Studies in Ethics, Law, and Technology

Volume 5, Issue 1 2011 Article 4

Enforceability of Clickwrap and Browsewrap Terms in Australia: Lessons from the U.S. and the U.K.
Kayleen Manwaring

Recommended Citation: Manwaring, Kayleen (2011) "Enforceability of Clickwrap and Browsewrap Terms in Australia: Lessons from the U.S. and the U.K.," Studies in Ethics, Law, and Technology: Vol. 5: Iss. 1, Article 4. DOI: 10.2202/1941-6008.1102 Available at: http://www.bepress.com/selt/vol5/iss1/art4 2011 Berkeley Electronic Press. All rights reserved.

Enforceability of Clickwrap and Browsewrap Terms in Australia: Lessons from the U.S. and the U.K.
Kayleen Manwaring

Abstract
In a two week period in the first half of 2009, I bought theatre tickets from a virtual box office, browsed a social networking site a handful of times, and read a leading metropolitan newspaper online every day. All three of these activities, whether or not I was aware of it at the time, were intended by the service providers to be subject to contractual terms. For two of these activities I was asked to click on a button to indicate I agreed to these terms; for the other, I never even noticed a reference to the terms until I returned to the site for research purposes. I will admit freely that during my initial web activity, I was foolhardy enough to read none of the proffered terms. This paper asks the question: will the service providers nevertheless be able to rely on the protection of those terms? KEYWORDS: Internet, contracts Author Notes: Kayleen Manwaring, LLM (University of New South Wales). This paper was prepared based on research undertaken as part of UNSW's LLM program.

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1.

Introduction

In a two week period in the first half of 2009, from computers located in NSW, I bought theatre tickets from a virtual box office, browsed a social networking site a handful of times, and read a leading metropolitan newspaper online every day. All three of these activities, whether or not I was aware of it at the time, were intended by the service providers to be subject to contractual terms. For two of these activities I was asked to click on a button to indicate I agreed to these terms: for the other, I never even noticed a reference to the terms until I returned to the site for research purposes. I will admit freely I that I was foolhardy enough, during my initial web activity, to read none of the proffered terms. This paper asks the question: will the service providers nevertheless be able to rely on the protection of those terms? 2. 2.1 United States developments Definitions of clickwrap and browsewrap

The terms "clickwrap" and "browsewrap" gained prominence in the many U.S. decisions which consider the formation of contracts online. The terms were coined in imitation of the "shrinkwrap" licences that were found under the packaging of boxes of software1. A common type of clickwrap agreement is one where an internet user is presented with terms of use of a website (on a page, or in a scroll box), and must click on a button or in a checkbox which says, or write words in a box to the effect of, "I accept", in order to undertake a desired activity such as buying goods or downloading electronic files from the website. A browsewrap "agreement" is one where the website contains terms, usually available via a hyperlink, that do not require an active expression of assent before undertaking activities on the site (usually browsing)2.

Smith, GJH, Internet Law and Regulation, 2002, 3rd ed, Sweet & Maxwell: London, at 357 The categorisation of an agreement as a "clickwrap" or "browsewrap", even in the U.S., is not always clear. For example, Weise, B, "The enforceability of browsewrap agreements", Journal of Internet Law, 1 June 2004 and Adams, J, "Digital age standard form contracts under Australian law : 'wrap' agreements, exclusive jurisdiction and binding arbitration clauses" Pacific Rim Law and Policy Journal 13 (3) June 2004 503 (at 537) cite Comb v PayPal, Inc, 218 F Supp 2d 1165 (ND Cal 2002) as a clickwrap decision, but other commentators such as Trakman, L, "The Boundaries of Contract Law in Cyberspace" 2008 (at 57) and Darden, L and Thorpe, C, "Forming Contracts Over the Internet: Click-wrap and Browse-wrap Agreements", 2003 (at Part IV.C.2) classify it as browsewrap. In this case, the user was expected to click on an "I accept" button but was not required to scroll through the terms, which were available via hyperlink. In this paper, I
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2.2

The general U.S. position

The U.S. cases on clickwrap and browsewrap terms must be treated with some caution in an Australian context. Most of the decisions are reliant on interpretation of the U.S. Uniform Commercial Code3, rather than the common law, and many are interlocutory and/or the comments relating to enforceability are obiter. However, with these limitations in mind, these decisions can still provide some guidance on how the common law may apply in jurisdictions such as Australia. 2.3 Clickwrap terms

A number of cases in the U.S. have upheld the enforceability of clickwrap terms, and it appears to be settled law there that such agreements will be binding in the absence of special circumstances. Table A (Schedule 1) sets out a series of decisions where such terms have been assessed and accepted, almost without exception, by state and federal courts at both first instance and appellate level. Of course, enforceability may otherwise be affected by factors other than the fact that assent is indicated by a button click on "I accept", rather than by a physical signature4. In the case of Scarcella v America Online5, for example, wording on the website positively encouraged the acceptor not to read the terms before indicating assent. The court held this was perilously close to deceit, and declined to enforce a forum selection clause that significantly disadvantaged the website user. In Comb v PayPal 6 , clauses compelling arbitration and precluding class action contained in PayPal's clickwrap user agreement were held unenforceable on the grounds of unconscionability, because an average claim was so small compared to the cost of any action under the dispute resolution clauses.

