Litigation surrounding the enforceability of website terms isn’t new.  Indeed, back in 2014, we blogged about the Nyugen case. Yet, courts continue to grapple with the question of what constitutes an adequate disclosure and binds website visitors to the terms and conditions of a service agreement.

Last month, the Seventh Circuit decided in Sgouros v. Transunion Corp. that an online browsewrap contract was not binding because it did not provide notice that the customer was subject to the agreement.  The plaintiff had purchased a credit score from a website, but claimed that he later found out that the credit score he purchased was 100 points higher than one he later received.  As a result, he filed a putative class action alleging violations of the Fair Credit Reporting Act and state deceptive business practice laws.  TransUnion sought to compel arbitration based on its website terms.

The plaintiff argued that the terms, and thus the arbitration clause, were unenforceable because they were not adequately disclosed.  According to the plaintiff, the checkout page showed a scroll box with only a few lines of the entire service agreement.  It looked like this:


The defendant was trying to enforce an arbitration agreement that was not visible unless the user first scrolled through eight printed pages worth of text in the narrow scroll box.  As you can see, directly below the scroll box, the website required the user to click a button that read “I accept and continue to step three.”  Immediately above the “I accept” button appeared language stating that, by clicking the button, the user authorized TransUnion to obtain the necessary information to confirm the user’s identity and display the user’s credit data.  But there was no mention of accepting the terms in the scroll box.

The Sgouros court applied two-part “reasonable communicativeness” test:  (1), whether the web pages presented to the consumer adequately communicated all the terms and conditions of the agreement, and (2) whether the circumstances supported the assumption that the purchaser had reasonable notice of the terms.  The Seventh Circuit found the disclosure insufficient in a number of ways:  Nothing on the web page at issue clearly stated that the purchase was subject to any terms and conditions, the only visible language in the scroll box did not clearly indicate that the contents purported to bind purchasers of consumer credit scores, and the language above the “I accept” button said nothing about accepting contractual terms buried deep in a scroll box.

Internet arbitration provisions in customer agreements became a renewed topic of conversation in Congress last year.  Congress has already addressed the issue in contracts for financial products and services under the Dodd-Frank Act by providing the Consumer Financial Protection Bureau with the authority to ban arbitration clauses that would prevent consumers from participating in class action lawsuits, a measure which is now under consideration by the CFPB.

In the courts, Internet arbitration agreements with site users are enforceable, as long as there is sufficient indication that the users understood they were agreeing to the terms.  Sgouros provides a cautionary lesson for Internet marketers:  If you want your terms enforced, review your site’s layout and language for clarity.