The Privacy Lawyer: Get Real About Your Terms-Of-Service Agreements - InformationWeek

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05:05 PM

The Privacy Lawyer: Get Real About Your Terms-Of-Service Agreements

Browse-wrap agreements may not be enforceable if they're not obvious and their terms are too onerous, Parry Aftab says.

Your terms-of-service and privacy policy both probably provide that their terms are deemed accepted by any user who accesses your Web site. Lawyers love these provisions. They can load up the policies and agreements with overreaching terms without having to answer to anyone. There's no one on the other side with whom you have to negotiate. It's a corporate lawyer's dream.

But how enforceable are these agreements, if the users don't affirmatively click "I agree" or otherwise do something to accept their terms? If it turns out that courts are reluctant to enforce them, this may become a plaintiff litigator's dream and the corporate lawyer's nightmare instead.

The law in this area has been evolving over the last decade. Beginning with the "shrink-wrap" cases, in which the conditions set forth on software packaging were deemed accepted once the package was opened and the product installed, the courts have tried to be both innovative and practical. "Click-wrap" agreements are the online equivalent of shrink-wrap agreements but require users to click "I accept" or otherwise do something to indicate they've read and accepted the terms. These are commonly used at software-download and E-commerce Web sites and are generally upheld by the courts as well.

But the newest form of virtual contract acceptance, known as "browse-wrap" agreements, may not be as enforceable, and for good reason. Browse-wrap agreements are most commonly used with terms-of-service or privacy policies, where the user is deemed to have accepted the terms merely by using the site. While most Web sites' privacy and terms-of-service policies use this method, these agreements are generally not very obvious. Is that fair? Do most Web-site users understand that they've entered into a contract merely by visiting a Web site? Probably not.

How enforceable should browse-wrap agreements be? It may depend entirely on how accessible and obvious the agreements are and what they provide. The less obvious and more onerous their terms, the less likely they'll be upheld in a court of law. Drafters of these agreements need to heed an old farmers' adage: "Pigs get fat, hogs get slaughtered." The further the Web site seeks to push the issue, the more likely a court will determine that no valid and enforceable agreement exists at all.

Certain kinds of agreements receive heightened scrutiny by courts. These include arbitration agreements and consent to select jurisdiction clauses and are less likely to be enforced unless the Web site can prove clear assent to the terms of the agreements. Typically courts review the circumstances surrounding these kinds of agreements. How obvious were these terms? Did the consumer knowingly agree to them? How was this agreement manifested? Because of this, you shouldn't try to lump everything into the terms of service without requiring some type of assent by the user. I use the "sniff" test: If it "smells" bad, it may not be enforceable.

An example of an actual terms-of-service provision relating to enforcement of rights and handling disputes that could be seen as going too far is included below, with certain text intentionally omitted:

"You and [deleted] agree that the exclusive remedy for all disputes and claims relating in any way to, or arising out of, this Terms of Use Agreement, the Application, or your use of the Application (including the arbitrability of any claim or dispute and the enforceability of this paragraph), or to any other alleged act or omission by you or [deleted] toward the other, shall be determined exclusively by final and binding arbitration. The arbitration shall be conducted under the Commercial Arbitration Rules of the American Arbitration Association ("AAA") before a panel of three arbitrators and conducted in the State of [deleted]. You and [deleted] also agree that the AAA Optional Rules for Emergency Measures of Protection shall apply to the proceedings.

"You and [deleted] must commence an arbitration by filing a demand for arbitration with the AAA within ONE (1) YEAR after the date the party asserting the claim first knows or reasonably should know of the act, omission or default giving rise to the claim; and there shall be no right to any remedy for any claim not asserted within that time period. (If applicable law prohibits a one year limitations period for asserting claims, the claim must be asserted within the shortest time period in excess of one year that is permitted by applicable law.) To the fullest extent permitted by applicable law: no arbitration under this Terms of Use Agreement shall be joined to an arbitration involving any other current or former licensee of [deleted], whether through class arbitration proceedings or otherwise; no finding or stipulation of fact in any other arbitration, judicial or similar proceeding may be given preclusive or collateral estoppel effect in any arbitration hereunder (unless determined in another proceeding between you and [deleted]); and no conclusion of law in any other arbitration may be given any weight in any arbitration hereunder (unless determined in another proceeding between you and [deleted]).

"This Terms of Use Agreement shall be governed by the laws of the State of [deleted] and the Federal Arbitration Act, without regard to conflicts of law provisions, and you hereby consent to the exclusive jurisdiction of the state and federal courts sitting in the State of [deleted]. This Agreement will not be governed by the United Nations Convention of Contracts for the International Sale of Goods, the application of which is hereby expressly excluded."

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