Nguyen v. Barnes & Noble

Those interested in the validity of electronically-formed contracts will take note of this week’s opinion by the Ninth Circuit Court of Appeals in Nguyen v. Barnes & Noble. In the case, the court found unenforceable the so-called “browse-wrap” terms of service found on the website of national bookseller Barnes & Noble.

In August 2011, Barnes & Noble liquidated its inventory of discontinued Hewlett Packard Touchpads by advertising a “fire sale” on its website. Kevin Nguyen acted quickly and purchased two of those Touchpads. He received an email confirming the transaction. The next day he received an email telling him that his order had been canceled. He sued Barnes & Noble in California on behalf of himself and a putative class of consumers whose orders had been canceled, alleging deceptive business practices.

Barnes & Noble moved to compel arbitration, as its website’s Terms of Use included an arbitration clause. The Terms of Use also stated that the law of New York would apply.

The company’s website included a hyperlink to its Terms of Use at the bottom corner of every page (including the checkout process pages). This hyperlink sat alongside various other hyperlinks. Thus, in this case, the Terms of Use were offered as a so-called “browse-wrap” agreement that did not require the user to manifest assent to the terms and conditions expressly. Instead, as Barnes & Noble argued, in this browse-wrap agreement each user gives his assent simply by using the website.

The court, applying New York law, found that Nguyen had no actual notice of the Terms of Use and was not required to affirmatively acknowledge those terms before completing his online purchase. As such, the validity of the browse-wrap agreement turned on whether the Barnes & Noble website put a hypothetical reasonably prudent user on inquiry notice of the terms of the contract. The answer to this question depends upon the design and content of the website and the agreement webpage.

In this case, the Terms of Use hyperlink on the bottom of each page of the Barnes & Noble website, and the link’s “close proximity” to the site’s checkout button, were not enough to put a reasonably prudent user on constructive notice of the terms of contract.

According to the court:

“Where a website makes its terms of use available via a conspicuous hyperlink on every page of the website but otherwise provides no notice to users nor prompts them to take any affirmative action to demonstrate assent, even close proximity of the hyperlink to relevant buttons users must click on—without more—is insufficient to give rise to constructive notice.”

Lesson to web developers.


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