Beware of Human Intervention With Online Contracting – 2 Costly Mistakes To Avoid

By Chip Cooper, Esq

The law of online contracting has become fairly well settled. This is good news for ebusiness sites with Membership Agreements, Subscription Agreements, Terms of Sale, SaaS Agreements, Content License Agreements, and the like.

Online contracting with click-wrapped agreements — where the user indicates agreement by clicking on I AGREE — will usually result in an enforceable contract if 5 simple rules are followed:

conspicuous presentation during registration process;
reasonable notice of the existence of contract terms;
unambiguous manifestation of assent;
opportunity to review contract terms, and
opportunity to print agreement.

The above rules for online contracting are a relatively simple recipe for success. Recent cases suggest that if ebusinesses add human intervention to the online contracting process, rather than enhancing the enforceability of contracts, the exact opposite is likely to occur — an unenforceable contract… and as a result, an ebusiness which is not protected from liability with contractual disclaimers and limitations of liability.

The Feldman Case

In the case of Feldman v. United Parcel Service, Inc., No. 06 Civ.2490 (S.D.N.Y., March 24, 2008), Feldman used a kiosk inside a UPS retail outlet to contract for the shipment of a diamond ring which was later lost in shipment. The ring was valued at $57,000, but UPS' shipping contract clearly prohibited the shipment of items valued in excess of $50,000 in its Tariff Agreement.

The kiosk presented a Terms of Service link that pointed to a pop-up window which advised that:

the UPS Tariff Agreement governed all shipments, and
the Tariff Agreement could be obtained from an on-premises UPS agent, or from the UPS website (the URL of the home page was given, but there was no link specifically to the Tariff Agreement).

Feldman took up the matter with a UPS counter agent who agreed to ship the ring, despite knowledge that the ring was valued in excess of $50,000.

After the ring was lost, Feldman sued UPS for the value of the diamond ring. UPS moved for summary judgment (dismissal of the suit as a matter of law).

The Reynolds Case

In the case of Reynolds v. Credit Solutions Inc., No. 07-AR-1516 (N.D. Ala., Feb. 26, 2008), Reynolds purchased Credit Solutions' debt settlement services online with the assistance of a Credit Solutions agent. The transaction was initiated by a telephone call during which the agent advised Reynolds that the contract could be completed online.

Reynolds contracted online, and the telephone call continued during the online contracting process. Credit Solutions' recording of the call indicated clearly that the Credit Solutions agent hurried Reynolds through the online contracting process. Reynolds clicked on the YES – I CONSENT” button after only about 30 seconds to review the 8-page agreement.

Reynolds later sued alleging failure to provide the services contracted for, and Credit Solutions moved to dismiss the suit as a matter of law, or in the alternative, to compel arbitration.

Conclusion – Case Results And Lessons Learned

Both Feldman and Reynolds prevailed in their actions and successfully defeated the contracts at issue.

In the Feldman case, the court ruled in favor of Feldman stating: “”[t]hese facts, if proved, implicate a substantial face-to-face communication, suggesting that the surrounding circumstances might have prevented the plaintiff from having adequate notice of the terms of the Tariff.”

In the Reynolds case, although the case was decided on other grounds, the court expressed concern over the contracting process, as follows:

“However, the court notes, as an aside, that someone who reads with the speed of a Jesse Owens in the 100 yard dash could not read the contract displayed on Picard's (plaintiff's) computer screen in 30 seconds particularly with Englert (defendant's agent) salivating on the other end of the line.”

The lessons learn can be boiled down to this: human intervention in an online contracting process is generally a bad idea. It opens the door to issues that a customer can use to defeat the contract. I'm sure that the defendants in the 2 cased discussed above assumed incorrectly that human intervention would enhance the online contracting process, but for the reasons indicated, the result was just the opposite.

Here’s How To Make Sure You, Your Business & Website Is FTC Compliant

By now it should be clear how important it is for you to be FTC compliant. But how can you do that without spending $7,500-$8,000 or more on Internet Attorneys?

Smart business owners around the world are doing it with the help of FTC Guardian.

FTC Guardian is a service that is 100% focused on helping to keep you get and stay FTC compliant and fully protected. And right now, we are offering a free training to give you the knowledge, information, and guidance that you need to stay out of trouble with the Federal Trade Commission.

Free Compliance Workshop: Join Chip Cooper, Esq., the #1 FTC Compliance trainer in the World, for a one-of-kind, completely free online compliance workshop. Workshops fill up quickly, so register now.

Here are some of the things you’ll discover on the training:

Real-Life Examples of People Who Didn’t Think They Were At Risk, But Who Got Nailed By The FTC, And Why It Could Happen To You, Too

The 3 Enormous Powers The FTC Has That Can Change Your Life – And Your Family’s Life – Forever!

How to Avoid FTC Claims When Collecting Leads With Optin Forms

3 Privacy Policy Mistakes Every Digital Marketer Is Making, And Why You’re In The FTC Crosshairs.

And Much More…

Remember: legal protection is a massively important part of your business, and it’s one you cannot afford to ignore any longer.

Go here to register for our next FREE training and make your business is FTC compliant today!

Disclaimer: This article is provided for informational purposes only. It’s not legal advice, and no attorney-client relationship is created. Neither the author nor FTC Guardian, Inc. is endorsed by the Federal Trade Commission.