Online Contract
Contract Formation
Online Contract Formation
License Agreement
Conspicuous Notice of an Arbitration Provision?
Presentation to Users in an Online Pop-Up Window that Contained the Entire Agreement within a Scrollable Text Box
Shrink-Wrap Licenses
Browsewraps, Clickwraps, Scrollwraps, and Sign-in Wraps Agreements
Terms of an Extrinsic Document May Be Incorporated by Reference in a Contract
Contract Drafting
California Law
Blizzard moved to compel arbitration based on the dispute resolution policy incorporated into various iterations of the online license agreement that Blizzard presented to users when they signed up for, downloaded, and used Blizzard’s service. The trial court denied the motion, finding a “reasonably prudent user would not have inquiry notice of the agreement” to arbitrate because “there was no conspicuous notice of an arbitration” provision in any of the license agreements. We disagree. As we will explain, the operative version of Blizzard’s license agreement—the most recent version presented in 2018 before Plaintiffs filed suit—was presented to users in an online pop-up window that contained the entire agreement within a scrollable text box.
As the screenshot shows, the portion of the license agreement immediately visible in the text box displayed two significant notices. First, that users may not use Blizzard’s service if they do not agree to all of the terms in the license agreement. And second, that users should read the section of the license agreement “below” titled “dispute resolution” because it contains an arbitration agreement and class action waiver that affect users’ legal rights. That section stated that disputes under the license agreement would be resolved in accordance with Blizzard’s dispute resolution policy, to which the section connected via hyperlink. The dispute resolution policy contained a comprehensive arbitration agreement. The pop-up window admonished users that by clicking the “Continue” button (immediately below the admonishment) the user “acknowledged that he or she has read and understood the license agreement.” B.D. could not have continued to use Blizzard’s service if he did not click the “Continue” button, and Blizzard’s records indicate B.D. did, in fact, continue to use the service. In the context of the transaction at issue, we conclude Blizzard’s pop-up notice provided sufficiently conspicuous notice of the arbitration agreement such that Plaintiffs are bound by it.
(…) Accordingly, we reverse the trial court’s order denying Blizzard’s motion to compel arbitration and direct the court to enter a new order granting the motion.
1.Online Formation of Arbitration Agreements
“‘Under “both federal and state law, the threshold question presented by a petition to compel arbitration is whether there is an agreement to arbitrate.”’” (Long v. Provide Commerce, Inc. (2016) 245 Cal.App.4th 855, 861 (Long); see Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236 (Pinnacle); Sellers v.Just Answer LLC (2021) 73 Cal.App.5th 444, 461 (Sellers).) “This threshold inquiry stems from the ‘“basic premise that arbitration is consensual in nature.”’” (Long, at p. 861.) Thus, “while California public policy favors arbitration, ‘“‘there is no policy compelling persons to accept arbitration of controversies which they have not agreed to arbitrate.’”’” (Sellers, at p. 461.) “‘General principles of contract law determine whether the parties have entered a binding agreement to arbitrate.’” (Pinnacle, supra, 55 Cal.4th at p. 236.) “Mutual assent, or consent, of the parties ‘is essential to the existence of a contract’ [citations], and ‘consent is not mutual, unless the parties all agree upon the same thing in the same sense’ [citation]. ‘Mutual assent is determined under an objective standard applied to the outward manifestations or expressions of the parties, i.e., the reasonable meaning of their words and acts, and not their unexpressed intentions or understandings.’” (Sellers, supra, 73 Cal.App.5th at p. 460; see Donovan v. RRL Corp. (2001) 26 Cal.4th 261, 270 (Donovan) [“An essential element of any contract is the consent of the parties.”].) If an offeree objectively manifests assent to an agreement, the offeree cannot avoid a specific provision of that agreement on the ground the offeree did not actually read it. (See Pinnacle, at p. 236 (“An arbitration clause within a contract may be binding on a party even if the party never actually read the clause.”].) These consent principles apply “with equal force to arbitration provisions contained in contracts purportedly formed over the Internet.” (Long, supra, 245 Cal.App.4th at p. 862; see Sellers, supra, 73 Cal.App.5th at p. 460.) “While Internet commerce has exposed courts to many new situations, it has not fundamentally changed the requirement that ‘“mutual manifestation of assent, whether by written or spoken word or by conduct, is the touchstone of contract.”’” (Long, at p. 862.)
