New Ruling on Terms of Use Process Impacts Online Business Contracts

by Martin Medeiros, Buckley Law P.C.

In a transaction, the best evidence of a meeting of minds is a valid contract. Terms of Use, Terms of Service, “Click-wrap”, Privacy Policies and other electronic agreements are binding contracts, if you follow the correct procedures. This notion was clearly outlined by the Federal 9^th Circuit Court of Appeals on March 27, 2025 in the case Berman v. Freedom Financial Network, LLC. The court reasoned that an arbitration clause was not enforceable because of the process involved in providing notice to the website visitor, and a record of assent. What is that process?

The court emphasized two key points:

1. Notice and Presentation. The website’s design did not adequately alert users to the terms of use. The text referencing the terms was in small, gray font against a white background, positioned below the prominent “Continue” button, and not near the action users were required to take. The court contrasted this with cases where terms were enforceable, such as when they were presented in a conspicuous hyperlink or required affirmative assent (e.g., a checkbox).
2. Mutual Assent. For an online agreement to be binding, there must be evidence of mutual assent. The Ninth Circuit found that the defendants’ “browsewrap” agreement—where assent is inferred from website use without explicit agreement—did not suffice here. The lack of clear notice meant users were not reasonably informed that clicking “Continue” constituted acceptance of the terms, including the arbitration clause.

Conspicuousness of terms and the clarity of the user’s action are critical to enforceability. Also, registering user identity is evidence of notice and assent. For a copy of the complete decision in .pdf form check here.

We at Buckley Law are here to answer questions and help you navigate these updates. If your terms of use and service delivery architecture is in need of legal review, please contact the Buckley Law business team at 503-620-8900 or email [email protected].