Many UK companies first enter the US market by selling online, with a website tailored to US customers.  If they’re prudent they also tailor the Terms of Use of their website to US law.  Jonathan Strassberg, US Attorney at Law, explains here that if those Terms of Use are not adequately conveyed to the website user, legal protections can be lost; a point made clear by the US Federal Court of Appeals recently when it stated that in order to be binding online, Terms of Use must be expressly agreed to by a user of the website.

Terms of Use are usually included on a company’s website to serve as a contract between the website user and the company.  Terms cover all manner of rights and obligations, including such vital issues as warranty limitations, limitations of damages, indemnities, jurisdiction and alternative dispute resolution, such as a requirement to arbitrate.  Needless to say, if by reason of some defect in the website, Terms of Use become ineffective; a UK company can face serious financial risk and loss in the US.

There are generally two methods by which a user is notified that specific Terms of Use apply to a website, “click-wrap” and “browse-wrap”.  With click-wrap agreements, the user must provide affirmative assent to the Terms of Use by actually clicking a button that says “I Agree” or words to that effect.  Most times, a hyperlink to the Terms of Use is nearby the “I Agree” button; or the user may have to scroll through the Terms of Use in order to agree and move forward with the transaction.

With browse-wrap agreements, on the other hand, no affirmative act is required of the user.  Instead, a link to the Terms of Use will be found somewhere on the page, often inconspicuously, and it is the user’s option to review these or not.  The Terms of Use usually contain a clause stating that use of the site constitutes acceptance of said terms.

In Nguyen v. Barnes & Noble, Inc., the Federal Court of Appeals held that a user must have actual or constructive notice of Terms of Use in order to be bound by them; and further that actual notice can only be demonstrated when a user  has taken  affirmative steps to agree to the Terms.  In this case, Barnes & Noble (an on-line book seller) was unable to provide availability of certain goods advertised as on sale.  Its Terms of Use required arbitration of any disputes, but those Terms were indicated only by a hyperlink in close proximity to the checkout button.  Not only was this not actual notice, but in the court’s view, neither did it constitute constructive notice, because nothing on the website prompted the user to review those Terms.

This case makes clear that anything less than affirmative click-wrap agreement by website users to Terms of Use, may leave the website owner open to legal challenge.  For a UK company doing business in the USA, it is vital to limit liability as well as the cost of dispute resolution.  This is a simple way to help do so.

If you’re already conducting business in the US or considering expanding into the US, contact Jonathan on 02380 717484, email jonathanstrassberg@warnergoodman.co.uk or visit www.wgcommercial.co.uk.