The recent failure of Zappos.com’s user agreement to protect the site from a class action lawsuit demonstrates a few crucial lessons for websites wishing to protect themselves. You can see this post as Barnes and Noble Part II, except in this case the court rejected the agreement not only on the basis there was not proper acceptance (browsewrap vs clickwrap), but also because the terms of use had a provision that allowed Zappos to change the terms of use whenever they wanted, and the user would still be bound to the terms.
In January, 2012, Zappos announced a massive security data breach that affected approximately 24 million customers. In response, users launched a class action security breach lawsuit against the company. Zappos tried to send the lawsuit to arbitration as per an arbitration clause in its user agreement. The court, however, has since struck down Zappos.com’s user agreement, leaving it without the legal protection the agreement would have provided Zappos, and denied the arbitration request.
There are two main reasons why the court struck down Zappos’ user agreement. The first is that the agreement was a “browsewrap” agreement. The second reason the court struck down the agreement was the fact that it gave Zappos the ability to unilaterally change their terms.
A “browsewrap” is an agreement that purports to bind users simply by virtue of the fact that they browse the website. A “clickwrap” or “clickthrough agreement,” on the other hand, is presented to the user in such a way that they must take some action that unambiguously signifies that they are assenting to the contract. The court has rejected the idea that a “browsewrap” agreement can bind the users of a website because with these types of agreements, there is no evidence that the user viewed, much less assented to, the agreement. Because of this, it is important to use “clickwrap” agreements to ensure that the contract holds up in court.
Read the legal document: In re Zappos.com Inc., Customer Data Security Breach Litigation
The second reason the court struck down Zappos’ user agreement is that it contained a provision that stated they had the right to change the terms and conditions at any time. The court ruled that this fact renders the contract “illusory.” As such, if a website is seeking to amend an agreement binding existing users of their site, it is important that it finds a way to have the users view and agree to the terms again. Many websites actually have this clause, so it is worthwhile to check your terms of use to ensure you are not exposed to any legal risk.
To conclude, if a website would like to rely on a user agreement, it must ensure that the user actually reads and assents to the terms in question. This is true whether that user had agreed to an older version of those terms or not. Zappos.com actually could have easily satisfied this because it requires users to click through before purchasing a product. Unfortuately, they chose a different route by using a “browsewrap” agreement. In order to meet these conditions, websites should use “clickwrap” agreements whenever possible and avoid using “browsewrap” agreements.