can consumers do to avoid this? The first step is to be aware of these click-wrap and browse-wrap agreements in the first place and to make sure to review them prior to finalizing the purchase. In the case of arbitration clauses, many of them (and, in particular, the ones most likely to be held enforceable by a court) allow the customer to opt out of binding arbitration by following certain specified steps, typically informing the company over the phone or in writing of the customer’s desire to opt out of arbitration within 30-60 days of the purchase. This is always a wise thing to do: despite the fact that no one makes a purchase thinking that they will need to sue the seller down the line, if and when circumstances become such that a lawsuit is an appropriate mechanism to address a grievance or right a wrong, consumers should not have that option denied them because they unwittingly signed it away. And, even if never used, the simple threat of a class action lawsuit serves as an important deterrent against unethical and even illegal corporate conduct. When that threat dissipates, the temptation to bend the rules without any real risk of reprisal understandably grows.

So, as a more litigation-minded, internet-savvy Timothy Leary might have said: “Turn on, Log in, Opt out!”