have categorised these types of terms as "clickwrap" terms, because the required expression of assent distinguishes them clearly, I believe, from other browsewrap cases. 3 Blount, S, Electronic Contracts: Principles from the Common Law, 2009, Sydney: LexisNexis at 6.1 4 Ibid 5 Scarcella v America Online Inc 11 Misc 3d 19 (NY App Term 2005) 6 Comb v PayPal, Inc, 218 F Supp 2d 1165 (ND Cal 2002)
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2.4

The distinction between clickwrap and browsewrap Specht

Specht v Netscape Communications Corp 7 became the key case in the development of the U.S. law in both the clickwrap and browsewrap contexts. The decision clearly distinguished between the enforceability of clickwrap and browsewrap terms8. In this case, two software programs (Communicator and SmartDownload) were offered for free on Netscape's website. To download Communicator, a user was shown a scrollable text of the licence terms, and could not download the software without clicking on a "yes" button to indicate assent: a typical clickwrap agreement. The U.S. Court of Appeal held that, for online contracts, "[r]easonably conspicuous notice of the existence of contract terms and unambiguous manifestation of assent to those terms by consumers are essential"9. However, the court held that the enforceable clickwrap agreement governing the use of Communicator was not the one that was applicable in this case. It was the terms (or lack of them) governing the download of SmartDownload which were relevant. To obtain SmartDownload, users needed only to click on a "download" button and the purported terms applicable to the download were displayed via a hyperlink only available by scrolling down to the next screen after the button. The arbitration clause at issue in the case could only be viewed after scrolling through a number of screens. The defendants failed in compelling arbitration at both first instance and on appeal. The appeal court affirmed that: clicking on the "download" button did not indicate assent; and although it was accepted law that a party could not argue that there was no contract just because s/he did not read it before assenting, there is no contract if the terms are not clearly contractual in nature and notice is not drawn to them (a position very similar to basic Australian contractual principles).

2.5

Browsewrap, knowledge and the sufficiency of notice

The enforcement of browsewrap terms, with the absence of obvious assent, has been more difficult in the U.S. (see Table B, Schedule 1). The Specht rejection of the SmartDownload browsewrap terms reinforced this. However, Specht did not

Specht v Netscape Communications Corp, 150 F Supp 2d 585 (SDNY 2001) (first instance), affirmed at Specht v Netscape Communications Corp 306 F 3d 17 (2002) 8 Blount, Electronic Contracts, 6.15 9 n7, 28
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reject browsewrap terms outright and more recently, a trend towards enforceability may be emerging in the U.S.10. One of the very first browsewrap decisions, Pollstar11, did not follow the same reasoning as Specht, but this was an interlocutory decision and the court showed some reluctance to enforce the terms. However, the court was prepared to acknowledge "that people sometimes enter into a contract by using a service without first seeing the terms" and held that therefore the browsewrap terms it was considering in this case "may be arguably valid and enforceable". As the link to the terms were in grey on a grey background and were not underlined or otherwise indicated to be a hyperlink, it is unlikely this particular decision would stand up to post-Specht scrutiny, especially as the judge was not impressed with the sufficiency of notice of the terms. However, there has been two important developments in the law since the Specht case. Browsewrap terms have been held enforceable in circumstances where: (a) the user had actual or constructive knowledge of the terms, and nevertheless kept on accessing the site regularly in breach of those terms; and where the hyperlinks themselves were seen as sufficiently prominent to provide reasonable notice of the terms.

Actual or constructive knowledge

In Register.com v Verio, Register.com operated a database which provided free web access to the information of domain name registrants. When anyone queried the database, part of the reply contained a notice containing terms forbidding the use of the information for direct marketing purposes. Verio accessed the database on a daily basis and used the information to mail, email and call registrants. A Federal appellate court enforced the terms prohibiting these direct marketing activities, distinguishing the decision in Specht. The court held: "[w]e recognize that contract offers on the Internet often require the offeree to click on an "I agree" icon no doubt in many circumstances, such a statement is essential to the formation of a contract. But not in all
Coulthart, S, "Incorporation of terms into online agreements: a brief review", Internet Law Bulletin 10 (3) June 2007 37 at 37 and Blount, S, "Agreeing to terms in webpage contracts", Law Society Journal, v 46, no 11, Dec 2008 74 11 Pollstar v Gigmania Ltd, 170 F Supp 2d 974 (2000)
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circumstances... It is standard contract doctrine that when a benefit is offered subject to stated conditions, and the offeree makes a decision to take the benefit with knowledge of the terms of the offer, the taking constitutes an acceptance of the terms, which accordingly become binding on the offeree." 12 There was an additional comment by the court that if Verio's use of the site had been sporadic and infrequent, then the result may have been different. In the Ticketmaster cases, the first decision 13 held that the browsewrap agreement, accessible by hyperlink at the bottom of the page, was not enforceable. However, the plaintiff was given leave to replead that Tickets.com had actual or presumptive knowledge of conditions, and when the matter was reheard by the U.S. District Court, the browsewrap terms were enforced14. The U.S. District Court most recently in Southwest Airlines sums up the current U.S. law as: the validity of a browsewrap license turns on whether a website user has actual or constructive knowledge of a sites terms and conditions prior to using the site. Where a website fails to provide adequate notice of the terms, and there is no showing of actual or constructive knowledge, browsewraps have been found unenforceable.15 (b) Hyperlinks that constitute sufficient notice

