Consumer Arbitration Clauses: Traps for the Unwary


Consumer Arbitration Clauses: Traps for the Unwary

We’ve previously written about issues related to consumer arbitration clauses for online transactions, as well as related online terms and conditions. But, some courts are loathe to enforce consumer arbitration clauses and will look for ways to avoid them, as a recent federal court case from Illinois illustrates.


In Anand v. Heath, a class action claim was brought for alleged violations of the Telephone Consumer Protection Act, 47 U.S.C. § 227, et seq. This is a statute with teeth and a magnet for class actions because it authorizes consumer lawsuits and provides for large penalties for each violation.

At the heart of the case was whether the plaintiff “assented to the terms and conditions [including an arbitration requirement] when navigating through the website.” The terms included a consumer arbitration requirement for all cases.

Online Consumer Arbitration Agreement

Plaintiff registered with a website and completed a survey to receive a free gift card. The defendants argued that plaintiff, in doing so, “submitted her contact information, including her phone number, and expressly consented to being contacted at the number ….”

During the registration process, plaintiff was presented with the following, which she had to click through to complete her registration and obtain her gift card:

There was no dispute that plaintiff clicked “Continue,” completed her registration, and obtained a gift card.

Seems pretty straightforward, right? Right above the “Continue” button is a statement in plain English, with links to the applicable terms and conditions, which provides that visitor both understands and agrees to be bound by those terms — and expressly calls out the mandatory arbitration agreement. What could be simpler?

Not so fast. The court concluded that plaintiff hadn’t agreed to anything.

No Online Consumer Arbitration Agreement

So how did the court avoid the consequence of a full, plain English disclosure, coupled with the provision of a valuable benefit to the plaintiff, i.e., a free gift card? Offer, acceptance, consideration. Sounds like a contract.

The court, however, said there was no evidence that the plaintiff had actually clicked through and read the terms and conditions, and so she had no actual knowledge of the terms. Wait a second. Didn’t another federal judge in Illinois just rule that you didn’t actually have to read the terms and conditions to be bound by them? We discussed that case, Wayfair v. Gorny, here. Yes, and the court in Anand recognized this, and turned to the question of whether the plaintiff had “constructive” knowledge of the terms, and concluded that she did not.

So, in Wayfair there was constructive knowledge, but not so in Anand. Why? Can these two cases be reconciled?

What Exactly Is Constructive Knowledge?

The test applied in Assand was whether “a reasonable user in [plaintiff’s] position would have understood that she was assenting to the terms and conditions by clicking the ‘Continue’ button.”

Let’s look at that button again:

The court contrasted this arrangement with other approaches, including “placing the agreement, or a scroll box containing the agreement, or a clearly labeled hyperlink to the agreement next to an ‘I Accept’ button that unambiguously pertains to that agreement.”

Here is how Wayfair did it:

Wayfair checkout page showing link to web arbitration agreement.

You’ll note that directly under the “Place Your Order” button, Wayfair stated: “By placing an order, you are agreeing to our Privacy Policy and Terms of Use.”

Wayfair’s approach does include magic language indicative of an agreement and making explicit that the action taken — placing an order — constitutes an agreement on the part of the consumer. But in Anand, not only is the reference to the agreement up front — above the button — but it specifically calls out the arbitration requirement. One could argue that Anand does as good a job (if not better) in bringing the serious nature of the terms and conditions to the attention of the website visitor.

The court didn’t see it that way. It viewed as dispositive the fact that “nothing expressly linked the ‘I understand and agree …'” language to the ‘Continue’ button.” Without it, the court held, there simply was no agreement because there was no “manifestation of assent.”


Wayfair and Anand are reconcilable, with the lesson being that you’d better expressly state that clicking whatever button you present constitutes a sufficient “manifestation of assent” to be bound by a website’s terms and conditions. But, even then, a court that’s inclined against enforcing an online agreement might keep looking under the microscope for a way out. In the end, you’ll have a range of options in terms of how to present your agreement, and your lawyers can help you choose which best suits your business — and which adequately addresses your risks.

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