Disputes over the enforceability of Web site modifications to an agreement, based on claims of unconscionability, typically involve a consumer opposing the enforcement efforts of commercial party. An example of such a case is Comb v. PayPal, 218 F.Supp. 2d 1165, 1174 (N.D.Cal. 2002), in which the district court refused to enforce a provision in the PayPal agreement with users that allowed PayPal to modify the terms of the agreement without notice, by posting the modified terms on its Web site.

Unlike that paradigm case, the parties in Margae v. Clear Link Technologies, LLC, 2008 U.S. Dist. LEXIS 46765 (D. Utah June 16, 2008), were commercial parties involved in transactions involving affiliate marketing and search engine optimization services.

Margae admits that it assented to an online agreement covering the provision of some of those services on Clear Link’s Web site via a “click.” At the time of Margae’s assent, the online agreement did not contain an arbitration clause, but it did contain a provision allowing Clear Link to modify the agreement at any time without notice by posting a new agreement on its Web site. A marketing partner that continued to provide services, the agreement provided, would be deemed to be bound by the modified agreement. At some point in the relationship between Margae and Clear Link, Clear Link posted a modified agreement containing an arbitration provision.

When a dispute arose between the parties, Clear Link invoked the arbitration provision in the modified agreement. Margae opposed Clear Link’s motion to compel arbitration, claiming among other things that the modified agreement was unenforceable, because the provision allowing Clear Link to modify the terms without notice was unconscionable.

The district court concluded that under Utah law, the agreement was neither procedurally nor substantively unconscionable, rejecting Margae’s reliance on consumer cases such as Comb v. PayPal:

There was no procedural unconscionability in the formation of either agreement.  Importantly, Margae is a sophisticated corporation that had operated under a written contract with a predecessor of Clear Link.  There is no factual basis to support Margae’s assertion that it was in an inferior bargaining position as compared to Clear Link.  Moreover, nothing about the contract negotiations leading to the Partner Agreement amounted to overreaching or oppression by Clear Link.  While using a “boilerplate” agreement may be a factor in the analysis, it is not determinative.  See, e.g., id. at 402-04 (not procedurally unconscionable for pharmacy to enter an at-will employment contract by providing pharmacist with a “boilerplate” employment manual). Nor does amending the Partner Agreement under its own terms strike the court as procedurally improper.

Further, neither agreement is substantively unconscionable.  ***

Looking to the Partner Agreement’s modification clause, Margae asserts that it was unfair for Clear Link to grant itself the unilateral right to modify the contract by posting a new one on its website.  But this argument fails for a several reasons. First, Margae had reason to continually visit the website that contained a link to the Amended Agreement, and Margae easily could have checked for updates to the Partner Agreement at any time.  Moreover, Margae was a sophisticated corporation being paid for its services on a monthly basis.  In that context, monitoring for updates is not unduly burdensome.  Margae cites several cases holding that similar internet modification provisions were unconscionable.  Those cases, however, are distinguishable because they involved a corporation unilaterally changing its relationship with consumers via changes to a website.  Here, the court is faced with internet-savvy corporate parties that entered a contract on the internet and agreed to make changes through the internet.


Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Daryn Grossman Daryn Grossman

Daryn A. Grossman is a partner in our Corporate Department and head of the Life Sciences Group.

Daryn is the former Managing Partner and continues to participate in the leadership of the firm in various capacities, working closely with the Firm’s Chair and…

Daryn A. Grossman is a partner in our Corporate Department and head of the Life Sciences Group.

Daryn is the former Managing Partner and continues to participate in the leadership of the firm in various capacities, working closely with the Firm’s Chair and Executive Committee in relation to the implementation of the Firm’s business strategy.

Over the course of her career, Daryn has served in several leadership positions including co-chair of Proskauer’s global Corporate Department, the Firm’s largest department, and as co-head of the Technology, Media & Telecommunications Group. She has also served on the Firm’s Hiring Committee, Business Development Committee and Lateral Acquisition Committee.  Daryn has championed the career of many women lawyers throughout the Firm and actively engages in the Proskauer Women’s Alliance programming.

As a tech-transactional lawyer, Daryn has designed and negotiated complex technology and intellectual property transaction structures, including strategic alliances, licensing, technology development and outsourcing transactions. Her clients include a wide range of life sciences, cloud computing, digital media, Internet, software, electronics, luxury goods, retail, fashion, entertainment, telecommunications and clean technology companies.

Daryn’s practice also focuses on technology mergers, acquisitions, sales and spinoffs. She represents both growth and mature companies, and counsels venture capitalists and strategic investors in evaluating intellectual property portfolios in connection with private equity investments, public offerings and mergers and acquisitions. Daryn often counsels boards of directors and management teams in navigating the critical commercial and legal issues surrounding product development and exploitation and risk mitigation.

Clients describe Daryn as “skilled and resourceful.” IAM Patent writes: “In the IP monetization area, there is nothing crack negotiator Daryn Grossman can’t do,” adding that she has “a command of all deal types across the IP commercialization spectrum…she can go toe to toe with anybody. She just gets deals done.”