More on the Enforceability of Online Agreements

More on the Enforceability of Online Agreements

LawAs detailed in a previous post, the terms and conditions of service posted on your website constitute a binding obligation if (and only if) the consumer is made aware of their existence, and affirmatively assets to the terms (i.e., by checking a box).  This requirement is further illustrated by a recent case titled Tompkins v. 23andMe, inc., in which the Court dealt with an online checkout process for purchasing the defendant’s DNA testing kits.

In this case, the issue was not whether consumers were required to check a box confirming their assent to the website TOS, but at which point in the checkout process the checkbox was presented.  When completing a purchase, customers were not presented with any mandatory checkbox to complete the transaction.  Instead, 23andMe included a simple link at the footer of the transaction page (a browsewrap as opposed to a clickwrap). The court confirmed that presenting the Terms of Service by a passive link, standing alone, was ineffective to create a binding agreement.

However, in order to obtain the results of their DNA tests, customers were required to register and create an account with 23andMe. In this post-sale registration process, a mandatory click-through screen was presented to customers, not once but twice. The court decided that this second step was valid to bind the customers who purchased the DNA testing kits.

Online retailers should not view this case as an endorsing a post-sale mandatory TOS approval process.   The issue would have never arisen if 23andMe required consumers to assent to the TOS prior to the purchase of the DNA kit and afterwards to obtain the DNA test results. This double affirmation process would have ensured compliance.  Although the 23andMe DNA kits were essentially useless without purchasing test results, it is conceivable that a customer may have bought a kit, and never viewed the results, in which case the transaction would have taken place without the customer’s affirmative agreement to the website terms.

So why didn’t 23andMe insert a checkbox during the initial check out process?  One can only speculate, but any potential break in the sales process can reduce conversion rates, and those abandoned carts can certainly eat into the bottom line.

The lesson here is simple: online retailers should have their checkout process examined by an attorney to determine whether it supports the validity of their website TOS.

Author: Seth Heyman
Seth D. Heyman is a California attorney with extensive experience in advertising and marketing law, corporate law, contracts, governmental regulations, international business, and Internet law. He has counseled numerous successful companies, both public and private, and was responsible for regulatory compliance, contract management, corporate governance, and HR best practices for multiple organizations in many diverse industries, including marketing, telecommunications, energy, and technology development. He offers insight and guidance on federal and state direct mail, TV, radio, telemarketing, and Internet marketing laws, as well as online promotions, Internet privacy, data protection regulations, and similar matters.
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