(…) California and Delaware both adhere to the objective theory of contract formation. (See Sellers, supra, 73 Cal.App.5th at p. 460; Salamone v. Gorman (Del. 2014) 106 A.3d 354, 367-368 [“Delaware law adheres to the objective theory of contracts”].)
“In the world of paper contracting, the outward manifestation of assent to the same thing by both parties is often readily established by the offeree’s receipt of the physical contract.” (Sellers, supra, 73 Cal.App.5th at p. 461.) “By contrast, when transactions occur over the internet, there is no face-to-face contact and the consumer is not typically provided a physical copy of the contractual terms. In that context, and in the absence of actual notice, a manifestation of assent may be inferred from the consumer’s actions on the website—including, for example, checking boxes and clicking buttons—but any such action must indicate the parties’ assent to the same thing, which occurs only when the website puts the consumer on constructive notice of the contractual terms.” (Ibid.; see Stover v. Experian Holdings, Inc. (9th Cir. 2020) 978 F.3d 1082, 1086 [“notice—actual, inquiry, or constructive—is the touchstone for assent to a contract”].) “Thus, in order to establish mutual assent for the valid formation of an internet contract, a provider must first establish the contractual terms were presented to the consumer in a manner that made it apparent the consumer was assenting to those very terms when checking a box or clicking on a button.” (Sellers, at p. 461.) Recently, in Sellers, supra, 73 Cal.App.5th 444, our court thoroughly discussed the legal landscape regarding the various methods by which contracts are commonly formed online. We borrow extensively from Sellers here.
“Even before the rise of internet transactions, software providers included contractual terms of use in their packaging.” (Sellers, supra, 73 Cal.App.5th at p. 462.) “These agreements, which restricted how the software could be used and provided protection from widespread illegal copying, came to be ‘called shrink-wrap licenses [fn. omitted] because although the packaging contains notice of the agreement inside, the entire agreement can only be viewed after buying the product and breaking through the plastic shrink-wrap packaging.’” (Id. at p. 463, italics added.) “As consumers began downloading software from websites, agreements similar to shrink-wrap licenses began to appear online. [Citation.] But since there is no packaging on the internet, there was no way for providers to include a physical copy of the contractual terms. Instead, providers would ask customers to agree to the terms, displayed somewhere on their website, by clicking on an ‘“I accept”’ or ‘“I agree”’ button. [Citation.] This type of agreement became known as a ‘“clickwrap”’ agreement, ‘by analogy to “shrinkwrap,” used in the licensing of tangible forms of software sold in packages, because it “presents the user with a message on his or her computer screen, requiring that the user manifest his or her assent to the terms of the license agreement by clicking on an icon.”’ [Citation.] In most instances, the contractual terms were not actually displayed on the same screen as the ‘I accept’ button, but were instead provided via a hyperlink that, when clicked, took the user to a separate page displaying the full set of terms.” (Sellers, supra, 73 Cal.App.5th at p. 463, italics added.) “As the internet evolved, so did the various manners in which providers sought to impose contractual terms on consumers. Most courts now have identified at least four types of internet contract formation, most easily defined by the way in which the user purportedly gives their assent to be bound by the associated terms: browsewraps, clickwraps, scrollwraps, and sign-in wraps.” (Sellers, supra, 73 Cal.App.5th at p. 463.) “‘A “browsewrap” agreement is one in which an internet user accepts a website’s terms of use merely by browsing the site.’” (Sellers, supra, 73 Cal.App.5th at p. 463.) “‘“Unlike a clickwrap agreement, a browsewrap agreement does not require the user to manifest assent to the terms and conditions expressly.... A party instead gives his assent simply by using the website,”’” which typically contains a hyperlink somewhere on the page leading to a separate page containing the terms of use to which the owner intends to bind the user. (Long, supra, 245 Cal.App.4th at p. 862, quoting Nguyen v. Barnes & Noble Inc. (9th Cir. 2014) 763 F.3d 1171, 1176 (Nguyen).) “‘Thus, “by visiting the website—something that the user has already done—the user agrees to the Terms of Use not listed on the site itself but available only by clicking a hyperlink.”’”