6th Circuit Holds that Clicking Website Buttons Near Hyperlinked Terms of Use Created Enforceable Arbitration Agreement Under California Law

The U.S. Court of Appeals for the Sixth Circuit recently held that a prospective borrower’s clicking “critical buttons” on a mortgage loan referral service’s website created an enforceable agreement requiring the borrower to arbitrate all disputes.

The borrower visited the referral service’s website and completed the online process to find a lender with which he could refinance his existing loan.  On the website, he clicked multiple buttons with accompanying statements that, by clicking, the user agreed to the hyperlinked terms of use.  After completing the process multiple times, the borrower alleges that a mortgage lender repeatedly contacted him in violation of the Telephone Consumer Protection Act.  In response to the borrower’s ensuing lawsuit, the lender moved to compel arbitration pursuant to the website’s terms of use.  A Michigan federal district court denied the motion to arbitrate.

The Sixth Circuit reversed.  Under California law (which governs under the terms of use), there are three types of offers relevant to websites.  The first two are a “clickwrap” offer (which can result in an enforceable contract if the user clicks an “accept” button or takes other similar affirmative action) and a “browsewrap” offer (which cannot result in an enforceable contract when the user simply browses the website).  The court, however, determined that the instant case fell into the third category (a “hybrid” offer) because the borrower clicked a button to agree to terms that were provided via a hyperlink to a separate webpage.

Applying the established standard for hybrid offers under California law, the court held that the borrower formed a binding contract by completing the above-described process.  The court determined that the website provided “reasonably conspicuous” notice of the proposal because of the “spatial and temporal” proximity of the proposal and the critical buttons.  Likewise, the court determined that the borrower’s clicking of two critical buttons “objectively showed his assent” to the proposal.