SIGN IN WRAP AGREEMENT
Chabolla v. ClassPass, Inc.. 129 F. 4th 1147
Godun v. JustAnswer LLC, 135 F. 4th 699
Chabolla v. ClassPass, Inc.. 129 F. 4th 1147
Plaintiff purchased an introductory offer from defendant ClassPass giving her access to gyms. She ultimately sued ClassPass for violation of the California Automatic Renewal Act. ClassPass moved to compel arbitration. The arbitration agreement was on page 18 of the terms and conditions set forth on ClassPass’s website, which plaintiff used to make the purchase. The parties agreed that the arbitration agreement was a sign-in wrap agreement. Plaintiff could have accessed the terms and conditions through each of the three screens through which were needed to navigate to make the purchase. Each link to the terms and conditions was in a smaller font than the rest of the page and each was in gray type except for the top line, which was in blue type. Only the link on screen 1 advised her that by striking it she could access the terms and conditions. In addition, screen 3 was confusing because it made references to “redeem now” and “did you buy a gift card”. The district court held that plaintiff never agreed to arbitrate because the link to the agreement was both inconspicuous and ambiguous and denied the motion.
ClassPass appealed and the Ninth Circuit affirmed. A sign-in wrap agreement may be an enforceable contract based on inquiry notice if (1) the website provides reasonably conspicuous notice of the terms to which the consumer will be bound; and (2) the consumer takes some action, such as clicking a button or checking a box, that unambiguously manifests his or her assent to those terms. To be conspicuous, the notice must be displayed in a font size and format such that the court can fairly assume that a reasonably prudent Internet user would have seen it. For a hyperlink to be reasonably conspicuous, it must be denoted by design elements tailored to notify the reasonably prudent internet user of its presence. Screen 1 contained text in varying font sizes and images of people exercising. The user was directed to the action box in the right third of the page and needed to enter an email address to continue. The most obvious and natural next step was to click "Continue." If a user continued to read down the page, the user would see an option to "Sign up with Facebook." The notice of additional terms is found below the "Sign up with Facebook" option, on the periphery of where a user intending to use email would be looking. A reasonably prudent user would likely click "Continue" and read no further if the user had no intention of using Facebook. Thus, a user agreed to nothing on screen 1 other than sharing an email address.
Although screens 2 and 3 provided notice of the Terms of Use, plaintiff had no means of manifesting her assent to those terms on those screens. Reasonable conspicuousness alone is not sufficient to bind a user—a user must agree to the terms, not merely see them. In addition, the notice language on screens 2 and 3 was ambiguous. Screen 2 explained that "[b]y signing up you agree to our Terms of Use and Privacy Policy." But there was no sign up button, and the only button on screen 2 read "Continue." Rather than provide explicit instruction, screen 2 asked the user "What's your name?" and included fields for a first name and last name. It was up to the user to assume that entering a first and last name and clicking the "Continue" button amounted to signing up. A website must explicitly notify a user of the legal significance of the user’s actions and a manifestation of assent must be unambiguous.
Screen 3 resolved none of the ambiguity. The relevant notice language read, "I agree to the Terms of Use and Privacy Policy," and the action button that follows was labeled "Redeem now." Screen 3 failed to tell the user the significance of clicking "Redeem now," and therefore failed to provide the opportunity to unambiguously manifest assent to the Terms of Use. Moreover, the presence of the "Received a ClassPass gift card?" language further muddled the meaning of "Redeem now"—a user may reasonably be left with the impression that to "Redeem" means to "Redeem a gift card," rather than purchase a membership, much less manifest assent to additional terms. The website asked for little—just an email address, a name, and payment information. And it provided the user the opportunity to "Continue," "Continue," "Continue," then "Redeem now." A reasonable user could infer that the user enrolled in something—a membership, a subscription, an agreement to purchase credits—but the contours of that enrollment were vague, and what the user manifested by enrolling was ambiguous at best. .Viewed in total, a reasonably prudent internet user did not unambiguously manifest assent to the Terms of Use by working the way through ClassPass's multi-page website.