(Long, at p. 862, quoting Nguyen, at p.1176.) As noted, “‘a“clickwrap” agreement is one in which an internet user accepts a website’s terms of use by clicking an “I agree” or “I accept” button, with a link to the agreement readily available.’” (Sellers, supra, 73 Cal.App.5th at p.463.) “‘A “scrollwrap” agreement is like a “clickwrap,” but the user is presented with the entire agreement and must physically scroll to the bottom of it to find the “I agree” or “I accept” button....’” (Sellers, supra, 73 Cal.App.5th at pp. 463-464.) Finally, a “sign-in wrap” agreement is a “blend” or “‘hybrid’” of browsewrap and clickwrap agreements. (Colgate v. JUUL Labs, Inc. (N.D.Cal. 2019) 402 F.Supp.3d 728, 763.) “‘“Sign-in-wrap” agreements are those in which a user signs up to use an internet product or service, and the sign-up screen states that acceptance of a separate agreement is required before the user can access the service. While a link to the separate agreement is provided, users are not required to indicate that they have read the agreement’s terms before signing up.’ [Citations.] Instead, ‘the website is designed so that a user is notified of the existence and applicability of the site’s “terms of use” [usually by a textual notice] when proceeding through the website’s sign-in or login process.’” (Sellers, supra, 73 Cal.App.5th at p.464.) As we will explain below, we conclude Blizzard’s License Agreements constitute sign-in wrap agreements. The “wrap” methods of online contract-formation provide varying degrees of notice to users, with browsewrap providing the least and scrollwrap providing the most. (Sellers, supra, 73 Cal.App.5th at p. 471.) Our court recognized in Sellers that California “and federal courts have reached consistent conclusions when evaluating the enforceability of agreements at either end of the spectrum, generally finding scrollwrap and clickwrap agreements to be enforceable and browsewrap agreements to be unenforceable.” (Sellers, at p. 466; see, e.g., Nguyen, supra, 763 F.3d at p.1177.) The Sellers court was the first California court “to determine where sign-in wrap agreements fall on the spectrum.” (Sellers, supra, 73 Cal.App.5th at p. 466.) The court concluded “sign-in wrap agreements fall somewhere in the middle of the two extremes of browsewrap and scrollwrap agreements. Sign-in wrap agreements do include a textual notice indicating the user will be bound by the terms, but they do not require the consumer to review those terms or to expressly manifest their assent to those terms by checking a box or clicking an ‘I agree’ button. Instead, the consumer is purportedly bound by clicking some other button that they would otherwise need to click to continue with their transaction or their use of the website—most frequently, a button that allows the consumer to ‘sign in’ or ‘sign up’ for an account. Thus, it is not apparent that the consumer is aware that they are agreeing to contractual terms simply by clicking some other button. Instead, ‘the consumer’s assent is “largely passive,”’ and the existence of a contract turns ‘“on whether a reasonably prudent offeree would be on inquiry notice of the terms at issue.”’” (Id. at p. 471, second italics added.) The Sellers court observed that federal courts have generally upheld sign-in wrap agreements, “perhaps in part because the transactions at issue in those cases...mostly involve a consumer signing up for an ongoing account and, thus, it is reasonable to expect that the typical consumer in that type of transaction contemplates entering into a continuing, forward-looking relationship.” (Sellers, supra 73 Cal.App.5th at p. 471.) But, beyond this commonality, the Sellers court noted “some important limitations of the current state of the law in these federal cases.” (Id. at p. 472.) First, “because the threshold issue of the existence of a contract is for the courts to decide, the issue of conspicuousness is typically characterized as a question of law.” (Sellers, supra, 73 Cal.App.5th at p. 473.) But in deciding this issue, courts are actually undertaking “a fact-intensive inquiry” of “largely subjective” criteria, such as the size, color, contrast, and location of any text notices; the obviousness of any hyperlinks; and overall screen “clutter.” (Ibid.) Not surprisingly, then, the Sellers court observed that different federal courts have reached “seemingly inconsistent results” (ibid.) about the conspicuousness of “essentially the same... sign-up webpages” (id. at p. 474, citing Metter v. Uber Technologies, Inc. (N.D.Cal., Apr. 17, 2017, No. 16-CV-06652-RS) 2017 WL 1374579, at p.