A Federal court in Nevada has ruled that because users weren't forced to click through Zappos' terms of service agreement, the company's terms are invalid. The ruling is the result of a lawsuit regarding an unfortunate security breach at Zappos -- one where 24 million accounts were compromised by hackers.
The court's primary issues with Zappos' ToS were its inaccessibility and the company's unenforceable claim it could amend the contract whenever it wanted. Unfortunately, many other websites employ the same tactics.
"The Terms of Use is inconspicuous, buried in the middle to bottom of every Zappos.com webpage among many other links, and the website never directs a user to the Terms of Use. No reasonable user would have reason to click on the Terms of Use,"
"The Priera Plaintiffs argue that because the Terms of Use grants Zappos the unilateral right to revise the Arbitration Clause, the contract is illusory and therefore unenforceable," "... Most federal courts that have considered this issue have held that if a party retains the unilateral, unrestricted right to terminate the arbitration agreement, it is illusory and unenforceable, especially where there is no obligation to receive consent from, or even notify, the other parties to the contract."
Source: court ruling
Based on prior judgments by other courts, the decision draws down on a distinction between "browsewrap" and "clickwrap" agreements. Interestingly, there's little reason the ruling's logic couldn't apply to all types of digital agreements, like EULAs (End-user license agreement) and TOUs (Terms of Use), although there are plenty of precedents to the contrary.
Browsewrap agreements are essentially implied contracts that don't force users to interact with or view their enclosed terms. Such agreements are sometimes considered legally binding, but only if users can be reasoned to have "constructive knowledge" of the terms therein -- the ability to discover and understand the contract by taking reasonable care, performing their share of due diligence.
Clickwrap agreements, alternatively, require users interact with the contract. This often involves walking users through blobs of legalese by forcing them to scroll, click through pages or simply confirm they've read and agree to the terms before they can continue. Apple's nearly 50-page long iOS App Store agreement is an infamous example of a perfectly executed clickwrap contract.
If Zappos had chosen to do a clickwrap agreement instead of browserwrap, the court would have likely ruled the company's ToS as valid. Such a decision
Prominent Internet law professor Eric Goldman shares his opinion here, warning webmasters to avoid potentially perilous browserwrap agreements by always requiring users to click and agree to something. In his blog post, Goldman also offers other tips on making online service agreements effective.
Zappos is own by Amazon. The Internet giant purchased the footwear-focused e-tailer in 2009.
