Reference no: EM132354940

Cyber Security Program Assignment -

Case of the Hidden Restocking Fee - Hines v. Overstock.com, Inc., 668 F. Supp. 2d 362 (E.D.N.Y. 2009)

Plaintiff Cynthia Hines ("Plaintiff" or "Hines") initiated this purported class action pursuant to the Court's diversity jurisdiction, alleging that defendant Overstock.com, Inc.'s ("Defendant" or "Overstock") decision to impose a "restocking fee" amounted to a breach of contract. Overstock is an online, "closeout" retailer. On or about January 8, 2009, Plaintiff purchased an Electrolux Oxygen 3 Ultra Canister vacuum from Overstock's website. After receiving the vacuum, Plaintiff returned it to Defendant and was reimbursed the full amount she had paid for it, minus a $30.00 restocking fee. Plaintiff claims that she had been advised that she could return the vacuum without incurring any costs and that Defendant never disclosed that a restocking fee would be charged.

In support of the Motion, Defendant avers that: "All retail purchases from Overstock are conducted through Overstock's Internet website. When an individual accesses the website, he or she accepts Overstock's terms, conditions and policies, which govern all of Overstock's customer purchases." Overstock's "Terms and Conditions" state that "Entering this Site will constitute your acceptance of these Terms and Conditions" and include a provision that requires that "any dispute relating in any way to your visit to the Site . . . be submitted to confidential arbitration in Salt Lake City, Utah."

Plaintiff affirms, however, that she "never had any notice that disputes with Overstock.com require mandatory arbitration in Salt Lake City, Utah." Plaintiff affirms that when she accessed Overstock's website to purchase the vacuum, she was never made aware of the Terms and Conditions.

Discussion - It is a basic tenet of contract law that in order to be binding, a contract requires a "meeting of the minds" and "a manifestation of mutual assent" [citations omitted]. The making of contracts over the internet "has not fundamentally changed the principles of contract." Register.com, Inc. v. Verio, Inc., 356 F.3d 393, 403 (2nd Cir. 2004). On the internet, the primary means of forming a contract are the so-called "clickwrap" (or "click-through") agreements, in which website users typically click an "I agree" box after being presented with a list of terms and conditions of use, and the "browsewrap" agreements, where website terms and conditions of use are posted on the website typically as a hyperlink at the bottom of the screen. Unlike a clickwrap agreement, a browsewrap agreement "does not require the user to manifest assent to the terms and conditions expressly . . . [a] party instead gives his assent simply by using the website" [citation omitted]. In ruling upon the validity of a browsewrap agreement, courts consider primarily "whether a website user has actual or constructive knowledge of a site's terms and conditions prior to using the site."

In Specht, the plaintiffs had downloaded free software from the defendant's website; because they did not scroll down the page, they did not see the notice advising site-users to review and agree to the software license agreement's terms prior to downloading. The Second Circuit held that the plaintiffs were not bound by the license agreement's terms because they "were responding to an offer that did not carry an immediately visible notice of the existence of license terms or require unambiguous manifestation of assent to those terms" [citations omitted]. Motise v. America Online, Inc., 346 F. Supp. 2d 563, 564-65 (S.D.N.Y.2004) (finding no notice where terms of use were available on website, but not presented to plaintiff).

In the instant case, it is clear that Plaintiff had no actual notice of the Terms and Conditions of Use. Defendant has also failed to show that Plaintiff had constructive notice. The Hawkins Affidavit, upon which Defendant relies, conclusory states that by accessing Overstock's website, an individual accepts Overstock's Terms and Conditions-but, crucially, does not explain how a site- user such as Plaintiff is made aware of the Terms and Conditions. Despite Defendant's assertion that "all customers to Overstock's website are advised of the company's terms and conditions prior to their entry onto the site," . . . Notably, unlike in other cases where courts have upheld browsewrap agreements, the notice that "Entering this Site will constitute your acceptance of these Terms and Conditions," was only available within the Terms and Conditions . . . Hines therefore lacked notice of the Terms and Conditions because the website did not prompt her to review the Terms and Conditions and because the link to the Terms and Conditions was not prominently displayed so as to provide reasonable notice of the Terms and Conditions. Very little is required to form a contract nowadays-but this alone does not suffice.

Case Questions -

1. What is the most basic tenet or doctrine under contract law for a binding contract?

2. What is the primary means of forming a contract via the Internet?

3. In ruling upon the validity of a browsewrap agreement, what do courts primarily consider?

4. How could Overstock.com have provided actual notice of the restocking fee?

Note - Please answer the questions for the case study. The answers should be free of grammatical errors and use appropriate punctuation where needed.