*3 [finding Uber’s sign-in wrap sufficiently conspicuous] and Cullinane v. Uber Technologies, Inc. (1st Cir. 2018) 893 F.3d 53, 63 [finding Uber’s sign-in wrap not sufficiently conspicuous]). Second, the Sellers court noted that, because the “courts have relied on similarly, subjective views about the experience, knowledge, and skill level of the ‘typical’ online consumer” (Sellers, supra, 73 Cal.App.5th at p. 474), “it is more appropriate to focus on the providers, which have complete control over the design of their websites and can choose from myriad ways of presenting contractual terms to consumers online” to “eliminate any uncertainty as to the consumer’s notice of contractual terms and assent to those very terms” (id. at pp. 475-476). In this respect, “the transactional context is an important factor to consider and is key to determining the expectations of a typical consumer.” (Sellers, supra, 73 Cal.App.5th at p. 481.) Thus, “when the transaction is one in which the typical consumer would not expect to enter into an ongoing contractual relationship,” such as buying a single flower arrangement or pair of socks, downloading free software, or signing up for a free trial, the consumer “is less likely to be looking for” contractual terms. (Id. at p.476; see Long, supra, 245 Cal.App.4th at p. 866 [online purchase of flower arrangement]; Specht v. Netscape Communications Corp. (2d Cir. 2002) 306 F.3d 17, 32 (Specht) [free software download].) “By contrast, the majority of the federal cases finding an enforceable sign-in wrap agreement involve continuing, forward-looking relationships.” (Sellers, at p. 476; see, e.g., Meyer v. Uber Technologies, Inc. (2d Cir. 2017) 868 F.3d 66, 80 (Meyer) [“The registration process clearly contemplated some sort of continuing relationship between the putative user and Uber, one that would require some terms and conditions, and the Payment Screen provided clear notice that there were terms that governed that relationship.”].)
Applying these principles, the Sellers court found a sign-in wrap agreement was not sufficiently conspicuous to put consumers on notice of the service provider’s arbitration provision and class action waiver, where the plaintiffs alleged they believed they were paying a one-time fee of $5 to submit a question to an online “‘expert.’” (Sellers, supra, 73 Cal.App.5th at p.452.) The plaintiffs alleged the defendant then enrolled them in a costlier, automatically renewing membership, in violation of California’s Automatic Renewal Law (ARL), which requires “‘clear and conspicuous’ disclosures” and “‘affirmative consent’” to enrollment. (Sellers, at p. 452.) First and foremost, the Sellers court found that in the context of a transaction governed by the ARL, the sign-in wrap notices “were not sufficiently conspicuous to bind” the plaintiffs (Sellers, supra, 73 Cal.App.5th at p. 478) because the notices were “significantly less conspicuous than the statutory notice requirements governing the plaintiffs’ underlying ARL claims” (id. at p. 479; see id. at p. 480 [“a textual notice of the existence of contractual terms that limit the consumer’s ability to address ARL violations should... be at least as conspicuous as the notice required by the statute in the first instance”]). Second, apart from the ARL, the Sellers court found the sign-in wrap notices were “not sufficiently conspicuous even when considering the more subjective criteria applied in the more recent federal cases” (Sellers, supra, 73 Cal.App.5th at p. 478) because the “context of the transaction”—clicking a “‘Start my trial’” button to “get the answer to a single question for a one-time fee of $5” (id. at p. 480, italics added)—“is not a situation in which ‘the registration process clearly contemplated some sort of continuing relationship... that would require some terms and conditions’” (ibid., quoting Meyer, supra, 868 F.3d at p. 80).Rather, in this context, consumers “would not likely be scrutinizing the page” for notices regarding terms of use, which were disclosed (1) “in extremely small print” that contrasted less against the background than other print on the same page; (2) outside the “box containing the payment fields where the consumer’s attention would necessarily be focused”; and (3) via a hyperlink that, although underlined, was “not set apart in any other way..., such as with blue text or capital letters.” (Sellers, at pp. 480-481).
