“If we attach our terms, they’ll want to negotiate. Let’s just link to them instead.” Every lawyer has worked with clients who want to shorten the sales cycle, reduce the friction of acquiring new users, and minimize negotiation of terms and conditions. But while it is critical to keep these business goals top of mind in designing a contracting process, it is equally critical to ensure that your terms will actually be enforceable if you ever find yourself in court.

As we often tell our clients, the enforceability of a contract is not a matter of degree: whether or not you have a binding contract is a binary test — you have either formed a contract, or you have not. The real question is, how likely is it that a court will agree that you have actually formed a contract? That analysis is fact-driven and will have practical implications for how you go about presenting your terms to your customers and securing their consent.

Using Linked Terms to Bind Customers Through a Digital Interface

If you are selling an app or a browser-accessed subscription service, you will have to decide “how much is enough?” when it comes to getting your customers to agree to your terms. Should your customers be forced to scroll through the terms? Click a box? Click two boxes? Or should you drop a link in your footer and hope for the best?

These decisions will impact your business — courts may pay very careful attention to what you do and how you do it when deciding whether your terms bind users.

A recent Supreme Judicial Court (SJC) decision in Massachusetts regarding Uber’s app terms, which follows a 2018 First Circuit case on the same subject, proposes a two-pronged test for determining whether a contract has been formed: (1) whether there is reasonable notice of the terms, and (2) whether there is a reasonable manifestation of assent to those terms.^[1] The SJC concluded Uber’s process failed both prongs, citing deficiencies in how and when the terms were presented to users, the fact that users were not required to actually click on or scroll through Uber’s terms at all (which, the court noted, was different than the process Uber used for securing its drivers’ assent for the driver terms and conditions), and the misleading title of the page on which the terms appeared, to name a few.

When designing a digital contracting process, the questions you must ask are: how will I demonstrate the customer had reasonable notice of these terms, and how will I show the customer’s reasonable manifestation of assent to these terms?

1. Reasonable Notice. Drafters should establish a stand-alone section of the sign-up or registration process where the customer can clearly see that an agreement to the terms is required to continue. This step should include a title that references the terms, should give the customer a simple way of accessing the terms and should encourage the customer to review the terms before assenting. Some courts have found that a user may be bound by terms without having actually read or navigated to the relevant webpage,^[2] as long as it is clear that consent to the terms is required, and the user has the ability to access the terms (even if that consumer did not open the link to the terms).^[3]

2. Manifestation of Assent. Clicking through an acceptance prompt is the most common way to establish user assent to standard terms. In the recent SJC decision, the court described how Uber muddied the waters as to what the user accepted because “the statement explaining the connection between creating the account and agreeing to the terms, which would encourage opening and reviewing the terms, was displayed less prominently than the other information on the screen.”^[4] There, the title of the page and the text on the acceptance button focused the user on linking payment and establishing an account, and not on accepting legal terms. Uber could have established a clear manifestation of consent from the user if it provided a dedicated “acceptance” button or checkbox.

Using Linked Terms to Bind Customers in a Signed Document

Where your product relies on an order form or other non-electronic document that is inked by a customer, incorporating contractual terms from a webpage by reference may be enforceable if:

1. The parties’ intent to incorporate the external website is clear. It may not be enough for a contract to state the company’s terms are “found at” a particular webpage,^[5] or that it is “subject to” the terms located on a particular webpage,^[6] because courts have held that such language lacks the parties’ specific intent to incorporate the terms found at the URL into the underlying contract between the parties. Instead, drafters should use a clear “entire agreement”–style clause^[7] that explicitly incorporates the terms into the contract the customer is signing,^[8] or a clause stating that, by signing the contract, the user certifies that it has read and agreed to the terms set forth at the URL,^[9] or both.

2. The incorporated terms are clearly contained within the referenced URL and labeled appropriately. If a contract links to a general webpage ending in “/legal/”, you cannot rely on terms that may be posted to other URLs from the same root unless the contract specifically references those terms by URL and by name.^[10] For example, if you properly incorporate your Terms of Service by reference to the URL “yourcompany.com/legal/terms,” that is not sufficient on its own to bind customers to your Acceptable Use Policy at “yourcompany.com/legal/AUP” unless you have separately referenced and incorporated that document into your contract. Drafters should take care to refer to the referenced terms using the exact same title as the referenced webpage, and if the name or webpage may change over time, the contract language should also contain a phrase such as “the Terms of Service posted at [URL], or successor website” (emphasis added).^[11]

Bonus Topic — How Do I Update My Standard Terms?

Businesses change, as do best practices in contracting, and clients always want to know how to update their online terms. The answer is twofold: (1) build an update mechanism into your terms from the get-go and (2) when in doubt, require your users to click again.

1. Build in mechanisms from the get-go. Merely posting revised terms online will not bind users to them.^[12] Instead, you must actually notify users of changes in writing. However, the type of notice can be established by the original contract language. For example, your Terms of Service may state that “these terms may change at any time upon written notice to you.”^[13] and may provide that notices may be sent via email. This way, you can notify users by email that updated terms will be in effect as of a particular date, and their continued use of the service after that date constitutes acceptance of those modified terms. While a court may find that simply posting a new Terms of Service and changing the “last updated” date can be sufficient to bind users if the original contract language of your Terms of Service described that as the update mechanism, drafters should consider the many ways in which such a mechanism could be vulnerable to counterarguments by an aggrieved user.

