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Arbitration “Agreements” Struck Down

The Internet age has distorted the meaning of “agreement” to a contract almost beyond recognition: companies hide disclaimers, conditions, and waivers of our rights in the fine print of mind-numbingly long agreements. Just by clicking on an “I agree” checkbox, consumers can be forced to sign away their privacy, their intellectual property, or even their right to sue in court. Modern life requires us all to click or sign our “agreement” to such terms before we can use a cell phone, watch TV, or keep in touch with our friends on social media. No wonder no one reads these endless streams of unintelligible legalese. One researcher calculated that reading just the privacy policies that an ordinary person encounters in daily life would take a month out of every year, costing the economy the equivalent of the annual GDP of Florida. The “agreement” between consumers and companies to such contracts is pure legal fiction: consumers must deal on the companies’ dictated terms or not at all.

But “agreement” has not entirely lost its meaning. The Ninth Circuit recently ruled that companies cannot take away consumers’ legal rights without at least some affirmative action by the customer showing assent to the company’s terms. In Nguyen v. Barnes & Noble, Kevin Nguyen bought a tablet computer from Barnes & Noble’s website at an attractive sale price. Barnes & Noble sent Mr. Nguyen an email confirming the sale, reasonably leading anyone to conclude that Mr. Nguyen had an enforceable agreement to purchase the tablet at the advertised price. But Barnes & Noble unilaterally cancelled Mr. Nguyen’s order and took the position that he had no right to enforce the agreement in court. Mr. Nguyen then learned that the “Terms of Use” hyperlink on the lower-left-hand corner of Barnes & Noble’s website purported to force Mr. Nguyen into a private, confidential arbitration where he would have no right of appeal and no right to represent other consumers who had similarly had their orders cancelled.

Of course Mr. Nguyen had never seen, much less read and understood, these “Terms of Use.” Barnes & Noble nevertheless took the position that just by “visiting any area in the Barnes & Site, creating an account [or] making a purchase … a User is deemed to have accepted the Terms of Use.” The district court disagreed, denying Barnes & Noble’s motion to compel arbitration, and the Ninth Circuit affirmed. Finding that Barnes & did not prompt users “to take any affirmative action to demonstrate assent,” the Ninth Circuit held that Mr. Nguyen was not on notice of the Terms of Use and not bound by them. In so holding, the Court reaffirmed the fundamental principle that “‘[m]utual manifestation of assent, whether by written or spoken word or by conduct, is the touchstone of contract.’”

Barnes & Noble imposes some sane limits on companies’ ability to force consumers to give up important legal rights. We can hope this well-reasoned ruling will strengthen the efforts of those who are bringing attention to abuses of Internet “Terms & Conditions.” At least the Ninth Circuit has shown that, even in the Internet age, the common-sense meaning of “agreement” still counts for something.

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