Adhesion contracts are ubiquitous in modern internet commerce, and the rules of contract formation are generally the same for contracts entered offline and those entered online. Parties are generally bound by terms and conditions incorporated by reference into paper contracts, so long as the incorporated terms and conditions are reasonably available and viewable. The same principle applies to online agreements. The key is conspicuousness, because a contracting party “is not bound by inconspicuous contractual provisions of which he was unaware, contained in a document whose contractual nature is not obvious.” For these reasons, a so-called browsewrap agreement—where terms are posted via hyperlink at the bottom of a website, and where the user is not required to manifest assent to those terms—is generally unenforceable (especially in the Ninth Circuit). See Nguyen v. Barnes & Noble Inc., 763 F.3d 1171 (9th Cir. 2014). On the other hand, a “clickwrap” (or “click-through”) agreement, where the user is required to click an “I agree” box after being presented with the terms, is generally enforceable.
In the recent case In re Randall Holl, the U.S. Court of Appeals, Ninth Circuit reviewed an online arbitration agreement that implicated a combination of the clickwrap and incorporation by reference principles, enforcing an arbitration agreement it viewed as on the “outer limits” of conspicuousness. The opinion provides a good primer on the contract formation principles governing online agreements.
On June 28, 2016, Randall Holl shipped a package from the UPS store in Healdsburg, California, to Big Lake, Minnesota. Based on the shipment’s remote destination, the store charged an additional fee of $5.92. Holl filed suit against the company, arguing that he should only have been charged $3.15 based on UPS’s advertised retail rates and alleging that the company systematically overcharges its retail customers.
UPS moved to compel arbitration of Holl’s individual claims. Before making the shipment that formed the basis for his lawsuit, Holl enrolled in the UPS My Choice program, a free, optional program that allows UPS customers to track and manage deliveries. When he did so, he agreed to arbitrate all claims relating to UPS’s shipping services, the company said.
The path to the arbitration clause was neither straight nor clear. Holl had to click on a box affirmatively indicating his assent to the UPS Technology Agreement and the UPS My Choice Service Terms in order to begin the enrollment process. The enrollment page had a hyperlink to the 96-page Technology Agreement, which provided that Georgia will be the exclusive forum for any legal actions.
In the three-page My Choice Service Terms document, also accessible by hyperlink, multiple other documents were incorporated by reference, although links were not provided to them. One of the referenced documents—the UPS Tariff/Terms and Conditions of Service—which could be accessed on the ups.com website by navigating through several pages, mandated binding arbitration.
While Holl conceded he checked the box indicating his agreement to the UPS My Choice Service Terms and the UPS Technology Agreement, he told the court he could not be bound by the arbitration clause because it was so inconspicuous that no reasonable user would be on notice of its existence and that the arbitration provision conflicted with the jurisdictional provision of the UPS Technology Agreement.
The district court disagreed and granted UPS’s motion to compel arbitration. Holl responded with a petition for a writ of mandamus asking the Ninth Circuit to vacate the order.
Emphasizing the “extraordinary remedy” of mandamus, the federal appellate panel declined to grant the writ. While locating the arbitration clause at issue requires “several steps and a fair amount of web-browsing intuition,” the district court’s determination regarding the validity of the arbitration provision “does not warrant the extraordinary remedy of mandamus,” the court said.
No question existed that Holl affirmatively assented to the UPS My Choice Service Terms, the court said. The first section of the My Choice Service Terms stated in clear language that the UPS Tariff/Terms and Conditions of Service were expressly incorporated and that the most current version of the document was available on ups.com, and Holl checked the box on the website, expressly acknowledging that he “reviewed, understood and agree[d]” to the terms.
“We cannot say, with ‘definite and firm conviction,’ that the district court erred by finding the incorporation valid,” the panel wrote. “Despite Holl’s urging, the characteristics of the UPS Technology Agreement—its length; incorporation of rules, regulations and documents by reference; and inclusion of a jurisdictional provision—do not alter our assessment of the district court’s holding.”
Other federal courts have reached the same conclusion when considering similar online agreements, the Ninth Circuit said, citing a decision from the Second Circuit.
“Faced with the heavy burden of showing a ‘clear and indisputable’ right to the extraordinary remedy he seeks, Holl fails to establish the type of ‘judicial usurpation of power’ or ‘clear abuse of discretion’ that might justify issuance of the writ,” the panel wrote.
To read the opinion in In re Randall Holl, click here.
Why it matters: At the end of the day, Holl’s affirmative assent to the UPS My Choice Service Terms, combined with those terms’ unambiguous incorporation by reference of the UPS Tariff/Terms and Conditions of Service (which contained the arbitration agreement), created an enforceable arbitration agreement between Holl and UPS. However, this was not an ordinary appeal. The panel evaluated a petition for writ of mandamus, which is governed by a very deferential standard of review. Emphasizing that Mr. Holl sought the “extraordinary remedy” of mandamus, the panel could not say, viewing the largely undisputed facts and governing California contract law, that the district court’s order was “clearly erroneous as a matter of law.” As the panel noted, this issue should not arise for UPS in the future: “The My Choice Service Terms now include a hyperlink to the UPS Tariff/Terms and Conditions of Service and expressly inform the user that the incorporated document contains an agreement to arbitrate.”