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In response to the global pandemic, there was a huge shift towards online business in 2020. In fact, e-commerce sales increased 30% in the first two quarters of 2020 alone. As a result, it has become more important than ever for companies to protect themselves by making sure their online terms are enforceable in court. To do that, they'll need to be able to show consent to certain actions, enforce arbitration or forum selection clauses, and much more.
But, like most things in 2020, the task of enforcing terms in court has not been easy. The overall success rate for companies trying to enforce their terms in court was just 60%, compared to 70% in 2019. This blog post will give an overview of some stats and trends we saw play out in the courts in 2020 for companies trying to enforce ‘wrap agreements (clickwrap, sign-in-wrap, and browsewrap).
Content Download: Clickwrap Litigation Trends: 2020 Report
Of the three main types of online agreements disputed in 2020, 63% were clickwrap agreements, 30% were sign-in-wrap agreements, and 6% were browsewrap agreements.
Of those, 70% of clickwrap agreements were successful, 64% of sign-in-wrap agreements were successful, and 14% of browsewrap agreements were successful. Compared to 2019, clickwrap and sign-in-wrap agreements increased in popularity while the use of browsewrap agreements decreased significantly. Additionally, success rates for all three types of agreements decreased.
Arbitration clauses were the most common clause companies tried to enforce, with rulings on motions to compel arbitration comprising nearly 89% of ‘wrap cases that came out this year.
Forum selection clauses were a distant second most common clause, with rulings on motions to transfer venue pursuant to a forum selection clause comprising only 6% of cases.
Other common arguments included consent based on contract terms and enforcement of non-competes and non-disclosure agreements.
Related Content: Clickwrap Litigation Predictions for 2021
This year, finance was the top industry trying to enforce their terms in court, taking up 18% of cases. These cases involved traditional financial institutions like credit unions and banks, as well as some fin-tech companies. Some notable mentions for this industry include Intuit, Wells Fargo, Upstart Network, and Merrill Lynch.
E-commerce came in at a close second, taking up 15% of cases. Some notable mentions for this industry include Amazon.com, Walmart, and Shutterfly. Gig economy companies, such as Uber and DoorDash, came in third with 11%. Other industries hit consistently include online marketplaces, travel, and gambling/online gaming.
Most companies used a combination of the three different types of evidence: 23% of companies relied on screenshots and declarations or affidavits, 14% of companies relied on a combination of all three types of evidence, and 12% relied on back-end records and declarations or affidavits. Additionally, 17% of companies relied solely on declarations or affidavits, and 9% relied solely on screenshots. Notably, 18% of companies either offered up no evidence or relied solely on what was written in the motions to enforce the terms, the complaints, the answers, replies, etc. to support their stance.
Poor screen design was the most commonly violated best practice. 43% of companies that were unable to enforce their terms lost because the screens failed to put users on notice of the terms. They did so by failing to make the agreement language and corresponding button conspicuous, using browsewrap agreements instead of clickwraps to alert users of the terms, choosing poor language to reference the terms, pre-checking checkboxes, and not spatially locating agreement language next to the corresponding button.
Related Content: How to Design and Present Enforceable Terms
The second most commonly violated best practice was lack of a robust back-end record. 26% of companies that failed to enforce their terms lost because they were unable to produce a robust back-end record of contract acceptance. Notably, several of these companies were able to produce a record of initial contract acceptance, but were unable to do so for modifications to the terms.
Other best practice violations include
The decreased success rate compared to 2019 indicates that courts continue to expect more when it comes to proving contract acceptance. They want to see robust back-end records of acceptance and screenshots demonstrating a solid screen design that put users on notice. But we saw an increase in the number of companies failing to bring these types of evidence to the table.
More companies are replacing browsewraps with sign-in-wraps and clickwraps, which indicates that many companies are becoming more comfortable with using ‘wrap agreements. But not everyone is paying special attention to screen design with the transition as that was the most commonly violated best practice.
All contracts are important, but certain industries face a higher level of scrutiny when it comes down to enforcing them. Companies working in heavily regulated industries need to be careful and make sure that they are adhering to best practices in the contract formation process.
WATCH: Summary of 2020 Clickwrap Litigation Report
The following cases were particularly important this year:
Kemenosh v. Uber Technologies, Inc. This case is notable because the court here explicitly shows a preference for clickwrap agreements over sign-in-wrap agreements. We see this preference a lot in case law, but this case lays it out nicely by expressly stating that Uber would have fared better if they had used a clickwrap agreement to capture user acceptance of the terms.
Valley v. Merrill Lynch. This case is important for several reasons. First of all, this case demonstrates that clickwrap agreements can be used in more heavily regulated industries, such as finance. Companies like Merrill Lynch can use clickwrap agreements to automate and standardize workflows while still minimizing risk by forming valid contracts.
Secondly, this case is a great example of a company seeking to enforce something in their terms other than an arbitration clause. Motions to compel arbitration are the most common motions we see in case law relating to clickwrap agreements, but not every company has arbitration clauses to enforce. As a result, this case is a great one to show companies that clickwrap agreements can be valuable even if they don’t care as much about enforcing arbitration clauses.
Snow v. Eventbrite. This case is influential because the court here was less forgiving than many courts have been in the past with online contract cases. The court expected Eventbrite to establish exactly what the screen looked like to consumers when they accepted the terms, as well as the exact set of terms they accepted. Eventbrite, like many companies, was unable to meet this expectation. Eventbrite did not demonstrate to the court what version of the contract the consumers agreed to, nor could they produce a screenshot of what the screen looked like when the consumers at issue signed up. Instead, all Eventbrite could produce was screenshots with layouts “exemplary” to what the consumers would have seen.
Nicosia v. Amazon.com. This case is important for several reasons. First and foremost, this case is a new development in one of the most widely known online contract cases. As a result, it’s one that many people follow and was big news for those who keep up with case law in the industry. Secondly, this case is an outlier case in terms of why the court granted Amazon.com’s motion. In most cases, courts are focused on whether consumers had reasonable notice of the terms and that they were agreeing to them before the conduct leading to the lawsuit took place. In this case, the court took a different approach and found that even if the consumer was unaware of the terms initially, after so many years in litigation, and after continuing to make purchases on Amazon.com over the years, the user is now on notice of the terms and bound by them as a result. This was not a good ruling, will likely not stand, and does not set a good precedent for other courts.
Check out our 2020 clickwrap litigation report! And stay tuned for our 2021 report!