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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: February 17, 2018

Court Refuses to Enforce Forum Selection Clause in Internet Contract

On February 1, 2018, Justice Ash of the Kings County Commercial Division issued decision in Swipe Ice Corp, Inc. v. UPS Mail Innovations, Inc., 2018 NY Slip Op. 30178(U), refusing to enforce a forum selection clause in an Internet contract, explaining:

The creation of online contracts has not fundamentally changed the principles of contract. To create a binding contract, there must be a manifestation of mutual assent sufficiently definite to assure that the parties are truly in agreement with respect to all material terms. There must be an offer followed by an acceptance. In regard to online contracts, courts look for evidence that a website user had actual or constructive notice of the terms of using the website. Where the supposed assent to terms is mostly passive, as it usually is online, courts seek to know “whether a reasonably prudent offeree would be on notice of the term at issue, and whether the terms of the agreement were reasonably communicated to the user.

Courts have held that there are three general principles regarding the enforceability of internet contracts. First, the website must be designed such that a reasonably prudent user will be placed on inquiry notice of the terms of using the website. Second, the design and content of the website must encourage the user to examine the terms clearly available through hyperlinkage. Third, agreements will not be enforced where the link to the agreement is buried at the bottom of a webpage or tucked away in obscure corners of the website.

In the present case, the court finds that the forum selection clause is unenforceable, as the online service terms and conditions were not reasonably communicated to Plaintiff. The facts indicate that The Agreement referenced a website hyperlink that contained terms not presented to the offeree at the time of acceptance. Furthermore, the hyperlink referenced in The Agreement was not a direct link to the service terms and conditions, instead, The Agreement provided a hyperlink to the general site that the user would have to scroll through to find the actual terms and conditions hyperlink at the bottom of the page. The court reasons that this type of design does not encourage the user to examine the terms, as they are not clearly available through the hyperlink referenced in The Agreement. Therefore, the court finds the forum selection clause to be unenforceable because a reasonably prudent offeree would not be on notice of the terms that were buried at the bottom of the web page in a manner that did not encourage the user to examine such terms and conditions.

(Internal quotations and citations omitted) (emphasis added).

New York contract law recognizes contracts entered into over the internet. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client face a dispute over a contract entered into over the internet.

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