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Warning: Check your Web site’s terms of service in the wake of Nguyen v. Barnes & Noble

Today the U.S. Court of Appeals for the Ninth Circuit (which covers California and other West Coast states, plus Hawai’i) came out with a ruling about the enforceability of “browse-wrap” license agreements, in Nguyen v. Barnes & Noble. The court affirmed a lower-court ruling that B&N’s terms of service were not enforceable against Nguyen. As a result, the arbitration agreement in the TOS didn’t apply, and so B&N must now defend a class-action lawsuit.

The court’s reasoning isn’t a model of clarity in some respects, but the main takeaways seem to be these (consult your lawyer, don’t rely on this as legal advice about your specific situation, etc.):

1. In a browse-wrap agreement, apparently it’s not enough to include just a link to the terms of service. The link should explicitly — and, preferably, conspicuously — warn the user that use of the Web page will constitute assent to a binding contract.

2. It’s best to put the link and its warning in close proximity to a button (or link) that the user must click to take action, e.g., create an account, place an order, etc.

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