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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 Group 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.
Copyright © 2007, Davis Wright Tremaine
LLP.
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