Modifying Online Contracts

Most regular Internet users have encountered a Terms and Conditions page at one time or another. Most often, they appear when initiating some sort of transaction, such as making a purchase or registering a new account at a website. A page crammed full of dense legal language appears, and one can only proceed by clicking a box or button saying something to the effect of: “I have read and understand these Terms and Conditions. By clicking here, I consent to be bound by them.” The user agrees, and the story usually ends here.

For owners and operators of Internet-based businesses, however, things are much more complicated. A Terms and Conditions page is the major legal document that defines the relationship between a website operator and a website user. When disputes and lawsuits arise over websites, it is the Terms and Conditions page that sets the terms of the debate. If a Terms and Conditions page is found unenforceable in court, then it ultimately doesn’t do a website operator much good.

A recent Texas court decision, Harris v. Blockbuster, has introduced a new wrinkle into the already complex topic of online contracts. The Harris court held that Blockbuster’s online Terms and Conditions were “illusory” because of a clause that allowed Blockbuster to unilaterally change them at any time. Many laypersons would probably be inclined to agree. After all, a deal wherein one side can change the terms at any time with little notice doesn’t seem like a very good deal at all.

For anyone who has read or written a number of Terms and Conditions pages, however, this decision is extremely surprising. An enormous number of websites use similar modification clauses, and the Harris decision seems to render them all unenforceable. Rendering companies unable to modify their websites’ Terms and Conditions pages would fundamentally alter the nature of doing business online, and create huge areas of legal liability.

In reality, however, the Harris decision is probably not so earth-shaking. In general, the law around Terms and Conditions pages is not yet fully settled. Other courts have been generally more inclined to accept so-called “click-wrap” agreements as valid. Harris is unusual in this respect. It is also important to note that Harris itself isn’t necessarily settled. Further appeals may still clarify, alter or reverse the decision.

But what does this mean for the average online business operator? Given the nature of e-business today, it’s impractical to simply forego having a website out of fear of lawsuits. Although no contract or clause is ever completely foolproof, a carefully drafted modification clause can do a good deal to protect a website operator. Many problems with Terms and Conditions pages revolve around the issue of notice, which is to say, properly informing users of changes. In general, the more notice a site operator gives, the more likely it is that his Terms and Conditions will be enforced. This is among the most important issues to consider when drafting or revising a Terms and Conditions page.