Berman v. Freedom Financial and the Enforceability of Sign-In Wrap

If your website includes any browsewrap, sign-in wrap, or even clickwrap agreements, you must ensure that it is designed in a way that clearly and prominently displays simplified terms of use or any associated hyperlinks to terms to which the user is agreeing.

Browsewrap, Clickwrap, and Sign-In Wrap: Are They Enforceable?

Browsewrap agreements are online contracts whereby the website user implicitly assents to the terms and conditions just by using the website. Browsewrap is commonly presented using a hyperlink found at the bottom of the website. Unlike a clickwrap agreement, where the user manifests assent to the terms by checking a box or clicking a button associated with language such as “I agree to the Terms & Conditions,” browsewrap does not require any affirmative action besides visiting the web page. Federal courts have routinely found clickwrap to be enforceable but have been reluctant to enforce browsewrap. Under general contract law, both parties must manifest a mutual intent to enter into the contract, and it is sometimes questionable whether mere use of a website is sufficient to constitute assent to the proposed terms. Still, browsewrap remains a common type of digital consent for websites, and courts have enforced them upon findings of a user’s actual knowledge[1] of the terms and sufficient notice[2].

As a relatively new method of online contract formation, Courts have described the enforceability of sign-in wrap agreements as falling somewhere in between clickwrap and browsewrap[3]. Rather than checking a box or simply using the website to assent to the terms, sign-in wrap combines the physical action of signing into a website (e.g., inputting information and clicking a “continue” button) with accepting the website’s terms and conditions. Like browsewrap and clickwrap, sign-in wrap enforceability heavily relies on whether the website provides sufficient notice of the terms to the user. In April 2022, the 9^th Circuit Court of Appeals published its opinion regarding a putative TCPA class action. Berman v. Freedom Financial Network revisits the issue of sign-in wrap, where the court provides a two-part test in determining its enforceability.

Berman v. Freedom Financial Network, LLC, No. 20-16900 (9^th Cir. 2022)

At issue in Berman was the enforceability of a mandatory arbitration clause and whether the user had effectively agreed to it by way of inputting personal information and clicking “continue” to proceed to the website. The defendant was a digital marketing company that offered gift cards as incentive to collect consumer personal information such as gender and zip code. The plaintiffs claimed that they used the defendant’s websites but did not see a notice in fine print stating, “I understand and agree to the Terms & Conditions which includes a mandatory arbitration.” Although the defendant had hyperlinked and underlined the words “Terms & Conditions,” the hyperlink was in the same grey font as the rest of the sentence. The fine print was sandwiched between various graphics and was in a much smaller font than the surrounding text.

When plaintiffs brought a TCPA class action claim over calls and text messages allegedly received without their consent, the defendant moved to compel arbitration pursuant to the arbitration clause. The defendant argued that the plaintiffs were placed on notice by way of the hyperlinked sentence in small gray font. Therefore, the plaintiffs had allegedly assented to mandatory arbitration when they clicked “continue” to proceed onto the website.

The court denied the defendant’s motion to compel arbitration and provided two elements to determine the enforceability of sign-in wrap agreements. Website designers and owners intending to bind users to the terms of an online agreement must:

• provide “reasonably conspicuous notice” of the terms; and
• website users act in a way that shows an “unambiguous manifestation of assent” to the terms.

Reasonably Conspicuous Notice

A notice is reasonably conspicuous if the words are set apart from the surrounding text. Judge Watford reasoned that a website must do more than simply underline the hyperlinked text “to ensure that it is sufficiently ‘set apart’ from the surrounding text.” (Citing Sellers v. Just Answer LLC, 289 Cal. Rptr. 3d 1, 29).

“First, to be conspicuous in this context, a 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.”

“Second, while it is permissible to disclose terms and conditions through a hyperlink, the fact that a hyperlink is present must be readily apparent. Simply underscoring words or phrases, as in the webpages at issue here, will often be insufficient to alert a reasonably prudent user that a clickable link exists.”

The court further described the defendant’s display of the hyperlinked sentence to the terms and conditions and arbitration agreement as “the antithesis of conspicuous.” The court specifically pointed to the following details (or lack thereof) of the sign-in wrap that made it unenforceable:

• The tiny gray font was barely legible to the naked eye;
• The surrounding text was in comparatively larger font, which naturally directed the user’s attention elsewhere;
• The overall design of the website used other visual elements and graphics that drew the user’s attention away from the critical text;
• The hyperlinks were not distinguished from the rest of the sentence apart from underlining the text, which the court admonished because “consumers cannot be required to hover their mouse over otherwise plain-looking text or aimlessly click on words on a page in an effort to ‘ferret out hyperlinks.’”

