Ruling raises the question: What isn’t an enforceable web-based contract?

New Hampshire’s federal district court forecasts lessons for web designers and lawyers

Rocket MortgageA recent decision from the federal district of New Hampshire demonstrates why attorneys and web designers must find ways to communicate about the interplay between the law of contracts and web design in order to achieve apparently important business objectives for their employers.

In Daschbach v. Rocket Mortgage LLC, decided March 22, the court encountered a set of circumstances now familiar to all of us: legalese present on a computer-facilitated interface and posing as a contract. The question presented: is this legalese a true contract under contract law?

In the case, a consumer sued Rocket Mortgage for violating state and federal consumer law. As a defense, Rocket Mortgage sought to enforce the “Terms of Use” available through a hyperlink available on its consumer facing website. Those “Terms of Use” required the consumer to privately arbitrate all disputes with Rocket Mortgage.

Rocket Mortgage claimed that these terms bound a consumer under contract law even though the design of the website did not require the user to “click through” the terms to complete a transaction. The federal court disagreed.

In doing so, the court entered a continuing debate about what technology must facilitate through design to later claim a consumer has given up certain rights as part of a transaction. At the very least, the court said, a web design must put a consumer on notice, though notice is only a first step in an analysis that also requires proof that technology facilitates assent.

Marching through an analysis of what other courts have said about the issue of notice, the Court concluded that terms of use that are “indecipherable to the naked eye” – such as those Rocket Mortgage sought to enforce – do not meet the notice threshold.

Its analysis assessed the color and relative size and placement of text on the website, as well as the ways in which web design rendered the text salient and available to consumer as part of the set of steps and transactions the website facilitated for the consumer.

The court’s decision is not an aberration. Courts have viewed arguments relying on similar technology more skeptically in recent years.

Two years ago, for instance, the Massachusetts Supreme Judicial Court, in Kauders v. Uber, invalidated Uber’s terms and conditions through an analysis very similar to the analysis deployed by the court in Rocket Mortgage.

The matter is even grist for conflict between academics and enforcement officials. When a national body of experts working with the American Law Institute proposed a model rule that would have replaced “notice” for “assent” as a default rule in such settings, 23 state attorneys general objected on consumer protection grounds.

One important, practical lesson arising from this dynamic is that web designers must go further, even significantly further, than did Rocket Mortgage, to establish evidence of interaction and engagement by the consumer sufficient to meet the demands of contract law. After all, in Daschbach, even if Rocket Mortgage met the “notice” requirement, it would still have to demonstrate consumer “assent.” Failing to meet either standard, any value companies seek to capture in the altered, perhaps diminished, legal rights of its consumer base, will diminish in size and stability.

It follows from this that if companies see true value in these transactions, the project of designing enforceable contracts will require greater interaction between web designers and lawyers. Lawyers will have to understand web design capabilities at a sufficient level to provide advice on what features will meet basic legal thresholds established in cases like Daschbach. Web designers will have to receive and propose solutions that meet these thresholds by absorbing and internalizing the demands of contract law. That project also may require more from web design than putting consumers on notice. It may require companies to facilitate greater interactivity: the sort that demonstrates steps that provide greater assurance of actual assent. In this regard, as technology develops and claims regarding the difficulty of facilitating greater interaction on the consumer side become less credible, lawyers and web designers may even need to be ahead of the curve when predicting what courts will demand in order to protect companies from losing value they seek to capture through these transactions.

Michael S. Lewis is senior litigation partner at the law firm of Rath, Young & Pignatelli.

Categories: Law, Legal Advice, Technology