There also have two recent state appellate decisions16 where browsewrap terms have been enforced, solely on the grounds that the relevant hyperlink was sufficiently conspicuous to provide adequate notice, with no requirement of proof of actual or constructive knowledge. In these cases, hyperlinks to terms of use were posted on all important pages, and one contained an additional statement at important points that sales were subject to conditions17.
Register.com, Inc v Verio, Inc 356 F3d 393 (2d Cir 2004) at 17 Ticketmaster Corp v Tickets.com, Inc 2000 U.S. Dist Lexis 12987 (CD Ca., August 10, 2000) 14 Ticketmaster Corp v Tickets.com, Inc 2003 U.S. Dist Lexis 6483 (CD CA, March 7, 2003). Note however that the court noted that the hyperlink had been moved to the top of the page, which may have affected the sufficiency of notice question. 15 Southwest Airlines Co v Boardfirst LLC Civ Act No 3:06-CV-0891-B (ND Texas, September 12, 2007) at 9. See also Cairo, Inc v CrossMedia Services, Inc No C04-04825 (JW) (ND Ca, April 1, 2005) which expressly applied the decision in Register.com (n11). 16 See eg Aral v Earthlink Inc 134 Cal App 4th 544 (2005) (but note clause held unenforceable on other grounds), Hubbert v Dell Corp NE2d, 2005 WL 1968774. 17 See also an obiter comment at Note 4 in Net2Phone, Inc v The Superior Court of Los Angeles County 109 Cal App 4th 583 (Cal Crt App, June 9, 2003 where the court said: "[w]e perceive no
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3. 3.1

The Australian position General contract law principles

It is not expected that online contracting will be treated as a sui generis area of law in Australia18. Early indications are that Australian courts and tribunals are likely to apply established principles of contract law to establish the enforceability of agreements concluded wholly or partially in cyberspace19. Under general principles of contract law, terms are incorporated into an agreement if the parties assent to those terms. Express terms may be incorporated by signature, by notice, by prior dealing or by reference.20 3.2 Signatures and clickwrap

The general law on signed contracts in Australia can be summed up as: a term is incorporated by signature whether or not the party against whom the term operates read the contract or knew of its existence or content.21 In the U.K. case of L'Estrange v Graucob 22 , the court held that if a contractual document is signed, knowledge of the terms need not be established. This decision was adopted by the Australian High Court in Toll v Alphapharm23. Some Australian commentators have indicated that clickwrap terms are likely to be enforceable in Australia on the basis of notice24, rather than signature. However, there seems to be no compelling reason in Australian law25 why an electronic signature cannot be binding in the same way as a handwritten signature.

unfairness in Net2Phone's requirement that certain contractual terms must be accessed via hyperlink, a common practice in Internet business". 18 Wong, E, and Lawrence, A, "From shrink to click and browse: ensuring the enforceability of web terms" (2004) 7 (5) Internet Bulletin 61 at 61 19 See eg Evagora v eBay Australia & New Zealand Pty Ltd [2001] VCAT 49 (20 July 2001), Goldstein v Jumbo Corporation Limited (Civil Claims) [2006] VCAT 2472 (28 November 2006), eBay International AG v Creative Festival Entertainment Pty Limited [2006] FCA 1768 (18 December 2006), Peter Smythe v Vincent Thomas [2007] NSWSC 844 (3 August 2007). 20 Blount, Electronic Contracts, 7.1. See also Carter, JW, Peden E, Tolhurst GJ, Contract Law in Australia, 5th Ed, 2007, Sydney: LexisNexis Butterworths at [10-15]ff. This text also postulates an additional category of the "ticket cases" (at [10-18]), but Blount's treatment of these cases as merely a subset of the "notice" category makes sense. 21 Carter J, Carter on contract (looseleaf), 2002, Sydney: LexisNexis Australia 22 LEstrange v F Graucob Ltd [1934] 2 KB 394 23 Toll (FGCT) Pty Ltd & Alphapharm Pty Ltd [2004] HCA 52 24 Wong & Lawrence, 63 25 There is little online authority in the U.K. The decisions of Midasplayer.com Ltd v Watkins [2006] All ER (D) 98 (Jun) and Datec Electronics Holdings Ltd & Ors v United Parcels Services
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This view is supported by the (admittedly scant) authority that does actually exist in Australia. In late 2006, a Federal Court judge in eBay v Creative had no trouble finding that an enforceable contract came into existence by use of a clickwrap presentation of terms. The central issue in the case was one of an allegation of misleading and deceptive conduct, but Rares J nevertheless clearly characterised the clickwrap terms in this case as: a contract in writing signed by the parties. By clicking on the relevant buttons and, by the computer bringing up all terms needed to purchase ... the whole transaction was in writing, signed and agreed by the parties.26 3.3 Clickwrap terms presented after assent

