The U.S. Court of Appeals for the Second Circuit ruled on Aug. 25^th that Amazon.com failed to show that a customer had sufficient notice of an arbitration clause found in its terms of use because the notification message wasn’t conspicuous amid the page’s various hyperlinks and text. The decision reversed a federal district court opinion that held that the website design and placement of the link to the terms at the top of the web page did put the customer on notice. The Court of Appeals held that it was a question of fact whether “reasonable minds could disagree on the reasonableness of notice” and therefore was not grounds for dismissing the case.

The decision highlights the difficulty in relying on anything less than click-wrap terms of use agreements which are generally enforced because internet users affirmatively check a box or click an “I agree” button to assent to terms. In contrast browse-wrap agreements, where the terms of use are typically available via a hyperlink at the bottom of the screen, have often not been found to be binding. In this case, there was more robust disclosure with a clear statement that by placing an order the consumer was agreeing to the terms of use, but in this case, this disclosure was found to not be determinative for a binding agreement.

As usual, the case hinged on the enforceability of an arbitration clause which also prohibited class action lawsuits. Apparently at the top of the final checkout screen there contained a line of text that stated, “By placing your order, you agree to Amazon.com’s privacy notice and conditions of use.” “Conditions of use” was displayed as a blue hyperlink, which led to an agreement containing the arbitration provision in bold font. The Second Circuit said that although the link to the terms appeared at the top of the page, it wasn’t directly adjacent to the “Place your order” button. The court felt that nothing about that button suggested that additional terms apply or that by clicking it a user has assented to the terms stating, “Proximity to the top of a web page does not necessarily make something more likely to be read in the context of an elaborate web page design.”

Today, if you are relying on arbitration to avoid the potential for a class action lawsuit it hard to recommend anything but a click-wrap assent from your customers. However, if you are afraid of that checkbox requirement will hurt conversion and you are going to instead rely on a browse-wrap agreement, I strongly urge you to review your check out pages and ensure that the statement of what the consumer is agreeing to is placed directly above the order or submit button in clear and conspicuous typeface focusing on placement, type size, and contrast.