Caught in the Web, 0715 SCBJ, SC Lawyer, July 2015, #22
| Author | Nathaniel P. Mark, J. |
\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0The Incorporation and Enforceability of Extra-Contractual Online Terms and Conditions
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\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0As business progresses further into the 21st century, more and more companies are opting to list their standard terms and conditions for doing business online as a means of convenience and cost savings. These terms and conditions include, among other things, licenses, purchase terms, invoice terms and codes of business conduct. By posting terms and conditions online, it allows businesses to produce shorter contracts and maintain consistent terms across all their contracts with their clients, customers and suppliers. It is a relatively inexpensive practice, but does this time and cost saving method create legally binding contractual terms? This article addresses the enforceability of incorporating online terms and conditions into separate written agreements by reference and how South Carolina courts would likely construe these agreements.
\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0Traditionally, parties may incorporate another writing into a contract's terms. Generally, all writings that are part of the same transaction are interpreted together.1 Because state law governs the issues surrounding the validity, revocability and enforceability of contracts generally, each state may reach different conclusions with regards to their incorporation and enforceability. In South Carolina, it is law that a contract can incorporate another document by reference.2 The parties' intent is determined by the language of an agreement.3 There is no specific language one must state to incorporate another writing into a written agreement; however, a contract "must explicitly, or at least precisely, identify the written material being incorporated and must clearly communicate that purpose of the reference is to incorporate the referenced material into the contract^] "4 Additionally absent fraud, mistake or unfair dealing, the failure of a party to read the terms incorporated into a contract by reference (when the reference is clear and inclusive) shall not permit a party to escape the obligation of such incorporated terms simply because he did not read them.5
\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0Notwithstanding the foregoing, it is essentially settled law that fully electronic "click-through" and "shrink-wrap" terms and conditions are enforceable under the same standards as a written contract (and such terms and conditions are naturally still subject to the traditional defenses for written contracts) when a party affirmatively accepts them and has a chance to review the term and conditions.6
\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0Enforceable terms
\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0The law surrounding whether terms and conditions posted online and incorporated by reference in a separate written agreement is still being decided by courts across the country with varying results. The majority of courts side with their enforceability subject to elements outlined in the cases summarized below. The following are recent decisions where courts found online terms and conditions incorporated by reference into a written contract enforceable.
• In International Star Registry of Illinois v. Omnipoint Marketing, LLC,7 Omnipoint entered into a business relationship with International Star Registry to provide Internet services. The invoices provided to International Star stated that by signing the invoices, International Star was certifying that it read and agreed to the provisions of the invoice in addition to the terms and conditions posted on Omnipoint's website. The language on the invoice clearly identified a specific web address ("www.omnipointmarketing.com/genterms.html"). The general terms and conditions on Omnipoint's website stated that Florida law applied and the exclusive venue for any legal proceedings would be Broward County Florida. In 2005, International Star sued Omnipoint for breach of contract along with other various causes of action concerning the provision of e-mail advertising services in the Northern District of Illinois. The Illinois District Court transferred the case to the Southern District of Florida citing the forum selection clause located in Omnipoint's online terms and conditions. The Florida court adopted the reasoning from the Illinois District Court and ruled the online terms and conditions were enforceable because the invoice clearly "express[ed] the parties' intent to be bound by the terms on Omnipoint's website[,]"8 Thus, the Florida law applied to all disputed invoices containing the incorporation by reference.9
• The Fifth Circuit case One Beacon Insurance Co. v. Crowley Marine Services, Inc.10 arose over a contract dispute about whether there was a written agreement that required a maritime repair company (Tubal-Cain Marine Services, Inc. (Tubal-Cain)) to defend, indemnify and obtain insurance for its client, Crowley Marine Services, Inc. (Crowley). For each repair project Crowley issued a repair service order (RSO) to Tubal-Cain outlining the scope of repairs for each assigned project. Each RSO contained the language "THIS RSO IS ISSUED IN ACCORDANCE WITH THE PURCHASE ORDER TERMS AND CONDITIONS ON WWW.CROWLEY. COM/ DOCUMENTS & FORMS, UNLESS OTHERWISE AGREED TO IN WRITING." Crowley's online terms and conditions required Tubal-Cain to defend and indemnify Crowley for any third party claim brought against it, even if it was due to the negligence of Crowley11 Each RSO also required Tubal-Cain to procure commercial general liability insurance on behalf of Crowley for any work performed. The purchase order terms and conditions were located on Crowley's website, but could not be accessed by entering the web address stated in the RSO into a web browser. The District Court ruled that the web address provided in the RSO was not intended to be an exact location of the page containing the terms and conditions, but rather provided guidance in locating them on Crowley's website.12 Additionally the District Court concluded that the online terms and conditions were incorporated into each RSO since each one contained a notice that "plainly and conspicuously" incorporated the terms and conditions from the website. The court further found that by accepting each RSO and issuing an invoice for payment, Tubal-Cain ratified their course of dealing and assented to the online terms and conditions.13 Finally the District Court found that the terms were sufficiently legible and accessible so that enforcement of the terms would not be unconscionable.14 On appeal, the Fifth Circuit, applying Maritime Law, upheld the District...
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