Privacy and Security Advisory
Amending Terms of Service – Are
Website Postings Enforceable?
By Charlene
A. Brownlee
[August 2007]
In our wired world
of texting, email and the Internet, businesses continually communicate
with potential and existing customers online. The majority of websites,
regardless of content and functionality, post a link to an online
agreement, typically referred to as the website “Terms of
Use,” “Legal Terms,” “Acceptable Use Policy,”
(or something similar). This agreement usually provides that, “We
may amend this Agreement at any time by posting the amended terms
on this Site.”
Can a business amend
an existing contract with a customer (whether entered into online
or by other means) by merely posting the agreement at its website?
A recent decision of the Ninth Circuit, Douglas v. US District
Court ex rel Talk America, Inc.,1
considered whether a telecommunications service provider (Talk America,
which acquired AOL’s long-distance business) could unilaterally
modify an existing service contract by merely posting the new agreement
on its website. Unfortunately, the opinion does not indicate how
the customer entered into the original agreement (by phone, for
example) or whether he agreed that its terms could be amended by
posting the revised agreement online (let’s assume he didn’t).
What is clear is that Talk America made significant changes to the
agreement, including additional service charges and a mandatory
arbitration clause, and then posted the revised contract at its
website without further notification to Douglas.
Four years passed and
Douglas had not visited the Talk America website and was unaware
of the new terms of service. The court noted that even if Douglas
had visited the Talk America website, he had no reason to look at
the revised contract posted there. The court held “[p]arties
to a contract have no obligation to check the terms on a periodic
basis to learn whether they have been changed by the other side.”
The court concludes that the revised terms of service are not enforceable;
holding that posting the new terms at the service provider’s
web site was not sufficient notice.
The decision has significant
ramifications for the enforceability of material changes to agreements
where online posting of the revised terms is not likely to come
to the attention of the customer. What steps can be taken to provide
proper notice of changes to an online agreement? While not a comprehensive
list, consider the following measures:
- Ensuring that the
initial agreement includes a "change in terms" notice,
specifying that the agreement may be revised at any time by posting
the amended terms to the website. The customer may reject the
amendments by refusing or terminating the services (without penalty);
- Allowing a reasonable
period, such as 30 days, after the amended terms have been posted
prior to the effective date;
- Describing the
nature of the changes to the Agreement at the website and posting
a redlined version of the new agreement to clearly indicate the
revisions; and
- Taking reasonable
measures to notify customers by email if changes are significant
(particularly an arbitration clause ) and adverse to the customer.
Footnotes
1
Douglas v. U.S. District Court for the Central District of California,
2007 WL 2069542 (9th Cir. (Cal.) available at http://pub.bna.com/eclr/0675424_071807.pdf.
For more information,
please contact:
This advisory is a publication of the Privacy/Security and Communications Groups of Davis Wright Tremaine LLP. Our purpose in publishing this advisory is to inform our clients and friends of recent legal developments. It is not intended, nor should it be used, as a substitute for specific legal advice as legal counsel may only be given in response to inquiries regarding particular situations. Attorney Advertising. Prior results do not guarantee a similar outcome.
Copyright © 2007, Davis Wright Tremaine LLP.
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