Intellectual Property Law

How to guard Terms and Conditions agreements from being found unenforceable after Harris v. Blockbuster, Inc?

By mengj

The U.S. District Court in Harris v. Blockbuster, Inc. (622 F.Supp.2d 396) denied Blockbuster’s motion to compel arbitration under the terms in the Click-Wrap Agreement that its customers were required to accept as a condition of joining Blockbuster online. The Court found that the agreement was unenforceable because the arbitration provision cannot be reasonably applied to disputes arising, or arising out of events occurring before the change was posted online.

Does this mean that customers can rely on this decision and not worry about signing the Terms of Use agreement online? What kind of provision should be included in Terms and Conditions agreement to protect the business from being found unenforceable by the Courts?

Blockbuster’s agreement had the problem that it could change its Terms and Conditions in the click-wrap agreement at its sole discretion, and the changed provisions would become effective immediately upon posting. The Circuit Court in the case stated that the right to modify provision concerned them since it leaves no room for the other party – the customers, to respond to the terms, and thus putting them at an unfair disadvantage in the event of a dispute.

What should the business do? The Court in Blockbuster pointed to a Texas Supreme Court case from 2002, In re Halliburton Co., 80 S.W. 3d 566, which found an electronic agreement enforceable because it included a provision like: “notwithstanding any provision to the contrary, no amendment shall apply to a dispute of which the amending party had actual notice on the date of amendment.”

So there should be a provision stating that parties should be subjected to the provisions that were effective at the time when the dispute arose, but not to the amendment made thereafter.

Full post as published by BC Law Intell. Prop. & Tech. Forum on November 18, 2009 (boomark / email).