Godun v. JustAnswer LLC, 135 F. 4th 699
Plaintiffs filed a class action against JustAnswer alleging that it violated the Electronic Funds Transfer Act by signing them up for a subscription when they were simply responding to a free trial offer, The district court denied JustAnswer’s motion to compel arbitration, stating that it had not cured the inquiry notice problems cited in Sellers v. JustAnswer LLC, 73 Cal. App. 5th 444 (2021). JustAnswer appealed.
The Ninth Circuit affirmed. The first step of the inquiry-notice internet contract formation test asks whether the website provides reasonably conspicuous notice of the terms to which the consumer will be bound. This test has two aspects: the visual design of the webpages and the context of the transaction. Both aspects should be considered together.
Visual conspicuousness is a matter of whether an advisal is displayed in a font size and format such that the court can fairly assume that a reasonably prudent Internet user would have seen it. This inquiry is fact-intensive and is informed by the totality of the circumstances. There is no bright-line test for finding that a particular design element is adequate in every circumstance. At bottom, when visually analyzing the conspicuousness of an advisal and any hyperlinks, courts must be tuned to the expectations of a reasonably prudent internet user. Together with the visual prominence of an advisal, one must also consider under the first step the full context of the transaction, such as whether the type of transaction contemplates entering into a continuing, forward-looking relationship that would be governed by terms and conditions. Following California caselaw, courts have considered, for example, (1) whether the transaction contemplates a continuing relationship by creating an account requiring a full registration process; (2) whether the user is entering a free trial; (3) whether a user enters "credit card information," and (4) whether the user has downloaded an app on their phone (suggesting consistent accessibility).
The second step of the inquiry-notice internet contract formation test considers whether any action taken by the internet user—such as clicking a button or checking a box—unambiguously manifests his or her assent to proposed contractual terms. Such unambiguous manifestation of assent can only occur in the inquiry-notice context where an internet user is explicitly advised that the act of clicking will constitute assent to the terms and conditions of an agreement. Even strongly implicit advisement isn't enough—a webpage must explain that certain actions will be understood by the offeror to signal assent to contractual terms. And it must identify what exactly those actions are. The notice must explicitly notify a user of the legal significance of the action she must take to enter into a contractual agreement..
The court concluded that no plaintiff was put on inquiry notice that the use of the website constituted agreement to its Terms of Service. Some plaintiffs were presented with advisals that were insufficiently conspicuous to put them on inquiry notice. Others weren't explicitly advised of what actions would be taken to signal assent to contractual terms.
For example, the payment page that plaintiff Davis saw did not put her on notice of any contractual terms. The advisal text was printed in relatively small text and not located directly above or below the action button. This created the impression of being visually buried. Additionally, the color of the advisal text blended into the background and was displayed in a lighter color than other text on the page. A reasonable internet user's attention to be drawn to it. While each of these factors may not be enough on their own to support Davis’s argument, under the totality of the circumstances, the advisal was not visually conspicuous. Furthermore, the consumer was not informed that there was an automatically renewing subscription at issue. For such transactions, it must be clear that consumers agree not only to the one-time purchase, but also to the continuing purchases going forward.
As for plaintiff Nelson, the issue of gray-on-gray text was cured and, unlike the page that Davis saw, the advisal text was the same color as other text on the page. But the advisal was not located directly above or below the action button and was displayed in relatively small text. Considering the notice in the full context of the transaction, a reasonably prudent internet user would not be on inquiry notice of the contract.
The advisal on the payment pages that Plaintiffs Godun, Faust, and McDowell saw, failed to explicitly advise users of what action would constitute assent to any terms they were provided with. The parties' outward manifestations must show that the parties all agreed upon the same thing in the same sense and if there is no evidence establishing a manifestation of assent to the same thing by both parties, then there is no mutual consent to contract and no contract formation. The advisal lacked an explanatory phrase indicating that "By clicking connect now" or "By connecting," or "By chatting," etc., she agreed to the terms. It instead simply said "I agree" without explaining more. That was not enough to constitute an unambiguous manifestation of assent to those terms