Many companies now use shorter contracts that incorporate the terms and conditions spelled out on a company’s website. It’s an efficient way to keep the terms of similar deals uniform and reduce paperwork. However, when business arrangements unravel, the parties often find themselves arguing in court regarding whether the online terms are part of the printed agreement that they signed. The answer to that question often depends on whether the parties have sufficiently conveyed their intent to incorporate the online terms into the written agreement.
The Dallas Court of Appeals recently ruled in Montgomery Chevrolet v. Dent Zone Companies that unless the language of the contract shows a clear intent to incorporate online terms and conditions, such terms are not part of the contract.
In this case, Dent Zone, a Texas company, entered into an agreement with Montgomery Chevrolet, a Kentucky company, which contained the following provision, “Additional benefits, qualifications and details of the PDR LINX Service Program are available for your review at our website,” and provided a link to that website. The terms and conditions on the website included a forum selection clause. When the parties’ business relationship soured, Dent Zone sued Montgomery Chevrolet in Dallas, alleging that it had consented to a suit in Texas by the terms of the contract. Montgomery filed a special appearance and argued that the forum-selection clause was not incorporated by reference into the parties’ contract. The trial court denied Montgomery’s special appearance, but the Dallas Court of Appeals reversed, agreeing with the defendant.
The Court of Appeals explained that under Texas law, unsigned documents may be incorporated into the parties’ contract by referring in the signed document to an unsigned document. The language used to refer to the incorporated documents is not important as long as the signed document “plainly refers” and not just mentions the incorporated document. According to the Court, the clause in Montgomery Chevrolet simply indicated that the “internet document contained informative materials,” and fell short of actually incorporating the online terms because it did not “plainly refer” to them as becoming part of the parties’ agreement and did not otherwise suggest that the parties intended that the internet document be incorporated in the agreement.
Montgomery Chevrolet provides a good example of what not to do when attempting to incorporate online terms and conditions in a written agreement. In contrast, a previous decision by the Fifth Circuit Court of Appeals in One Beacon v. Crowley Marine Serv’s, provides a good example of how to incorporate such terms properly. The Court in Beacon found that the following clause was sufficient to incorporate the terms and conditions on a company’s website, including an indemnification clause: “THIS RSO IS ISSUED IN ACCORDANCE WITH THE PURCHASE ORDER TERMS & CONDITIONS ON WWW.CROWLEY.COM / DOCUMENTS & FORMS, UNLESS OTHERWISE AGREED TO IN WRITING.“ The Court ruled that the parties’ intent to incorporate the online terms in their agreement was clear from the explicit language prominently place on the face of the RSO in all capital letters. Moreover, the location of the additional terms was clearly indicated, and any reasonable person would be able to find them.
CONCLUSION: Letting a party to a written agreement know that additional terms are available for review online is insufficient to incorporate such terms. Instead, the language in the written agreement incorporating online terms and conditions should meet the following requirements (to avoid future litigation regarding this issue):
(1) be clear and specific;
(2) be prominently placed on the face of the written document in all capital letters; and
(3) include a specific URL address where the online terms are located, so that the other party can easily find and review the terms.
Leiza Dolghih is a partner at Lewis Brisbois Bisgaard & Smith LLP in Dallas, Texas and a Co-Chair of the firm’s Trade Secrets and Non-Compete Disputes national practice. His practice includes commercial, intellectual property and employment litigation. You can contact her directly at Leiza.Dolghih@LewisBrisbois.com or (214) 722-7108.