Online Terms as In Terrorem Devices

Abstract

Online shopping has quickly replaced the brick-and-mortar experience for a large portion of the consuming public. The online transaction itself is rote: browse items, add them to your cart, and checkout. Somewhere along the way, the consumer is likely made aware of (or at least exposed to) the merchant’s terms and conditions, via either a link or a pop-up box. Such terms and conditions have become so ubiquitous that most consumers would be hard-pressed to find a merchant that doesn’t try to impose them somewhere on their website. Though such terms and conditions are pervasive, most consumers do not bother to read them before checking-out. Consumers might be surprised at what they would find if they did read the terms and conditions as many retailers include clauses limiting liability, disclaiming warranties as well as choice of law, forum selection, arbitration, jury waiver, and class action waiver clauses. Many of these clauses are grounded in a practical concern over limiting liability and lowering transaction costs. However, the fact that retailers do not include such clauses as part of their in-store transactions raises the question of whether the retailers are actually concerned with binding consumers to such terms. The apparent lack of importance of these terms is further highlighted by the fact that most retailers use “browsewrap” terms and conditions to bind their customers, despite browsewrap being one of the least effective methods of making consumers aware of the terms. While these terms and conditions may provide some utility to the companies attempting to impose them, the main benefit may in fact be their in terrorem effect. This is especially true in instances where companies have failed to adequately notify their consumers about the terms’ existence. This article examines the various methods that are used in online contracting to bind consumers, as well as the enforceability of the most common terms. The article concludes that the primary incentive sellers have to include such terms on their websites is their in terrorem effect. Though the use of online terms and conditions as in terrorem devices may be appealing economically, the use of browsewrap as the primary notification device ex ante presents moral and ethical issues.