When Digital Small Print Flashes on Your Screen

Few things are more common on the Internet than the lengthy, largely incomprehensible, online contracts that are often buried at the bottom of web pages with a simple link to "terms." These agreements sometimes run dozens of pages if printed out and invariably transfer all responsibility and liability to the user, while selecting a jurisdiction clause that is advantageous to the website and inconvenient to most users.

Consumers agree to these contracts dozens of times each day (sometimes proactively by clicking that they agree and most other times by impliedly agreeing to the terms by using the website), but the enforceability of all the terms within the agreement remains an open question.

The law has removed most uncertainty about whether an electronic contract can be enforceable -- it can -- but ensuring that the form of the contract is valid does not mean that all of its provisions will be enforced by a court. Last month, a Quebec court provided an important reminder that some provisions may not be enforced, as it rejected eBay's standard terms which require all disputes to be adjudicated in California.

The case involved an auction gone bad with the Montreal-based sellers seeking to hold eBay responsible. Two students had acquired a rare pair of Nike shoes produced for the National Basketball Association 2012 All-Star game. The shoes were listed for auction on eBay and quickly garnered bids that exceeded US$50,000. Before the auction was concluded, however, eBay stopped the auction (the reasons have yet to be disclosed in court).

The two students sued the online auction giant in a Quebec court, arguing that it could assert jurisdiction over the matter since the sellers were located in the province. eBay countered by noting that though its terms of use agreement states that all disputes are governed by Ontario and Canadian laws, any litigation must occur in California.

Dense and complex

The Quebec court was not impressed, noting that the eBay agreement was over six pages of dense text with "a large number of conditions and restrictions stacked on top of each other in language that is difficult to understand." The jurisdiction clause was located at the bottom of page five, leading the court to wryly conclude that for a user with very good eye sight and lots of patience and determination, they will find the provision stipulating California as the forum for disputes.

The court suggested that the choice of California appeared to be an attempt to dissuade potential litigants from proceeding with their action, noting that using Canadian law as the governing law but California courts as the jurisdiction for disputes was inserted to "prevent, deter, and void" any appeal against eBay.

Given the court's discomfort with the eBay agreement, it concluded that the California jurisdiction provision was "excessive and unreasonable" and therefore void. The decision allows the two students to continue their action against eBay in the Quebec courts.

The ruling runs counter to earlier Canadian cases that have generally granted considerable deference to freedom of contract and the ability to enforce somewhat onerous jurisdiction clauses.

For example, one of the first e-commerce cases in Canada involved a lawsuit against Microsoft, which at the time was offering Internet access services. The lawsuit was launched in Ontario, but Microsoft's electronic user agreement included a provision stipulating the State of Washington as the jurisdiction to settle disputes.

An Ontario court upheld both the contract and the provision, warning in a 1999 decision that failure to enforce electronic contracts would "lead to chaos in the marketplace, render ineffectual electronic commerce and undermine the integrity of any agreement entered into through this medium."

Those concerns may have been valid when e-commerce was just getting started, but years later the Quebec decision suggests that e-commerce is also dependent upon fair contracts that grant a genuine ability to pursue legal action in the event of a dispute.