According to the Eastern District of New York, it depends on the facts. A federal judge was recently asked to look at the issue of whether website Terms and Conditions could be binding on a customer who purchased from the website Overstock.com. The customer initiated a class action suit against Overstock.com because she was charged a $30 restocking fee for returning the items she had purchased from the website. The restocking fee was clearly set forth in the Terms and Conditions, which were available on the website. The Terms and Conditions also stated that “Entering this Site will constitute your acceptance of these Terms and Conditions.” In addition, the Terms and Conditions contained a “choice of law clause,” by which the parties agreed to be subject to arbitration in Utah.
The federal judge refused to dismiss the case and determined that the case could proceed in New York because Overstock.com did not demonstrate that customers had notice of the Terms and Conditions, or that a reasonable user of the website would have had notice of the Terms and Conditions.
It is a basic tenant of contract law that in order to be binding, a contract requires a “meeting of the minds” and “a manifestation of mutual assent." The Judge determined that because of the following factors, the customer, or any other user of the website, would not be on notice of Overstock.com's Terms and Conditions:
Because of the way the Terms and Conditions were presented on the website, actual or constructive notice prior to using the site was necessary. Overstock.com was unable to prove to the Court that its customers received actual or constructive notice. Therefore, none of its Terms and Conditions will be binding on its customers and its request to move the case to Utah was denied.
Having Terms and Conditions on your website will give you protection if they are used properly. However, if your website does not give customers proper notice of the Terms and Conditions, you may find out that your terms are unenforceable. In Overstock.com’s case, it may end up costing the company a significant amount of money because their customers are now claiming breach of contract and fraud for being charged the restocking fee.
If you have questions regarding your website or other Internet law questions, please contact Jeffery Jacobson.
