Forum Selection Clauses in Online Contracts – “Accept”ing More than You Bargained for

Accept and Install

Scenario: While browsing the web, you run into a downloadable software that interests you. Without thinking twice, you “accept” the corresponding terms and conditions.  Only too late do you realize that the software you downloaded also installed a never-ending stream of pop-ups and cookies that have slowed your computer and infested your operating system. Irate, you decide to sue the site owner for damages.  After suit is filed, the company’s lawyer gives the petition a once over, twirls his overgrown mustache, which curls into an evil grin, and he prepares to type. With the chatter of the keys, he belts out an evil laugh while responding to the lawsuit. His response — “too bad, so sad. If you want to sue, you have to do it in our state. See you later, sucker.” Dumbfounded, you ask, “can they do that?!”

Evaluation of scenario: Most online Terms and Conditions (T&C) statements (to which most people usually agree by clicking “I accept”) contain what’s called a “Forum Selection Clause.” That is, if you are going to sue the company for any reason, it must be done in the company’s jurisdiction (“the forum state”). Generally, Forum Selection Clauses in online contracts are enforceable (assuming they are “fair and reasonable”). This is incredibly unfortunate if you “accepted” the T&C while sitting in your home office a thousand miles away. Let’s assume that the jurisdiction of the company is the State of California. In theory, no matter your location, you would have to bring the lawsuit in California.

However, different courts have reached different conclusions on this issue. For example, in America Online, Inc. v. Superior Court (2001), a California Court prevented a Forum Selection Clause (concerning jurisdiction in Virginia) from being enforced. The Plaintiff sued in California while the Defendant wanted jurisdiction in Virginia (as per the online contract). Ultimately, the California Court asserted that the clause was “unfair and unreasonable,” and the decision was upheld on appeal under the theory that Virginia law provided for less consumer protection than California (thus, it would be against California public policy to allow for the clause to be enforced).  The lesson here:  READ the Terms and Conditions before agreeing to them, if for no other reason than to be aware of what they say.

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