It has been postulated by at least one commentator that clickwrap terms which are only made available to the website user after assent27 may not be incorporated under Australian law. There is no online authority in the U.K.28 or Australia that would support or negate this reasoning. However, the likelihood of unenforceability in online cases is supported by an authority on offline terms presented after the contract is made, such as in Oceanic Sun Line Special Shipping Co Inc v Fay29. In this decision, the Australian High Court refused to incorporate an exclusive jurisdiction clause into a cruise contract because the ticket containing the clause was not given to the customer until well after the cruise had been booked and paid for. 3.4 Incorporation by reference

Incorporation by reference (either in a clickwrap or browsewrap situation) should also be governed by the normal offline contractual principles.

Ltd [2007] UKHL 23 (16 May 2007) assumed the validity of contracts formed online but the issue was not discussed in any detail. 26 eBay International AG v Creative Festival Entertainment Pty Limited [2006] FCA 1768 (18 December 2006) at 49, per Rares J 27 Lawrence, A, The law of ecommerce (loose leaf), 2003, Chatswood: LexisNexis Butterworths at [150,060] 28 The Scottish decision of Beta Computers (Europe) Ltd v Adobe Systems (Europe) Ltd [1996] SCLR. 587, which held a shrinkwrap licence (where terms were presented after purchase) could be valid was decision was dependant on a particular aspect of Scottish law that does not apply in Australia. 29 (1988) 165 CLR 197. See also Olley v Marlborough Court Ltd [1949] 1 KB 532 and Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163.
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Just before the eBay v Creative decision was handed down, a Victorian Civil and Administrative Tribunal (VCAT) Member, directly applied Toll v Alphapharm in holding30 that there was an enforceable clickwrap contract. The Member also held that additional terms were incorporated by reference, even thought those terms were not available through the usual hyperlink: "In my view Mr Goldstein became bound by those terms and conditions because he had ticked the box to signify that he agreed to them, even though he had not read them and even though there was no underlining that might have prompted him to click on a link in order to read them. They were available for him on an internet website to read in some other fashion, had he sought them. His legal position was no different to that of a person who signs a document on the back of which are terms and conditions which he does not read, although the face of the document, which he signs, refers to those terms and conditions; in the absence of a vitiating factor such as fraud or lack of capacity, he is bound by those terms and conditions once he signs: Toll (FGCT) Pty Ltd & Alphapharm Pty Ltd." 3.5 Browsewrap terms - incorporation by notice

A leading contract text states, on the authority of the High Court and Privy Council decision of Balmain New Ferry31, that: [w]here no document is signed by the parties, the usual way by which terms are incorporated is by one of the parties giving the other notice of the terms of the contract. It is difficult to state the legal requirements beyond saying that the notice must be reasonable. That is, the party relying on the terms must show that, in the circumstances, reasonable steps were taken to bring the terms to the attention of the other party.32 The requirement of "reasonable notice" is also supported by the so-called "ticket cases" 33 . The question that needs to be asked in most browsewrap situations is in what situations, if any, a hyperlink will constitute reasonable notice?
30

Goldstein v Jumbo Corporation Limited (Civil Claims) [2006] VCAT 2472 (28 November 2006) at 26, per Member Vassie 31 Balmain New Ferry Co Ltd v Robertson (1906) 4 CLR 379 at 386. 32 Carter, Peden & Tolhurst, [10-16]. 33 Eg Parker v South Eastern Railway Co (1877) 2 CPD 416, Mendelssohn v Normand Ltd [1970] 1 QB 177.
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The discussion above at 3.4(b) indicates that in the U.S., at least, it is arguable that prominent hyperlinks can constitute reasonable notice. This is also supported by a provincial appellate judgment in Canada, which held that a hyperlinked document may be considered to have been expressly brought to the attention of the consumer at the moment of formation of the contract if it is functional and clearly visible 34. Reliance on hyperlinks alone by a website owner may be somewhat risky, but it may be the only sensible commercial option for many sites, especially those who rely on advertising revenue rather than a traditional sales model. The U.S. experience, and the Australian offline authority, indicates that browsewrap terms are more likely to be enforceable the more prominent they are: for example, where hyperlinks are repeated on every page, and statements to their effects are repeated in a prominent position. 3.6 Browsewrap terms - incorporation by course of dealing

Terms may be incorporated into a contract between the parties when the contract at issue between the parties is preceded by a series of transactions over time35. For example, in the Henry Kendall decision in the U.K.36, "a long and consistent course of dealing, and failure to object to the terms, was held to imply assent to the incorporation of terms received after an oral contract was agreed between the parties."37 The U.S. decisions discussed in 3.4(a) above can be seen as somewhat analogous to a course of dealing under U.K. and Australian law. If this analogy is accepted, browsewrap cases where there was actual or constructive knowledge of the terms through continued use would likely be enforceable in Australia. However, the analogy is not perfect. In Henry Kendall, there was obviously an oral contract of some kind between the parties: the question was what terms were incorporated. In the U.S. cases, the offerings on the website were free and there still remains a question under Australian law as to if any contract was formed between the parties at all.

