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A security breach involving 24 million customers is a bad day. Having to go to court to defend yourself against a class of angry customers is equally a bad day.

That is exactly where Zappos.com is. In January of this year, Zappos notified 24 million of its customers that a security breach had occurred. The lawsuits ensued. Zappos attempted to move the lawsuits to arbitration. Under Zappos' website terms of use, customers all agreed to submit any disputes to confidential arbitration, or did they?

The court said no. The customers did not agree to the Zappos' terms of use. They did not agree to confidential arbitration. Now Zappos must litigate its disputes with customers in open court and not in confidential arbitrations.

Here is why. First, Zappos used what the court refers to as a 'browsewrap' and not a 'clickwrap.' Browse, click, what is the difference?

Per the words of the court: "With a browsewrap [terms of use] agreement, a website owner seeks to bind website users to terms and conditions by posting the terms somewhere on the website, usually accessible through a hyperlink located somewhere on the website. [I]in contrast, a "clickwrap" agreement requires users to expressly manifest assent to the terms by, for example, clicking an 'I accept' button."

Second, the Zappos' terms of use said Zappos could change the terms of use at any time. In the words of the court the terms of use were 'illusory'. How can there be an agreement if something is apt to change? Agreements are based on set terms that are agreed upon. To agree to something that can change is not an agreement at all.

Other than taking interest in others woes, why is this important?

Well, in the business world and the franchise industry is moving to an online world. How your customer website interface is setup is important.

Maybe you are scheduling appointments online. Maybe you are selling products online. Maybe taking pizza orders, or furnace repair orders, or contact lens orders online. Take heed. 

Ensure that customers are clicking to show their consent to your company's terms and conditions.

Do you have a clause in your contracts that says the terms and conditions may change at any time?

Remove that sentence from your agreements. Are you signing agreements that give the other party the right to change the agreement at anytime? Ask to have it removed or modified.

Lesson from the Court:  Step away from the illusory agreement.  Click don't wrap!

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About this Entry

This page contains a single entry by Mary Beth Gettins published on December 27, 2012 2:17 PM.

When Are Franchisors Liable for Sexual Harassment at the Franchisee's Location? was the previous entry in this blog.

See How Easy it is to Manage Change, Within Your Franchise System is the next entry in this blog.

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