2. When in doubt, re-consent. Particularly if there is a material update to your terms (for example, if you add a forced arbitration clause, or a class action waiver), the chances of enforceability will increase if you require users to re-accept your terms the next time they log in.

If you do update your terms over time, keep a record of each update and when it was enacted (in addition to records as to which users had accepted or been given notice of each new version and when). This is because, when analyzing the enforceability of terms, courts will look to the terms that were validly incorporated in the contract at the point in time where enforcement is sought.^[14] A record of time stamped, historical changes to online terms — alongside the notices sent to consumers of the changes — will help a company show the terms that were in effect at the relevant time. One court held that a printout of the terms that were time stamped years after the relevant events is insufficient to demonstrate they were in effect at the time of the relevant events.^[15]

Endnotes

_{[1] See Kauders v. Uber Techs., 159 N.E.3d 1033 (2020); see also Cullinane v. Uber Technologies, Inc., No. 16-2023 (1st Cir. 2018).}

_{[2] See Spartech CMD, LLC v. Int’l Auto. Components Group N. Am., Inc., 2009 U.S. Dist. LEXIS 13662 (E.D. Mich. 2006), Morgantown Mach. & Hydraulies of Ohio, Inc. v. Am. Piping Prods., Inc., 2016 U.S. Dist. LEXIS 21915 (N.D. Ohio, 2016).}

_{[3] In Appliance Zone, LLC v. Nextag, Inc., 2009 U.S. Dist. LEXIS 120049 (S.D. Ind., 2009), the court found the consumer agreed to, and therefore was bound by, the terms of the agreement. It did not matter that the consumer did not read the Terms of Service.}

_{[4] See Kauders v. Uber Techs., 159 N.E.3d 1033 (2020).}

_{[5] See Manasher v. NECC Telecom, 2007 U.S. Dist. Lexis 68795 (E.D. Mich. 2007). In Manasher v. NECC Telecom, the court found that the online terms were not incorporated because there was no clear intent to include these terms in the contract. The attempted incorporation did not explicitly state that the terms on the webpage applied to the agreement, but rather only indicated where to find additional disclosures.}

_{[6] See Affinity Internet, Inc. v. Consolidated Credit Counseling Services, Inc., 920 So.2d 1286 (Fla. Dist. Ct. App. 2006); see also Phoenix Motor Co. v. Desert Diamond Players Club, Inc., 144 So. 3d 694 (Fla. Dist. Ct. App. 2014). In Affinity Internet, Inc. v. Consolidated Credit Counseling Services, Inc., the contract between the parties stated, “This contract is subject to all of SkyNetWEB’s terms, conditions, user and acceptable use policies located at http://www.skynetweb.com/company/legal/legal.php” (emphasis added). 920 So.2d 1286 (Fla. Dist. Ct. App. 2006). Here the court found the language “subject to” lacked the intent to incorporate the URL by reference.}

_{[7] For example: “This Agreement and the [Terms of Service] contain the entire understanding of the parties with respect to the transactions and matters contemplated herein, and supersede all other communications, understandings and agreements (whether oral or written), and cannot be amended except by a writing signed by both parties or through the amendment mechanisms described in the [Terms of Service].}

_{[8] Hugger-Mugger, L.L.C. v. NetSuite, Inc. 2005 WL 2206128 (D. Utah, 2005).}

_{[9] In International Star Registry of Illinois v. Omnipoint Marketing, LLC, 2006 WL 2598056 (N.D. Ill. 2006), Terms of Service were found enforceable because the contract required a signature after the following block: “by my signature below, I certify that I have read and agree to the provisions set forth in this invoice and to the terms and conditions posted at [URL].” See also Access Telecom, Inc. v. Numaxx World Merchs., LLC, 2013 U.S. Dist. LEXIS 199860 (S.D. Fla. (2013)). In Hugger-Mugger, L.L.C. v. NetSuite, Inc., the court determined the parties agreed to be bound by the terms, as the agreement required the user to click through that they understood the terms of the agreement. See also Appliance Zone, LLC v. Nextag, Inc., 2009 U.S. Dist. LEXIS 120049 (S.D. Ind., 2009).}

_{[10] Affinity Internet, Inc. v. Consolidated Credit Counseling Services, Inc.}

_{[11] Hugger-Mugger, L.L.C. v. NetSuite, Inc., 2005 WL 2206128 (D. Utah, 2005); see also Grosvenor v. Qwest Communs. Int'l, Inc., 2010 U.S. Dist. LEXIS 147722 (D. Collo., 2010).}

_{[12] See Douglas v. United States District Court for the Central District of California, 495 F.3d 1062 (9^th Cir. 2007).}

_{[13] See Swift v. Zynga Game Network, Inc., 805 F. Supp. 2d 904 (N. D. Cal 2011); Mackinnon v. IMVU, Inc., 2014 Cal. App. Unpub. LEXIS 7798; Tompkins v. 23andMe, Inc., 834 F.3d 1019 (9^th Cir. 2016); Casa v. Carmax Auto Superstores California, LLC, 224 Cal. App. 4th 1233 (2014).}

_{[14] See Douglas v. United States District Court for the Central District of California, 495 F.3d 1062 (9th Cir. 2007).}

_{[15] See Fu Da Int'l v. Kohl's Dep't Stores, Inc., 2009 U.S. Dist. LEXIS 3860 (S.D.N.Y. 2009).}