Terms of Service (ToS), also known as Terms and Conditions (T&C), are crucial legal agreements between a company or website and its users that detail the rules and guidelines of using the particular service. These terms play a significant role in protecting the rights of the company, defining the scope of services, limiting liabilities, and guiding user behavior.
In the context of California law, as well as U.S. law in general, a few crucial cases highlight the significance of these terms:
- Specht v. Netscape Communications Corp. (2002): This case underscored the importance of conspicuousness in the presentation of terms. The court held that a reasonably prudent internet user should not be expected to scrutinize every button and link on a webpage to discover relevant terms of use.
- Long v. Provide Commerce, Inc. (2016): This case involved a dispute over an online flower purchase. The court ruled that users must unequivocally express agreement to be bound by terms of service. Merely placing terms in proximity to a purchase button, without more, is not enough to signify user acceptance.
- Nguyen v. Barnes & Noble, Inc. (2014): In this case, the court stated that where the terms of service are presented in a “browsewrap” agreement—where the terms are generally posted on the website and the user agrees to them by using the website—the website owner must provide a clear notice to users that they are bound by these terms.
- Knutson v. Sirius XM Radio (2014): This case reinforced the concept of “reasonable communicativeness”. The court stated that users must have reasonable notice of and manifest assent to the contract terms.
- Meyer v. Uber Technologies, Inc. (2017): This case involved a class-action lawsuit against Uber over the company’s arbitration clause in its Terms of Service. The court found that the arbitration clause was enforceable because the app provided users with clear notice of the terms, and the user’s assent was manifested through the use of the app. The case highlights the importance of presenting Terms of Service in a clear and conspicuous manner, as well as obtaining explicit user consent.
- Zappos.com, Inc. v. Stevens (2012): In this case, the court held that Zappos.com’s browsewrap agreement was not enforceable because it did not provide users with sufficient notice that they were agreeing to the terms by using the website. The case emphasizes the importance of providing users with clear notice of the Terms of Service and obtaining explicit consent.
- Sgouros v. TransUnion Corp. (2016): This case involved a dispute over an arbitration clause in TransUnion’s online service agreement. The court held that the agreement was not enforceable because the website design did not provide users with clear notice that they were agreeing to the terms when they clicked the “I Accept” button. The case highlights the importance of proper website design in conveying the Terms of Service and obtaining user consent.
- Lamps Plus, Inc. v. Varela (2019): This U.S. Supreme Court case clarified that, under the Federal Arbitration Act, an ambiguous agreement cannot provide the necessary contractual basis for concluding that the parties agreed to submit to class arbitration. The case highlights the importance of clear and unambiguous language in arbitration agreements within Terms of Service.
These landmark cases have played a crucial role in shaping how Terms of Service are construed in California and the United States. Companies should be mindful of these cases when drafting their Terms of Service to ensure that they are clear, conspicuous, and obtain explicit user consent to be legally enforceable.
