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Changing Online Terms of Use? Be Sure to Give Notice First!

First page from the Douglas case, which discusses changes to terms of use

Let’s assume that you have a website with great content. When users sign up, they eagerly click the “I agree” button to accept your standard terms of use. In those terms, you give yourself the right to make future changes to the terms of use via the following provision:

“We may change these terms of use at any time by revising them on our website. You agree to be bound by any such revisions. Therefore, you should review these terms periodically. If you do not agree with any revision, you must stop using our website.”

Changes to Terms of Use Require Notice

This approach is routine on the web and, until recently, was considered by many to have precisely the effect that was intended. In 2007, however, the United States Court of Appeals for the Ninth Circuit (which has jurisdiction over federal cases in the Western U.S.) stated that website owners must do more than just change terms of use online if they want the changes to take effect for existing users.

In Douglas v. U.S. Dist. Court , 495 F.3d 1062 (9th Cir. 2007), the court considered whether a service provider may change the terms of its service contract by merely posting a revised contract on its website. Plaintiff Joe Douglas had contracted for long distance telephone service with America Online. Talk America subsequently acquired this business from AOL and continued to provide service to AOL’s former customers.

Talk America then changed certain business and legal provisions in its online contract but never notified Douglas that the contract had changed. Unaware of the changes, Douglas continued using Talk America’s service for four years.

Contract Terms Cannot Be Changed Unilaterally

The Court held that, as a matter of contract law, Douglas was not bound by the revised terms of use, stating (emphasis added) that “Parties to a contract have no obligation to check the terms on a periodic basis to learn whether they have been changed by the other side. Indeed, a party can’t unilaterally change the terms of a contract; it must obtain the other party’s consent before doing so…. Even if Douglas’s continued use of Talk America’s service could be considered assent, such assent can only be inferred after he received proper notice of the proposed changes.”

A footnote to the first sentence quoted above states, in part, that Douglas should have been “notified that the contract has been changed and how [because] [w]ithout notice, an examination would be fairly cumbersome, as Douglas would have to compare every word of the posted contract with his existing contract in order to detect whether it had changed.”

In light of Douglas, there is a clear requirement for any website owner that wants to change its terms of use: Provide notice that the terms have been changed, and explain how they have been changed.

Multiple Ways to Provide Notice

There may be multiple ways to provide that notice – for example, via e-mail to all users, or via a pop-up or redirection when each user logs in (the Ninth Circuit did not address how notice must be provided). The important point is that the user must be notified, and must have an opportunity to review the changed terms of use, before they take effect.

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Dana H. Shultz, Attorney at Law  +1 510 547-0545  dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.

Contracts, Online Terms

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  2. Quora

    Would most state courts enforce a website’s arbitration clause if the terms of use included the right to modify or change the terms at any time?…

    I agree with Andy Chen that it difficult to say anything about “most state courts”. However, I am going to address another aspect of your question. Generally, I would expect an arbitration provision and a modification-of-terms provision such as you h…