“I understand and agree to the Terms & Conditions, which include mandatory arbitration” – We’ve all seen this language. In-house counsel routinely use this language. But is it enforceable? According to a recent Ninth Circuit opinion, it depends…
In Berman v. Freedom Financial Network LLC, No. 20-16900 (9th Cir. 2022), plaintiffs used defendants’ websites but [allegedly] did not see a notice stating, “I understand and agree to the Terms & Conditions, which include mandatory arbitration.” When a dispute arose, defendants moved to compel arbitration based on the above referenced notice, arguing plaintiffs’ use of the website signified their agreement to the mandatory arbitration provision found in the hyperlinked online terms and condition. The Ninth Circuit held that plaintiffs did not unambiguously manifest their assent to the online terms and conditions when navigating the websites and as a result, never entered into a binding arbitration decision to arbitrate their dispute.
The court concluded that defendants’ websites contained “sign-in wrap” (think electronic clickwrap) agreements, “which fall within a gray zone in the site’s online terms and conditions. Under this standard, defendants’ notices were insufficiently conspicuous and were not unambiguously tied to some act of the website user that manifested assent to the site’s online terms and conditions.”
Clients and general counsel alike despise the phrase “gray zone.” Businesses like certainty. But they also prefer to not inundate their clients with unnecessary additional signatures and acknowledgements. Clients benefit by selecting general counsel (whether in-house or external), who work with them to draft not only the “boilerplate” terms of their agreements, but to understand the clients’ sales process (in-person, web based, portal, etc.) and where such terms will appear and be acknowledged. This extra step and knowledge can make all the difference.
Depending on the client, industry, risk tolerance, and where the acceptance is found within the underlying agreement, I have found customer initial-based acceptance to work well for arbitration provisions. That said, a better question for many clients is to ask and understand the reason why they want an arbitration provision in the first place and whether it is recommended for their situation. But alas, that is a blog post for another day…
By Josh Roberts
(941) 315-4058
Josh Roberts is a business and litigation attorney at Roberts Law, PLLC with over a decade of BigLaw and in-house experience assisting business and business owners to navigate contracts, privacy concerns, negotiations, and dispute resolution.
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