Two cases involving click-wrap agreements were decided in the past few weeks—with very different outcomes.  Both cases involved Web-based purchases in which consumers agreed to certain online "terms and conditions."  In both cases, the online terms of sale contained forum selection provisions (a/k/a "if you sue us, you need to sue us in our state and you must do it our way" clauses).

But in one case, a court refused to enforce the forum selection clause; in the other, a court fully enforced the forum selection clause.  

Why the different results?  Answer: it's a classic case of pigs vs. hogs. When it comes to clickwrap agreements, tough contract language (i.e., pigs) generally will be enforced, while provisions that require too much of consumers—often to the point of unabashed overreaching (i.e., hogs)—will be rejected. 

In the first case, Fee v. Expedia Inc., the plaintiff, Zachary Fee, sued Expedia (which operates the travel website Hotels.com) for deceptive trade practices, alleging that Hotels.com unilaterally switched the plaintiff's paid reservation from a four-star hotel to a three-and-one-half star hotel.  Fee brought the lawsuit in Kansas, despite the fact that he clicked the "I Agree" button on Hotels.com's clickwrap agreement, which required Fee to bring all disputes against Expedia in Texas.  The Kansas court dismissed Fee's lawsuit, and held that the clickwrap agreement required Fee's lawsuit to be brought in Texas, not Kansas. 

In the second case, Omstead v. Dell, plaintiff Michael Omstead brought a class action lawsuit in California against Dell, Inc., the famous Texas-based computer company.  In his complaint, Omstead asserted that Dell designed, manufactured and sold defective notebook computers in violation of California law. 

But Dell's website required purchasers (including Omstead) to accept a clickwrap agreement that contained a quirky forum selection clause.  Not only did the clause require all lawsuits against Dell to be filed in Texas, but it required consumers to forgo their right to bring a class action suit against Dell for any reason whatsoever. 

The result?  Dell lost, and the California court refused to enforce Dell's forum selection clause in its clickwrap agreement.

So what gives?  Why did the court in the Expedia case enforce the forum selection clause, while the court in the Dell case refused to do so?

The answer lies in the language used by each company in its clickwrap agreement.  In the Expedia case, the clickwrap agreement simply said, in sum, "if you want to sue us, you need to come to Texas to do it."  That's easy enough, right?  Consumers might not like the venue restriction, but there are probably worse things than having to go to Texas to bring a lawsuit....

But in the Dell case, Dell not only required consumers to come to Texas for litigation, but the company's clickwrap agreement also required consumers to give up their right to band together to bring a class action lawsuit against the company.  Dell fell victim to classic case of contractual overreaching. 

Quick (related) side note: How do you know when a contract "overreaches"?  Here's my rule of thumb, which is not a formal rule per se, but it's remarkably accurate: if the contract makes you say, "I'm not sure I like that," then it's probably not overreaching.  But if the contract makes you say, "You're kidding right?  You think I'd ever agree to that?", then it's probably overreaching. 

Sometime overreaching in contracts is both justifiable and enforceable.  But in contracts of "adhesion" (i.e., "take or leave it" contracts that a consumer cannot negotiate), courts will look very carefully (and negatively) at provisions that require consumers to waive their rights, especially their right to sue.  

So what have we learned?  Here are the take-aways from the Expedia and Dell cases:

1.  If you're drafting a clickwrap agreement, include those provisions that (i) you really need and (ii) can be justified from a legal and business perspective.
2.  Just because a provision would benefit your company (such as requiring consumers to waive their rights to bring a class action case) doesn't mean that the provision is "justifiable."
3.  When drafting clickwrap agreements, stick to governing law and venue restrictions, and don't restrict too many other "fundamental" consumer rights, such as a consumer's right to sue. 
4.  Keep in mind the adage, "Pigs get fed, hogs get slaughtered." 

When it comes to clickwrap agreements, be a pig.  Not a hog.