Friday, June 22, 2007

Online Terms and Conditions - Binding in the US and Internationally?

We have worked with clients to help ensure that online terms and conditions are enforceable, both in the US and in other countries. Apart from online agreements accepted by clicking "I accept," some agreements are signed by parties yet refer to materials posted online as part of the agreement terms. Will such online terms be enforceable?

Not always. In a US court case in Florida, the parties signed a written agreement yet tried to make various online terms binding through the following language:

“This contract is subject to all of X's terms, conditions, user and acceptable use policies located at"

These online terms included an agreement to arbitrate, and the Florida court found that the agreement to arbitrate was not binding. Why? In essence, the incorporation of the online terms needed to be more specific than a simple reference that it is "subject to" the online terms. There was no specific reference in the "offline" written document that is meant to include the online document that contains the arbitration provision, and the web address link apparently did not directly point to the terms containing the arbitration provision.

Such a defect can be devastating in a cross-border context. We often recommend arbitration for international agreements, in part to stay out of unfamiliar local courts and in part due to the greater chances of enforceability in many other countries of an arbitral award as opposed to a foreign court judgment. If a US court is reluctant to enforce online terms which are not clearly meant to be binding by the parties, courts in many other countries may be even less likely to enforce terms, especially if they disadvantage a local party.

The decision is Affinity Internet, Inc., d/b/a SkyNetWeb v. Consolidated Credit Counseling Services, Inc. No. 4D05-1193 (Fla. Dist. Ct. App. 4th Dist., March 1, 2006)

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