The court then listed customary design elements that website designers should implement to remedy the inadequacies above and ensure enforceability:

• Denote the existence of a hyperlink through the use of contrasting font color (typically blue);
• Use all capital letters alerting a user that the particular text differs from other plain text;
• Use contrasting font that provides a clickable pathway to another webpage.

Unambiguous Manifestation of Assent

Not only did the defendant in Berman fail to meet the “reasonably conspicuous notice” standard, but it also failed to clearly identify the causal relationship between clicking “continue” and being bound by the website’s terms and conditions:

“Defendants rely on plaintiffs’ act of clicking on the large green “continue” buttons as manifestation of their assent, but merely clicking on a button on a webpage, viewed in the abstract, does not signify a user’s agreement to anything. A user’s click of a button can be construed as an. Unambiguous manifestation of assent only if the user is explicitly advised that the act of clicking will constitute assent to the terms and conditions of an agreement.”

The plaintiffs could not have reasonably known that by clicking “continue” they were also agreeing to be bound by the website’s terms and conditions. They therefore could not have provided their unambiguous manifestation of assent to the proposed terms, including the mandatory arbitration provision.

In sum, the appellate court affirmed the district court’s decision and held that “the content and design of the webpages did not conspicuously indicate to users that, by clicking on the ‘continue’ button, they were agreeing to Fluent’s terms and conditions.

Implications of Berman on Technology Transactions and Best Practices for the Future

Sufficient notice of a website’s terms and conditions is a well-established principle in online contracts, especially with respect to clickwrap and browsewrap agreements[4]. Although sign-in wraps are a relatively new type of online agreement, it’s no surprise that the reasoning in Berman follows the same pattern. The holding in Berman also confirms the court’s continued skepticism of enforcing online agreements that do not require affirmative action by the user. Without such evidence of the user’s actual knowledge and assent to the terms, websites designers must take particular care in ensuring that the terms are reasonably conspicuous and allow a sufficient opportunity for the user to manifest unambiguous assent.

As a practical matter, if your website includes any browsewrap, sign-in wrap, or even clickwrap agreements, you must ensure that it is designed in a way that clearly and prominently displays simplified terms of use or any associated hyperlinks to terms to which the user is agreeing. When designing your website, consider the following examples for how to ensure reasonably conspicuous notice for your website’s terms and conditions:

• Use all capital letters to make the statement stand out to the user;
• Choose a font size that is at least as big as the surrounding text in the sign-in pop up box;
• Underline, bold, and use a contrasting font color for hyperlinks (such as blue);
• Place the hyperlinked statement directly above or below any “sign-in” or “continue” buttons; and
• avoid creating any “fine print” statements that users could potentially weaponize to claim they not placed on sufficient notice.  

With TCPA actions on the rise due to increased marketing through mobile phones and texting, it has become increasingly important to take extra precaution so that a small website design choice does not result in a costly class action lawsuit.

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[1] Register.com v. Verio, 356 F.3d 393 (2^nd Cir. 2004) (finding browsewrap to be valid because user conceded it had actual knowledge of the online agreement terms).

[2] Southwest Airlines v. BoardFirst, Civil Action No. 3:060CV-0891-B (N.D. Tex. 2007) (finding that BoardFirst had knowledge of the contract terms because Southwest sent BoardFirst a cease and desist letter; browsewrap alone without the letter putting BoardFirst on notice would not have been sufficient notice).

[3] “[D]efendants’ websites contained ‘sign-in wrap’ agreements, which fall within a gray zone in which enforceability requires conspicuous textual notice that completing a transaction or registration signifies consent to the site’s terms and conditions.” Berman v. Freedom Financial Network, LLC, No. 20-16900 (9^th Cir. 2022) (Baker, J., concurring in denial of defendant’s motion to compel arbitration).

[4] Specht v. Netscape Comms. Corp, 306 F.3d 17, 35 (2^nd Cir. 2002) (finding that “reasonably conspicuous notice of the existence of contract terms and unambiguous manifestation of assent to those terms by consumers are essential if electronic bargaining is to have integrity and credibility”).