34

Dell Computer Corp v UDC & Dumoulin (2007) 284 DLR 4th 577 at 237. This was a minority judgement as the majority judgement decided the case on an interpretation of specific Quebec legislation. 35 Carter, Peden & Tolhurst, [10-18], also see Blount, Electronic Contracts, 7.15. 36 Henry Kendall & Sons v William Lillico & Sons Ltd [1969] 2 AC 31 37 Carter, Peden & Tolhurst, [10-18]. See also the Australian cases of Nominees Pty Ltd v Norman Ross Homeworks Pty Ltd (1992) 28 NSWLR 338, Teys Bros (Beenleigh) Pty Ltd v ANL Cargo Operations Pty Ltd [1990] 2 Qd R 288 at 295 and Ralph McKay Ltd v International Harvester Australia Ltd [1999] 3 VR 675 at 683.
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3.7

Clickwrap and browsewrap onerous terms and "special notice"

Even in cases where the enforceability, in general, of website terms and conditions has been established, there remains a serious question to be asked: whether all terms proffered by the supplier will actually be incorporated into the contract. The Australian High Court in Toll v Alphapharm held that, even if execution occurs, "documents containing an onerous exemptive provision must be brought to the notice of the party against whom they are to be enforced"38. This requirement of "special notice" has been accepted in Australia in an online context, although note that the decision was made in the context of a misleading and deceptive conduct claim. In Evagora v eBay, the VCAT Member held that: "I am not satisfied the proviso "Conditions Apply" provides sufficient notice to buyers that the available insurance cover is limited...It would appear the [sic] eBay have assumed a level of sophistication of its users that is not reasonable in all the circumstances. It is true that many people have a good knowledge and understanding of the internet but increasingly, those with limited experience are beginning to use it. The Respondent has an obligation to its consumers to ensure that any limitations associated with the use of its online auction facility are clearly notified to prospective users. It is not sufficient to have a 12 page User Agreement with numerous clickable links that in many respects contradicts the clear representations contained on the homepage and the "bidding" page. Where limits apply they must be clearly spelt out.39" How this special notice must be accomplished is still unclear, even in an offline context. Denning LJ in Thornton v Shoe Lane Parking provided some limited guidance, stating that "in order to give sufficient notice, [the term] would need to be printed in red with a red hand pointing to it - or something equally startling40."

38

n23, para 66, adopting the Victorian Court of Appeal in Le Mans Grand Prix Circuits Pty Ltd v Iliadis [1998] 4 VR 661 at 667. 39 Evagora v eBay Australia & New Zealand Pty Ltd [2001] VCAT 49 (20 July 2001) at 15 and 16, per Member Aird 40 Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163 at 170.
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3.8

A policy question

Should judges be more circumspect in enforcing online contracts than traditional contracts, due to the different circumstances inherent in ecommerce transactions? Some commentators argue that particular conditions surrounding online contracting can make e-consumers more vulnerable than offline consumers. These may include: many consumers may not treat a click signature with the same seriousness as a written signature41; computer monitors may not have the same level of readability as paper42; ecommerce consumers may well have to actively express assent to detailed terms and conditions much more often than for similar offline transactions (for example, a transaction where a newspaper is bought at a newsagent is not usually made subject to 5 pages of terms and conditions, compared to some online newspapers). This may lead to a corresponding neglect by consumers to read and understand online terms and conditions43 a form of consumer fatigue; and businesses are more readily able to manipulate the presentation format to encourage people not to read terms44.

The effect of the difference in conditions between online and offline contracts has been discussed at length by Cornell law professors Robert Hillman and Jeffrey Rachlinski 45 . However, in addition to the conditions that disadvantage online consumers, they also identify conditions which tend to favour e-consumers as compared to their offline counterparts46. For example, econsumers: are usually better educated and wealthier; usually have more time to read terms and conditions, and have less social pressure to avoid doing so, as they are not facing eager salespeople in person before they sign; and

41

Blount, Electronic Contracts, 7.6, Hillman R and Rachlinski J, Standard-Form Contracting in the Electronic Age, 77 New York University Law Review 429 (2002) at 481 42 Gautrais, V, The Colour of E-consent, 1 U Ottawa L & Tech J 189 2003-2004, at 195 43 This point was raised by an (anonymous) peer reviewer of this article. 44 Hillman R and Rachlinski J, Standard-Form Contracting in the Electronic Age, 77 New York University Law Review 429 (2002) at 479 45 Hillman R and Rachlinski J, Standard-Form Contracting in the Electronic Age, 77 New York University Law Review 429 (2002) 46 Hillman R and Rachlinski J, Standard-Form Contracting in the Electronic Age, 77 New York University Law Review 429 (2002) at 478.
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can more easily compare terms between competitors and investigate the reputation of businesses47.

