Clickwrap Kryptonite: Don’t Let Site Design Undermine Your TOS

clickwrapWe previously covered the developing legal issues with browsewrap agreements and the importance of reviewing and updating any such agreement to ensure users are bound to the terms. In a browsewrap agreement, the user’s assent to the agreement’s terms is inferred from the user’s use of the website. Often, the terms of a browsewrap agreement are accessible from a hyperlink placed on one or more webpages of the company’s website. As we mentioned in our initial post, browsewrap agreements have a close, usually more dependable relative—the “clickwrap” agreement. A clickwrap agreement requires the user to click a button to affirm assent to the agreement’s terms. As a result of this direct, affirmative action, many lawyers view clickwrap as a safer alternative than its browsewrap cousin.

But whereas our June 6th post looked at three cases where the enforceability of browsewrap agreements was successfully challenged, that’s not to imply it’s been smooth arbitration-only waters for those who employ clickwrap agreements. A recent Seventh Circuit decision, decided under Illinois law, offers some stringent criticism of clickwrap agreements. And once again, it all comes down to site design and user experience.

In Sgouros v. TransUnion Corp., No. 15-1371 (7th Cir. March 25, 2016), the appeals court refused to enforce an arbitration clause because it found that the layout of the site and the language used did not provide the Internet user with reasonable notice that clicking the button would manifest an assent to arbitrate. The plaintiff purchased a “credit score” package from TransUnion, and he later filed a putative class action suit, alleging that TransUnion provided him with an erroneously high number that was useless to him in his negotiations with a car dealer. TransUnion moved to compel arbitration, which the district court denied.

Sgouros’ purchase involved a 3-step process. The first page required the user to enter some identifying information and then select “Yes” or “No” in response to the following prompt: “Please send me helpful tips & news about my service, including special offers from TransUnion and trusted partners!” Next, the user would click a large orange button labeled “Submit & Continue to Step 2.” It was this second page that was at issue in the dispute. Once on the second page, the user is asked to create an account user name and password and to type in credit card information. The user is also asked whether “your home address [is] the same as your billing address?” with “Yes” and “No” bubbles. Below this question, there is a rectangular scroll window. In the scrollable window, one can see only the first two-and-a-half lines of a “Service Agreement.”

The appeals court reproduced this page in the opinion below:


Had Sgouros scrolled down the window and read to page 8 of the 10-page agreement, he would have found the arbitration clause. Below the scrollable window was a hyperlink to a printable version of the agreement and a bold-faced paragraph memorializing an “authorization” to obtain credit information. Below the hyperlink, a bold-face paragraph stated:

You understand that by clicking on the “I Accept & Continue to Step 3” button below, you are providing “written instructions” to TransUnion Interactive, Inc. authorizing TransUnion Interactive, Inc. to obtain information from your personal credit profile from Experian, Equifax and/or TransUnion. You authorize TransUnion Interactive, Inc. to obtain such information solely to confirm your identity and display your credit data to you.

At the very bottom of the page was a button labeled “I Accept & Continue to Step 3.”

The appeals court had a number of issues with the scrollable window. For example, it noted that the arbitration clause was not visible in the window, did not call the user’s attention to the existence of the arbitration clause in any way, did not require the user to acknowledge the scrollable window (e.g., scroll to the bottom of the window or click on the scroll box), the hyperlinked version of the agreement was labeled only “Printable Version”—not “Terms of Use” or “Purchase” or even “Service Agreement,” and the bold-faced paragraph was merely an authorization, not an acceptance of terms. In fact, the court found that the button labeled “I Accept” actually misled the consumer to thinking that this was an acceptance of only the authorization’s terms. “No reasonable person would think that hidden within that disclosure was also the message that the same click constituted acceptance of the Service Agreement.”

While TransUnion argued that clicking on the button that said “I Accept & Continue to Step 3” by Sgourous was sufficient and cited support that courts have recognized that this type of electronic “click” can suffice to signify the acceptance of a contract, the Seventh Circuit stated that the inquiry was fact intensive. Based on the present facts, the appeals court noted “we cannot presume that a person who clicks on a box that appears on a computer screen has notice of all contents not only of that page but of other content that requires further action (scrolling, following a link, etc.).” The scrollable window is not, the Seventh Circuit held, “in itself, sufficient for the creation of a binding contract.”

This case suggests it may be best practices to avoid a scrollable window altogether, relying instead on a pop-up window that flags the arbitration provision and requires specific assent to the provision. If a scrollable window is to be used for the services agreement, there should be visible text on the page (apart from the window) notifying the user of important clauses and indicating that the electronic click indicates an assent to be bound by the Terms of Service. Also advisable? Requiring the user to acknowledge the terms of agreement by scrolling through the window before completing purchase. What is evident is that courts have been looking more skeptically at both browsewrap and clickwrap agreements, especially when enforceability impacts waiving significant rights like the right to a jury trial.