A step in the right direction or a delay of the inevitable? –How a deferred proposal from the American Law Institute could impact your web browsing in years to come

A step in the right direction or a delay of the inevitable? –How a deferred proposal from the American Law Institute could impact your web browsing in years to come.

By Matt Digney Law clerk at BridgehouseLaw LLP

On Tuesday, May 21, 2019, at its annual meeting in Washington, the American Law Institute (ALI) chose to defer an important decision regarding the process of contract formation between companies and consumers over the web until next year. The deferred proposal, if implemented, would bind website visitors to contractual terms and conditions by simply browsing the website instead of having to click “I AGREE” after viewing a contract.
In recent years, an increasing proportion of daily business and tasks have begun to take place over the internet. Accordingly, more and more companies are using web-based agreements, commonly referred to as “Clickwrap Agreements,” to streamline the contract formation process and allow consumers to quickly assent to the terms and conditions of the current web page they are browsing with a click. Because these contracts can include important terms that may allow corporations to sell customer data to marketing companies or limit the consumers’ legal rights by including mandatory arbitration clauses or class-action waivers, the conspicuousness of the contract itself remains a critically important aspect of the contract formation process in an online setting: an aspect that the proposal would dispose of.

However, the recent proposal drafted by three law professors affiliated with the ALI would mark a notable departure from one of the most basic requirements of contract formation: an outward manifestation of assent to be bound by the terms of the contract. The drafters, along with advocates of the proposal, rely on the reasoning of some courts that have suggested there is no longer a need for businesses to require their customers to click “I AGREE” in a Clickwrap Agreement, because nobody reads the contractual terms anyway. However, as Ian MacDougall notes in an article for ProPublica, consumer advocates and critics of the proposal argue that the “proposed cure is worse than the disease.” In saying this, the opponents are arguing that the proposal would do nothing but provide a further opportunity for companies to bury non-favorable terms for consumers inside of longer and more difficult to find contracts instead of requiring the companies to identify and implement more efficient ways to make consumers aware of what terms they are agreeing to.

If the proposal is approved at the 97th Annual Meeting of the ALI in 2020, it will be written into the proposed Restatement of Consumer Contracts. While the proposed rule would not be enacted as an official statute, the Restatements that it would be included in are considered as “something close to an authoritative explanation of what the law is and where it’s heading,” said MacDougall, and is relied upon by courts regularly to guide their decision making. Much of the fear surrounding the proposal stems from the opposition’s viewpoint that the drafters relied on a rather selective reading of the relevant case law, and that the proposal does not capture the probable direction of the law, much less a desirable outcome in the realm of consumer protection.

While much of the opposition views the deferral of the decision regarding the proposal as a victory, advocates of the proposal view the deferral as simply a step that is delaying the inevitable drafting of the proposal into the Restatements. The question now becomes whether or not the average consumer will have to live in fear of predatory companies with self serving motives forcing the everyday person to assent to terms not made expressly available to them from the outset while browsing the web. The answer, for now at least, is unclear. Both sides still have a considerable amount of support and the proposal is up for consideration again at next year’s annual ALI meeting. Until then, the deferral can serve at least as a reminder to consumers to be vigilant and aware of what you are agreeing to while browsing your favorite web pages.

Post: June 4, 2019
Web Link to ProPublica Article referred to: