How a Barnes & Noble sale led to legal changes for e-commerce sites

The design of websites has increasingly moved towards aesthetically pleasing, clean looking web pages.  Web browsers and shoppers particularly do not want to be burdened by pop-up ads or web pages overcrowded with information, such as legal jargon or terms of use or privacy policies.

However, for those of you with e-commerce sites operating in the U.S., there was a recent decision by the U.S. District Court in California, NGUYEN v. BARNES & NOBLE, INC., on browser-wrap agreements that you should pay attention to.

According to the decision by the Court, Nguyen had seen an advertisement for 16GB HP TouchPad Tablets being sold for $99 USD. He purchased two of these tablets for a reduced price of $99.99 USD; the former price was $399.99 USD. One can imagine the demand this price drop caused for the online electronic retailer.  Barnes & Noble’s supply couldn’t meet the demand; and they ended up selling tablets they couldn’t offer.

Nguyen ultimately received a confirmation of his order, but eventually Barnes & Noble reneged on their obligation citing their web site’s term of service agreement. Nguyen launched a class action, and Barnes & Noble relied on their arbitration clause in the terms of service to force the matter to arbitration and avoid the class action suit.

However, in this situation, the court found that Barnes & Noble didn’t provide adequate “notice” to their terms of service during checkout. According to the court, there was no assent to the terms, meaning he was never asked to click “yes” to agree to the terms and conditions (referred to as a browsewrap agreement in the judgment), and as such Nguyen, the Court said, never agreed to be bound by the terms and conditions.  All that was on the site was a link to their terms at the bottom of the page, and this was not sufficient notice.

This decision will allow Nguyen to pursue a class action suit in this matter.

The dilemma now is maintaining a clean looking webpage, all the while legally protecting your website especially for e-commerce activity. Essentially, a great looking website where the terms are hidden or referred to without assent will not be legally safe for both the customer and company.  We also know that just a link to the Terms of Service at the bottom of the web page will not be sufficient. What is not clear is whether the Terms of Service needs to be displayed in order for there to be assent.

Many sites, have a link to the Terms of Service, and if you click signup, you then agree to those Terms of Service. On the Apple Store, for example, when making a purchase, there is on the sidebar a note that says, “By clicking Continue, you acknowledge that the terms of Apple’s Sales and Refunds will govern your purchase.” It is in a box with the heading Order Summary, but it is not in the main window of the screen. Would that be enough notice of their Terms of Service to say that an Apple customer was bound to the agreement.

Let’s consider Twitter’s signup process. When you sign up for a Twitter account, in their signup there are Terms of Use immediately displayed, in an expandable window, just above their “Create My Account” button, with the option to print them out.  This is probably the safer and closer to the type of assent the courts were looking for. The safest, and what the courts have upheld, is where the whole Terms of Use is displayed, as you would see on installing a desktop application and then asking your customer to accept them.

It is important for websites to achieve this balance that Barnes & Noble was unable to achieve.  To be safe, you should consider including an explicit agreement of your Terms of Service as a condition of purchase and be part of the purchase contract irrespective of your design scheme. And to make it sure there is proper agreement from the customer, make sure you have the user click to agree, or checks a box.

Monica Goyal
Monica Goyal
Monica Goyal, Entrepreneur, Lawyer and Innovator is the founder of Aluvion, a legal solutions company offering technology, paralegal and lawyer-driven solutions with a special focus on the quality, cost, and accessibility of legal services for both businesses and individuals. Monica began her career working as an engineer in R&D for companies like Toshiba, Nortel and Nokia while earning her Masters of Engineering at Stanford. Monica's history conditioned her to solve problems in a efficient and tech-savvy manner, an approach she brings with her to legal solutions. Monica currently sits on the Canadian Bar Association's Futures Initiative, and will be teaching a course on Legal Technology at York University’s Osgoode Hall. She was recently named one of 10 Women to Watch in Tech in the Journal of the American Bar Association.

Would you recommend this article?


Thanks for taking the time to let us know what you think of this article!
We'd love to hear your opinion about this or any other story you read in our publication.

Jim Love, Chief Content Officer, IT World Canada

Featured Download

Blogger Spotlight

Latest Blogs

ITB in your inbox

Our experienced team of journalists and bloggers bring you engaging in-depth interviews, videos and content targeted to IT professionals and line-of-business executives.