Finally, the court found that additional disclosures contained on the “View response” page that appears “only after the user has already signed up for a ‘trial’” were not sufficiently conspicuous. (Sellers, supra, 73 Cal.App.5th at p. 482.) Below the “View response” prompt was a checkbox next to text stating, “‘I agree to the Disclaimer and re-agree to the Terms of Service.’” (Id. at p. 456.) Although the court found this disclosure “somewhat more like a clickwrap agreement that is generally enforceable” (id. at p. 482), the court nonetheless found it insufficiently conspicuous because the underlined hyperlink “goes to a set of disclaimers regarding the accuracy of the answer the user is about to receive, and not to the terms of service” (id. at p. 483). The bottom of the accuracy-disclaimer page contained links to the terms of service, with a notice stating, “‘You can read more about these policies in our Terms of Service.’” (Ibid.) The court found this language insufficiently conspicuous because it “does not suggest the consumer will be bound by those terms and instead, the entire scenario requires the user ‘to ferret out hyperlinks to terms and conditions to which they have no reason to suspect they will be bound.’” (Ibid., quoting Nguyen, supra, 763 F.3d at p.1179.) “Considering the context of the transaction,” the court found the checkbox disclosure insufficiently conspicuous because “the hyperlink does not take the consumer to terms advising them they would be bound by an agreement to arbitrate. Instead, the terms are available only if the consumer scrolls through the disclaimers and clicks on a secondary link to the terms of service.” (Sellers, at pp. 483-484, italics added.)
(…) And he accessed Blizzard’s online platform to interact with other players in a videogame he alleges he “spent approximately 50 hours playing... over the course of approximately two years.” These circumstances “involve a consumer signing up for an ongoing account and, thus, it is reasonable to expect that the typical consumer in that type of transaction contemplates entering into a continuing, forward-looking relationship” governed by terms and conditions. (Sellers, supra, 73 Cal.App.5th at p. 471, italics added; see id. at p. 477 [users who “submitted a single question for a ‘trial’ and a one-time fee” “did not anticipate that they would enter into an ongoing relationship governed by extensive contractual terms”].) This is the type of transaction in which federal courts have generally found sign-in wrap agreements enforceable. (See id. at p. 476.)
In this context, we have no trouble concluding the 2018 pop-up notice provided sufficiently conspicuous notice that a user who clicked the “Continue” button at the bottom of the pop-up would be bound by the 2018 License Agreement and the Dispute Resolution Policy incorporated into it. As for notice of the 2018 License Agreement generally, the pop-up provided sufficiently conspicuous notice. It consisted primarily of a scrollable text box that contained the entire 2018 License Agreement. Thus, unlike in Sellers, users did not need “‘to ferret out hyperlinks to terms and conditions.’” (Sellers, supra, 73 Cal.App.5th at p. 483; see Specht, supra, 306 F.3d at p. 32 [“a reference to the existence of license terms on a submerged screen is not sufficient to place consumers on inquiry or constructive notice of those terms”].) Blizzard directly provided those terms and conditions. Blizzard also made clear the significance of clicking the “Continue” button in the pop-up. Immediately above the button, in white text contrasting against a dark background, the pop-up notice stated: “By clicking ‘Continue’, I acknowledge that I have read and understand the Blizzard License Agreement applicable to my country of residence.” The portion of the 2018 License Agreement immediately visible in the text box advised users to “CAREFULLY READ THE AGREEMENT,” and admonished that they “MAY NOT INSTALL OR OTHERWISE ACCESS THE PLATFORM” if they “DO NOT AGREE WITH ALL OF THE TERMS OF THE AGREEMENT.” This provided sufficiently conspicuous notice to users that by clicking the “Continue” button on the pop-up, they were agreeing to be bound by the 2018 License Agreement.