Hillman and Rachlinski conclude that the favourable and unfavourable conditions surrounding online contracting generally balance each other out and existing judicial approaches are adequate (at least under U.S. law) 48. This conclusion seems sensible, and I do not think that a contrary policy argument putting econsumers generally in a privileged position as regards enforceability will find significant judicial support in Australia, especially as the small amount of existing authority tends to treat online contracts as analogous to offline contracts. Consumers may well tend to click I accept without seriously considering the consequences or bothering to read terms and conditions: but Australias settled legal tradition is to enforce executed contracts that parties have not bothered to read before signing 49 , and just because the terms are offered online does not make this more or less unfair. However, this does not mean that judicial activism in relation to consumer protection will be nonexistent for online contracts. Aside from long-existing remedies applicable equally to online and offline contracts, such provided by the common law doctrine of special notice for onerous terms50, and the legislative prohibition of misleading and deceptive conduct 51 , the recent introduction of legislation regulating unfair contract terms may well provide significant impetus for judicial intervention in the enforcement of terms commonly disputed in online contracts52. 3.9 Statutory developments relating to unfair contract terms

Certain unfair contract terms in standard form consumer contracts made or varied after 1 July 2010 will be void under the new Australian Consumer Law53 (ACL). A contract term is considered unfair if: (a)
47

it would cause a significant imbalance in the parties rights and obligations arising under the contract; and

One significant example found in Australia is whirlpool.com.au, a forum dedicated to internet and technology discussion, including the comparison of ISP, mobile and other telecommunications plans. 48 Hillman R and Rachlinski J, Standard-Form Contracting in the Electronic Age, 77 New York University Law Review 429 (2002) at 495 49 See 3.2. 50 See 3.7. 51 S52, Trade PracticesAct 1974, and associated state legislation. 52 See 3.9. 53 Trade Practices Amendment (Australian Consumer Law) Act (No.1) 2010, now forming Sch 2 of the Trade Practices Act 1974.
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(b) (c)

it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on54.

Note that even when a term is held void for unfairness, the rest of the contract [will] continue to bind the parties if it is capable of operating without the unfair term55. Although the definition of consumer contract in the ACL does not expressly include online contracts, both the parliament 56 and the regulators57 expressly contemplate that these types of contracts will be covered by the legislation. An examination of the U.S. cases (see Table A and Table B) indicates that the overwhelming majority of troublesome clauses in clickwrap and browsewrap agreements are forum selection and arbitration clauses. This may provide somewhat of a guide to what may be litigated in Australia in the future. Forum selection clauses are particularly likely to cause problems due to Australia's isolation and the substantial number of offshore websites dealt with by Australians. Any jurisdiction other than an Australian one (and even then a NSW plaintiff may be severely handicapped in being forced to bring an action in WA) is likely to prove too costly for the size of the claims most litigants are bringing under online contracts. These sorts of clauses may well be brought under the microscope of unfairness under the new law. The ACL provides a non-exhaustive list of examples of types of terms that may be considered unfair, including terms that limit, or have the effect of limiting, a right to sue58. The Australian regulators consider that this provision may apply to [t]erms which require a consumer to bring legal proceedings in a foreign court59. Therefore, forum selection clauses must be considered a risky prospect for online businesses 60 . Mandatory arbitration clauses must also be approached with caution as the broad wording of the legislation may mean that these types of clauses will also attract negative judicial notice.
ACL, s3(1). ACL, s2(2) 56 Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No.1) 2009, para 11.75 57 Australian Competition and Consumer Commission, Australian Securities and Investment Commission, and state and territory consumer protection agencies, A guide to the unfair contracts terms law, available at http://www.accc.gov.au/content/index.phtml/itemId/937060, at 3 58 ACL, s4(1)(k). 59 Australian Competition and Consumer Commission, Australian Securities and Investment Commission, and state and territory consumer protection agencies, A guide to the unfair contracts terms law, available at http://www.accc.gov.au/content/index.phtml/itemId/937060, at 21 60 As they are in other jurisdictions. For example, in California such clauses have been characterised as "unconscionable in light of the cost of meeting the forum selection clause in
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4.

