Zappos Lawsuit: Website Terms Go Step Too Far

The ruling in the Zappos lawsuit is a point for consumers upset over the online terms of service many Internet merchants use.

Almost all retailers have their terms of use printed somewhere on their website, but this case makes the "where" more important. It drew a distinction between so-called "browsewrap" and "click-through" agreements.

For small Internet retailers, that's a huge deal. If you don't straighten out which one your company uses, you could be headed for a legal problem.

If you're not sure what kinds of terms of service your company's website uses, it might help to first define the difference between the two.

A click-through agreement is by far the more common option. These terms pop up on the screen as a result of a customer's action, like putting an item in an online shopping cart or starting the purchasing process.

To continue using the site, the customer has to "agree" to the terms by clicking a button. Sometimes there's also an option to check a box to indicate they've read the terms of a click-through agreement.

The other choice is to have terms of service offered as a browsewrap agreement. With browsewrap agreements, the terms are available on the website, but users don't have to agree to them by clicking in order to use the rest of the site.

Zappos offered a browsewrap agreement on its website, reports Inc. Most users probably never even read it since it was posted on a separate page on the website, and they didn't have to click "agree."

Then when a class action suit was filed against Zappos, the company attempted to enforce the terms of its browsewrap agreement. That agreement required all complaints to go through arbitration.

The issue of whether arbitration was mandatory was brought to a court, and Zappos was the big loser.

The court held that Zappos' browsewrap agreement was not binding on users, as Forbes reported. Since customers didn't have to click "agree," the terms couldn't be enforced.

It's a good note for any online retailer that unless customers agree to your website's terms, those terms probably won't be enforceable. Not sure if your online agreement complies, or need to make it better? We have some attorneys who can certainly help.

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Related Resources:

• Top 10 Recommendations for Creating Enforceable Online Agreements (FindLaw)
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