As for notice of the arbitration agreement specifically, we further conclude the pop-up provided sufficiently conspicuous notice. The portion of the 2018 License Agreement immediately visible in the scrollable text box also advised that the agreement contains a dispute resolution section that, in turn, contains an arbitration agreement and class action waiver: “PLEASE NOTE THAT THE SECTION BELOW TITLED DISPUTE RESOLUTION CONTAINS A BINDING ARBITRATION AGREEMENT AND CLASS ACTION WAIVER. THEY AFFECT YOUR LEGAL RIGHTS. PLEASE READ THEM.” Because this notice appeared in a scrollable text box that contained the entire 2018 License Agreement, a user could scroll through the agreement to find a section clearly titled “Dispute Resolution. ”Thus, the trial court mistakenly stated in its minute order that “there is no ‘Dispute Resolution’ section ‘below.’” (See Sellers, supra, 73 Cal.App.5th at p. 462 [Court of Appeal reviews undisputed screenshots de novo].)
The Dispute Resolution section of the 2018 License Agreement, in turn, provided sufficiently conspicuous notice that it incorporated by reference the Dispute Resolution Policy, which contains an arbitration provision. “The general rule is that the terms of an extrinsic document may be incorporated by reference in a contract so long as (1) the reference is clear and unequivocal, (2) the reference is called to the attention of the other party and he consents thereto, and (3) the terms of the incorporated document are known or easily available to the contracting parties.” (DVD Copy Control Assn., Inc. v. Kaleidescape, Inc. (2009) 176 Cal.App.4th 697, 713 (Kaleidescape); see Shaw v. Regents of University of California (1997) 58 Cal.App.4th 44, 54 (Shaw) [“The contract need not recite that it ‘incorporates’ another document, so long as it ‘guides the reader to the incorporated document.’”].) These criteria are satisfied here.
(…) It is of no import that the document being incorporated contains an arbitration agreement. (See Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 914 [the defendant “was under no obligation to highlight the arbitration clause of its contract, nor was it required to specifically call that clause to the plaintiff’s attention. Any state law imposing such an obligation would be preempted by the FAA.”]; Wolschlager v. Fidelity National Title Ins. Co. (2003) 111 Cal.App.4th 784, 791 [“There is no authority requiring the defendant to specify that the incorporated document contains an arbitration clause in order to make the incorporation valid. All that is required is that the incorporation be clear and unequivocal and that the plaintiff can easily locate the incorporated document.”]; Ajzenman, supra, 492 F.Supp.3d at p. 1077 [“there is no special rule that an offeror of an adhesive consumer contract specifically highlight or otherwise bring an arbitration clause to the attention of the consumer to render the clause enforceable”].)
Plaintiffs imply that Blizzard’s incorporation by reference was ineffective because the Dispute Resolution Policy was more than “one click” away from Blizzard’s textual notice; that is, the user would have to click a hyperlink to a first webpage that contains the License Agreement, and from there click a hyperlink to a second webpage that contains the Dispute Resolution Policy. (See, e.g., Sellers, supra, 73 Cal.App.5th at pp.483-484 [finding notice insufficient where “the terms are available only if the consumer scrolls through the disclaimers and clicks on a secondary link to the terms of service” (italics added)].) However, this ignores that the 2018 pop-up notice presented the entire 2018 License Agreement, which contained a hyperlink directly to the Dispute Resolution Policy. Thus, the incorporated document was only one click away, not two.
To conclude, the 2018 pop-up notice provided sufficiently conspicuous notice that by clicking on the “Continue” button at the bottom of the pop-up, the user would be agreeing to all of the terms of the 2018 License Agreement, which validly incorporated by reference the Dispute Resolution Policy, together with its arbitration agreement and class action waiver (both of which the pop-up notice specifically brought to the user’s attention).
(…)
DISPOSITION
We reverse the trial court’s December 18, 2020 order and direct the court to enter a new order granting Blizzard’s motion to compel arbitration. Blizzard is entitled to its costs on appeal.
(California Court of Appeal, March 29, 2022, B.D. v. Blizzard Entertainment, Docket No. D078506, Certified for Publication)
