The vast majority of Terms of Service (TOS) on websites are unenforceable. Companies spend a great deal of time and money in crafting what they believe to be appropriate website specific TOS which they hope will provide them with the various protections, safe harbors and advantages needed in dealing with the public or in transacting business. Countless hours are spent honing, devising, revising and fine-tuning clauses on limitations on damages, choice of forum and law, mandatory arbitration, automatic renewals, jury waivers, IP ownership clauses, assignments and licenses. Eventually, they are crafted just the way the entity wants them and they are posted. After the countless hours of design, reflection, revisions and thousands of dollars in legal fees, the appropriate well-crafted TOS appear. Unfortunately, in most cases, those bits will not have any legal byte!

When the entity goes to enforce the TOS, believing they have entered into a contract with their users, they are unpleasantly surprised time and again by judges who refuse to enforce them. 

Most websites do not have an affirmative mechanism for users to acknowledge their acceptance of the TOS. In the vast majority of cases, links to the TOS are relegated to the very bottom of the home page of the website where you have to scroll through several, if not dozens, of screens before you reach them where they are presented in a light and tiny font that says “Terms of Service,” “Legal” or some other vague descriptor. Most websites do their best to, and are usually successful at, getting people engaged in the website and off the landing page, so that almost no users ever get to the bottom of the screen or bother to click on the TOS hyperlink.

If you click on “Terms of Service,” a hyperlink takes you to the actual TOS. Usually, the TOS begins with language saying, “By using this website you agree to the Terms of Service.” However, in reality very few visitors ever click on the TOS link, let alone affirmatively agree to them.

However, if one is not aware of the terms of a contract, and therefore does not agree to them, one is not going to be bound by the terms. In order to make the TOS enforceable, it has to be a binding contract. You can enter into a contract by signing it, by taking affirmative actions (or forbearance) but not by inaction contract.

There are two types of online website licenses, “click licenses” and “browser licenses.” Click licenses are generally enforced by the courts. Those are the ones where users have to affirmatively state that they agree to the TOS before entering the site and/or completing a transaction. There is usually a prominent hyperlink to the TOS right next to the “I Agree” button. In a recent U.S. Court of Appeals for the Ninth Circuit case that came down at the end of August (Nguyen v. Barnes & Noble Inc.), the court was fairly direct in its requirements that a party actually needs to click on an “I Accept” button or must have knowledge of the TOS for it to be binding. Even prominent notices that there is a TOS will not work.

In the Nguyen case, the plaintiff initiated a California false advertising and deceptive practice case against Barnes &Noble over the purchase of a laptop. Barnes &Noble had a conspicuous “terms of use” link on the bottom of every page, along with other links on its website. The Ninth Circuit noted a “traditional reluctance” to enforce browse wrap agreements against individual consumers, particularly if there is nothing in the record that would have indicated that they had been viewed by the user. The plaintiff neither clicked on the links nor read the terms. As such, the plaintiff argued that he had no notice of the arbitration requirement and therefore did not agree to it. Barnes & Noble argued that he had sufficient constructive notice of the terms to make it enforceable. The court held, “The proximity or conspicuousness of the hyperlink alone is not enough to give rise to constitute notice.” The district court ruled against Barnes & Noble, and the Ninth Circuit affirmed. There is a similar holding in the Second Circuit in Specht v. Netscape Commc’ns Corp.

The message is clear: If one wants to be able to enforce its Terms of Service, a mechanism for the user to view the terms and then affirmatively agree to them must be provided.