Conclusion

I returned to the sites and the unread terms mentioned in the introduction to this article to see how the terms would stand up after this analysis. As for my tickets, I had to click a box stating "I agree to these Terms & Conditions", where the words "Terms & Conditions" were hyperlinked to the terms, and were highlighted in blue text and underlined. Maybe, since I didn't bother to read the terms at the time, I wasn't particularly serious about that "I agree". However I was serious enough to hand over $100 and my credit card and address details, so I think I'm stuck with my non-transferable, non-refundable tickets. However, the situation is not as clear-cut if the person accessing was something more than a consumer out to buy tickets. For example, if the owner of a "What's on in Sydney" site accessed the box office site in order to frame ticket information on their own site, there was no requirement to click on "I accept" in order to carry out the desired activity. However, there are terms available via another hyperlink on the website which purport to prohibit commercial reuse of information on the site. Whether or not they will be enforceable is still an open question in both Australia and the U.S., and the answer may depend on how often the site is accessed in this way. Returning to my own activities, I felt things might be looking up for me in relation to the social networking site. All I had to do to join was to click on the words "Sign Up", and this is not obviously the language of assent. Unfortunately for me, the qualification "By clicking Sign Up, you are indicating that you have read and agree to the Terms of Use" followed directly on from the words "Sign Up", and was not buried at the bottom of the page, and so I don't think the website provider should be too worried about most of its contract. However, I may have some chance in this case to avoid having to argue my privacy dispute in the service providers home jurisdiction of Santa Clara County, if I can successfully argue that the term imposing this is unfair. However, it was a completely different story with the newspaper terms. I could not find them at all or any reference to them on the front page of the site. After determined searching, I discovered a hyperlink marked "Conditions" in small print right at the bottom of a following page, four scroll clicks down, under a number of ads and fifth in a list of other links, and not underlined (unlike other hyperlinks on the site). Would the newspaper company be likely to successfully enforce those terms against me? In the words of the immortal Darryl Kerrigan in the Australian classic film The Castle, "Tell them they're dreaming!"61.
comparison to the limited value of the average claim" Darden, L and Thorpe, C, "Forming Contracts Over the Internet: Click-wrap and Browse-wrap Agreements", 2003 (at Pt IV.C.2) - see Comb v PayPal, Inc, 218 F Supp 2d 1165 (ND Cal 2002). 61 Working Dog Productions, 1997
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Schedule 1 TABLE A CLICKWRAP TERMS

Decision CompuServe Patterson62 Hotmail Corp Van$ Money Pie63 v v Jurisdiction U.S. Court of Appeals (Sixth Circuit) U.S. District Court (California) Rhode Island Superior Court New Jersey Appellate Court U.S. District Court (Maryland) U.S. District Court (Illinois) Court of Appeals Texas U.S. District Court (California) U.S. District Court (Florida) Appellate Division, Supreme Court of New York DC Court of Appeals U.S. District Court (Massachusetts) U.S. Court of Appeals (Second Circuit) Massachusetts Appeal Court U.S. District Court (Illinois) U.S. District Court (California) Appellate Division, Supreme Court of New York Ohio Court of Appeals U.S. Court of Appeals (Seventh Circuit) U. S. District Court (Pennsylvania) Year 1996 1998 1998 1999 2000 2000 2001 2002 2002 2002 Term/s discussed Forum selection Term prohibiting use of service for spam Forum selection Forum selection and choice of law clause Forum selection Arbitration clause Forum selection Arbitration clause Clause prohibiting commercial reuse of data Warranty disclaimer Result Enforceable Enforceable Enforceable Enforceable Enforceable Enforceable Enforceable Not enforceable Enforceable Enforceable

Groff v America Online64 Caspi v Microsoft65 Koch v Online66 American

Lieschke v Real Networks67 Barnett v Network Solutions68 Comb v PayPal69 Siedle v National Association of Security Dealers70 Moore v Microsoft71

Forrest v Verizon72 I.Lan v Netscout73 Specht v Netscape74

2002 2002 2002

Forum selection (prevented action) Limitation of liability Arbitration clause

class

Enforceable Enforceable Clickwrap Enforceable Browsewrap Not enforceable Enforceable Enforceable Enforceable Not enforceable

1-A Equip. Co Icode75 DeJohn v .TV76 Koresko v Networks77

2003 2003 2003 2005

Forum selection Forum selection Forum selection Forum selection

Real

Scarcella v America Online78 Durick v eBay79 Treiber & Straub v United Parcel Service80 Feldman v Google81

2006 2007

Clause prohibiting dangerous material Exclusion clause for shipping items of "unusual value" Forum selection

Enforceable Enforceable

2007

Enforceable

CompuServe, Inc v Patterson 89 F 3d 1257 (1996) Hotmail Corp v Van$ Money Pie, Inc 47 USPQ 2d (BNA) 1020 (1998) Groff v America Online, Inc 1998 WL 307001 (1998) 65 Caspi v Microsoft Network, LLC 732 A 2d 528 (1999) 66 Koch v America Online, Inc, 139 F Supp 2d 690 (D Md 2000) 67 Lieschke v Real Networks, Inc, 2000 US Dist LEXIS 1683 (ND Ill Feb 10, 2000) 68 Barnett v Network Solutions, Inc, 38 SW3d 200 (Tex App 2001) 69 N6 70 Siedle v National Association of Security Dealers Inc 248 FSupp2d 1140 (MD Fla 2003) 71 Moore v Microsoft Corp, 293 AD2d 587 (2002) 72 Forest v Verizon Communications, Inc, 805 A2d 1007 (DC Cir 2002) 73 I.Lan Systems, Inc v Netscout Service Level Corp, 183 F Supp 2d 328 (DMass 2002) 74 n7 75 1-A Equip Co v Icode, Inc, 2003 Mass App Div 30 (Mass App Div 2003) 76 DeJohn v The .TV Corp, 245 F Supp 2d 913 (CD Ill 2003) 77 Koresko v RealNetworks, Inc, 291 F Supp 2d 1157, 1163 (ED Cal 2003) 78 n5 79 Durick v eBay, Inc, 2006 Ohio 4861 (Ohio Ct App 2006) 80 Treiber & Straub Inc v United Parcel Service No 05-3743 (7th Cir, Jan 9, 2007) 81 Feldman v Google, Inc, 513 FSupp2d 229 (EDPa 2007)
63 64

