Zappos' Online User Agreement Gets the Boot - In House
In House - The FindLaw Corporate Counsel Blog

Zappos' Online User Agreement Gets the Boot

Like most retailers, Zappos' user agreement included a clause requiring claimants to submit to arbitration. But unlike most situations, it turns out the agreement didn't bind anyone.

The issue came out of a lawsuit against the company following an alleged breach of user privacy. Zappos customers banded together to file a class-action suit against the company. The popular online shoe retailer tried to force them to submit to arbitration.

That move didn't go so well. Not only is the class action going forward, Zappos' entire user agreement was effectively invalidated.

The problem is where they put the agreement on the Zappos.com website and its format, reports Inc. It's not just a problem for Zappos; other websites that use a similar style may also have a problem on their hands.

Zappos put its terms of use on a separate webpage that could be accessed from the homepage. If users scrolled down far enough, they would be able to find the link.

But users could still shop and use Zappos' website without acknowledging their agreement to the terms on that separate webpage, known as a "browsewrap" agreement. Many consumers probably didn't ever see the "browsewrap" terms.

The fact that users didn't agree to the terms before buying or entering information on Zappos' website made the user agreement void, according to the court ruling. If users don't have to click "I agree," then just having the terms listed somewhere on the site won't make those terms binding.

Most companies won't have this problem since many use a "click-through" or "clickwrap" agreement instead. Such user agreements pop up on the screen when a customer enters the site, adds something to an online shopping cart, or begins the purchasing process. That consumer must agree to the terms by clicking "I agree" before continuing on with his purchase.

By choosing a less intrusive model, Zappos lost all the legal protection its user agreement provided, the court ruled. That means the class action will go forward, according to Forbes.

As part of the ruling, the court noted that a user agreement is just like any other contract. Without assent, there is no agreement.

The takeaway lesson for general counsel: Now would be a good time to make sure your client's online user agreement requires some kind of assent by users rather than merely existing on the website.

Even if that's already taken care of, it may still helpful to educate your client about the issue, perhaps using Zappos' online user agreement case as an example.

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