Updated: Oct 23, 2019
It’s commonplace for websites to have terms of service (“TOS”) and privacy policies available via links at the bottom of the homepage or in a footer across the site. Similarly, many apps in the Apple App Store and the Google Play Store have end user license agreements (“EULAs”) that are available by clicking a link. What is not commonly known is that these agreements may not be enforceable. Judges frequently decline to enforce online agreements because the user did not have adequate notice and an opportunity to consent, because the agreement could be unilaterally modified by the licensor, or because it contained an arbitration clause that lacked certain provisions. Copying and pasting TOS and EULAs is risky not only because it could violate someone’s copyright – you may be inadvertently adopting provisions that are not appropriate or enforceable on your site.
Here’s the current landscape: judges frequently refuse to enforce the provisions of TOS and EULAs on the theory that the user did not have adequate notice or there has not been an affirmative, express act of consent following adequate notice. For example, an arbitration clause in online registration form for Tough Mudder, the obstacle course event company, was found not binding in part because the user could proceed without scrolling through the whole thing, plus the scroll box was small and required lots of scrolling. Similarly, Viacom’s EULA for a game called Llama Spit Spit was found not binding because the user had to click “more” to see that there was a license agreement applicable to the app.
There are several strategies for ensuring proper notice and consent for online TOS and EULAs. One option is to have the user create an account or sign into an existing account and agree to the terms in order to access the site or use the app. Another option is to use a “scroll-wrap” that displays the full agreement in a large box with a link to read, download and/or print and requires the user to scroll through the full agreement before they can click a button indicating “I Agree” or similar terms.
Even if you provide a user with adequate notice and ensure consent, there are certain types of provisions that may also render the agreement unenforceable. For example, courts have refused to enforce agreements that give the licensor the right to unilaterally change the terms of the agreement. The rationale is that if one party can change the whole agreement, then there is no real meaning to it, especially when the changes are retroactive not just prospective. Even if you post the new version online, the same issue discussed above regarding notice and consent may still apply. Similarly, courts have also declined to uphold arbitration clauses, unless the user has an opportunity to opt out of the arbitration clause and the company agrees to pay the fees of the arbitration.
Business owners want to receive the benefits set forth in their TOS and EULAs should consult with experienced counsel on the best strategy to ensure they will be enforced in this continually developing legal climate, otherwise, they may not be worth the “paper” on which they are written.