Law Office of Richard M. Russell
Falmouth, Massachusetts

This site does not provide legal advice. Please visit the Law Office of Richard M. Russell for information specific to your circumstances.


On-Line Terms of Service

Two recent cases address on-line arbitration clauses expressed in a terms of service: Starke v. SquareTrade, Inc., No. 17-2474-CV (2d Cir. Jan 10, 2019) and Sultan v. Coinbase, Inc., No. 18-934 (FB)(ST) (E.D.N.Y. Jan 24, 2019).

An on-line arbitration clause generally requires that disputes be resolved at arbitration (rather than at court) and such clauses usually are included in a terms of service that a customer accepts by “clicking” agreement to the terms. (It has sarcastically been said that the best place to hide something is in a terms of service.)

In Sultan v. Coinbase, Inc. a federal district court concluded that an arbitration clause in an online consumer contract was enforceable. The court described that determining the enforceability of an arbitration clause required the court to “look to the design and content of the relevant interface to determine if the contract terms were presented to the offeree in [a] way that would put her on inquiry notice of such terms.” Factors the court considered important were that the user interface had a “minimalist layout and no distractions,” the terms of service were presented above the “Create Account” button and were presented “simultaneously to enrollment,” and that the user was required affirmatively to click a box certifying that she agreed to the terms. While the court did enforce the arbitration clause, the case demonstrates that the enforceability of an on-line arbitration clause or terms of service requires the customer be reasonably made aware of such terms--as further explored in another recent case Starke v. SquareTrade, Inc. 

In Starke v. SquareTrade, Inc., a federal Appeals Court concluded that an arbitration clause was not enforceable because the consumer did not have reasonable notice of and indicate an assent to the clause. In Starke, the arbitration clause was included in link in a post-sale email sent to the consumer. The court concluded the consumer did not have reasonable notice of the arbitration provision. The court pointed to: (1) SquareTrade did not direct the consumer’s attention to the “terms and conditions” hyperlink that contained the arbitration clause, (2) the post-sale email sent to the consumer was “cluttered” and did not direct the consumer’s attention to the “terms and conditions”, (3) the clutter featured various graphics that distracted the reader from the hyperlink. The court noted: “The placement of the ‘Terms & Conditions’ hyperlink in the email makes it hard to escape the inference that SquareTrade hoped the reader’s eye would be drawn elsewhere.” With respect to the general rule that a party is bound by a contract he or she signs (or otherwise assents to), the court stated: “Starke, like any other offeree, had a duty to read the terms of the contract presented to him . . . [But] the duty-to-read principle still require[s] that the offeree be put on notice of the existence of [the] contract terms before it can be said that he has assented to them . . . [T]he duty to read does not morph into a duty to ferret out contract provisions when they are contained in inconspicuous hyperlinks.”