United States: New Jersey Appellate Division Further Defines "Fair And Forthright" Standard For Online Consumer Agreements

Background

As consumers continue to increase the frequency in which they make purchases over the Internet, courts have had opportunities to examine the terms of use found on many websites. The most recent example of such a court ruling was on May 13, 2011, when the New Jersey Appellate Division decided Hoffman v. Supplements Togo Management, L.L.C., No. 09-2-2128 (May 13, 2011, App. Div.), holding that the forum selection clause contained on the website of the defendant, an online seller of health supplements ("Defendant"), did not meet the "fair and forthright" standard and was therefore presumptively unenforceable. In Hoffman, the plaintiff ("Mr. Hoffman"), a purchaser of product from Defendant's website, sued Defendant in New Jersey state court, claiming that Defendant, among other things, violated the New Jersey Consumer Fraud Act. Defendant moved to dismiss Mr. Hoffman's complaint, claiming, inter alia, that Mr. Hoffman was precluded from suing Defendant in New Jersey because of a forum selection clause contained within a disclaimer on Defendant's website. The Trial Court agreed with Defendant, dismissing Mr. Hoffman's complaint, and Mr. Hoffman appealed.

Holding

The Appellate Division overturned the Trial Court's decision, holding that the placement of the disclaimer on Defendant's web page failed to meet the "fair and forthright" standard the Appellate Division had previous laid out in Caspi v. Microsoft Network, 323 N.J. Super. 118 (App. Div. 1999) and, as such, the forum selection clause contained therein was presumptively invalid. The Appellate Division found that Defendant's "submerging" of the forum selection clause was not "fair and forthright." Specifically, Defendant placed the disclaimer in a position on the web page where it was possible for a consumer to make their entire purchase without ever seeing the disclaimer if they did not scroll down the page. Furthermore, once a consumer had added an item to their online "shopping cart," the web page would skip ahead to a new page that did not contain the disclaimer. The Appellate Division highlighted these points, stating, "The forum selection clause was unreasonably masked from the view of the prospective purchasers because of its circuitous mode of presentation." Hoffman, supra, at p. 23. The Appellate Division therefore ruled that the forum selection clause was presumptively invalid and reinstated Mr. Hoffman's complaint.

What This Means for Companies

The Appellate Division in Hoffman has further detailed the "fair and forthright" standard for online consumer agreements previously laid out in Caspi. Companies that sell products directly to consumers over the Internet should therefore review and, where necessary, revise their website layouts to ensure that they are conforming to the now further-defined standard. Companies should make sure that any online consumer agreements are conspicuously displayed, in a manner ensuring that consumers will see them. To be enforceable, online consumer agreements in New Jersey must conform to the "fair and forthright" standard that has now been further defined by the Appellate Division.

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