The Zappos Case - The Enforceability of a Browsewrap Terms of Use

Jun 3, 2014 10:37:06 PM

One of the most prominent cases that relates to the enforceability of a browsewrap agreement is the Zappos.com, Inc. customer data security breach case. The Zappos case resulted from hackers who breached the Zappos.com security and were able to the access the personal information of the sites customers who had completed purchases from the website. The security breach exposed names, addresses, and phone numbers of the customers. The customers of Zappos.com then brought a class action lawsuit for damages that were a result from the data breach.

Zappos tried to prevent the class action by filing a motion to compel arbitration. Zappos argued that the customers were required to participate in arbitration individually instead of pursuing a class action suit because they automatically agreed to the terms of use (which contained an arbitration clause) when they used the Zappos.com website. These type of browsewrap agreements are created when a user indicates they have accepted the terms of service of the website without clicking a button or checking a box, but merely by accessing or browsing the site.

The Court denied Zappo’s motion to compel arbitration (thus allowing the class action to proceed) and found Zappo’s terms of use was not enforceable for a number of reasons. First, the terms of use hyperlink could be found on every Zappos webpage, between the middle and bottom of each page, but it was only visible if the user were to scroll down to the bottom. For example, when the homepage of Zappos.com was printed out as a hard copy, the link appeared on page 3 of 4. Additionally, the terms of use hyperlink text was the same size, font, and color as most other non-significant text links. Finally, the website did not direct a user to the terms of use when creating an account, logging in to an existing account, or making a purchase. The court concluded that “where, as here, there is no acceptance by Plaintiffs, no meeting of the minds, and no manifestation of assent, there is no contract pursuant to Nevada law.”

Going forward post Zappos, it is important to note other states may rule differently with regards to browsewrap agreement, but the current precedent set by the Zappos case is a good indication of future decisions regarding browsewrap agreements. Best practices suggest that it is important to make the Terms of Use link clear and conspicuous to a website user. This is accomplished by not burying the link in the middle of the page, and keeping it present at all time that the users are notified that Terms of Use exist.

Brian Powers

Written by Brian Powers

PactSafe CEO & Founder