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TABLE B BROWSEWRAP TERMS

Decision Pollstar v Gigmania82 Specht v Netscape83 Jurisdiction U.S. District Court (California) U.S. Court of Appeals (Second Circuit) U.S. District Court (California) U.S. Court of Appeals (First Circuit) Court of Appeals California U.S. Court of Appeals (Second Circuit) Rhode Island Superior Court U.S. District Court (California) Court of Appeal, California Appellate Court, Illinois U.S. District Court (Texas) Year 2000 2002 Term/s discussed Clause prohibiting commercial re-use of information Arbitration clause Result Enforceable Clickwrap Enforceable Browsewrap NOT enforceable Enforceable BUT originally held not enforceable. Not enforceable Enforceable Enforceable Not enforceable Enforceable Not enforceable (but only on unconscionability grounds) Enforceable Enforceable

Ticketmaster v Tickets.com (Ticketmaster II)84 Waters v Earthlink Inc and Onemain Inc85 Net2Phone v Superior Court of LA County86 Register.com v Verio87 Defontes v Dell Computers88 Cairo v Crossmedia Services89 Aral v Earthlink Inc90

2003 2003 2003 2004 2004 2005 2005

Clause prohibiting deep linking and commercial reuse of data Arbitration clause Arbitration clause Term forbidding use of information for direct marketing Arbitration clause Forum selection and clause prohibiting access for commercial use Mandatory arbitration, choice of law and class action waiver provisions Arbitration clause Term prohibiting use of website for commercial purposes

Hubbert v Dell91 Southwest Airlines v Boardfirst92

2005 2007

82 83

n11 n7 84 Ticketmaster Corp v Tickets.com, Inc 2003 U.S. Dist Lexis 6483 (CD CA, March 7, 2003) 85 Waters v Earthlink, Inc, 91 Fed Appx 697, 698 (1st Cir 2003) 86 n16 87 n12 88 Mary Defontes and Nicholas Long v Dell Computers Corp, et al CA No PC 03-2636 (RI Superior Crt, Jan 29, 2004) 89 n17 90 n15 91 n15 92 n17
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References Adams, J, Digital age standard form contracts under Australian law : 'wrap' agreements, exclusive jurisdiction and binding arbitration clauses" Pacific Rim Law and Policy Journal, 13 (3) June 2004 503 Australian Competition and Consumer Commission, Australian Securities and Investment Commission, and state and territory consumer protection agencies, A guide to the unfair contracts terms law, available at http://www.accc.gov.au/content/index.phtml/itemId/937060 Blount, S, Electronic Contracts: Principles from the Common Law, 2009, Sydney: LexisNexis. Blount, S, "Click signatures in webpage contracts", Law Society Journal, v 46, no 10, Nov 2008 Buono FM and Friedman JA "Maximizing the Enforceability of Click-Wrap Agreements, (1999) Vol 4 Issue 3 Journal of Technology Law & Policy Carter J, Carter on contract (looseleaf), 2002, Sydney: LexisNexis Australia Carter, JW, Peden E, Tolhurst GJ, Contract Law in Australia, 5th Ed, 2007, Sydney: LexisNexis Butterworths. Coulthart, S, "Incorporation of terms into online agreements : a brief review", Internet Law Bulletin 10 (3) June 2007 37 Darden, L and Thorpe, C, "Forming Contracts Over the Internet: Click-wrap and Browse-wrap Agreements", 2003, Georgia State University, College of Law, available at http://ul451.gsu.edu/lawand/papers/su03/darden_thorpe/ Gautrais, V, The Colour of E-consent, 1 U Ottawa L & Tech J 189 2003-2004 Hillman R and Rachlinski J, Standard-Form Contracting in the Electronic Age, 77 New York University Law Review 429 (2002) Lawrence, A, The law of ecommerce (loose leaf), 2003, Chatswood: LexisNexis Butterworths Samson, M, Internet Library of Law and Court Decisions, available at http://www.internetlibrary.com Smith, GJH, Internet Law and Regulation, 2002, 3rd ed, Sweet & Maxwell: London Trakman, L, "The Boundaries of Contract Law in Cyberspace" 2008 available at http://works.bepress.com/leon_trakman/6/ Weise, B, "The enforceability of browsewrap agreements", Journal of Internet Law, 1 June 2004 Wong, E, and Lawrence, A, From shrink to click and browse: ensuring the enforceability of web terms (2004) 7 (5) Internet Law Bulletin 61

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