If You’re Going To Incorporate Online T&Cs Into a Printed Contract, Do It Right–Holdbrook v. PCS

Photo credit: broken chain // ShutterStock

Photo credit: broken chain // ShutterStock

The plaintiff runs a pediatric dentistry. It retained defendant PCS to provide cloud services. The dentistry alleges that PCS subsequently locked it out of the cloud services improperly. The dentistry sued PCS for the lockout, and PCS sought to arbitrate the case based on an arbitration clause.

When the dentistry retained PCS, it signed a “Managed Support Plan” contract. PCS delivered this file electronically but he dentistry could not accept the Managed Support Plan electronically. Instead, it printed out the file and physically signed the document. The electronic version of the Managed Support Plan linked to a separate “Terms & Conditions” containing an arbitration clause. The court describes:

On the last page of the contract, in small font directly above the signature line, is the following text: “ Download Terms And Conditions ” [Eric’s note: I’m having difficulty making that link work]. According to PCS, when the Managed Support Plan is printed on paper, the coding for the hyperlink appears as above rather than as a hyperlink.

So everyone agrees that the Managed Support Plan was properly formed and the T&Cs contained an arbitration clause. This narrows the dispute to whether the T&Cs were properly incorporated into the Managed Support Plan. The court says no.

First, PCS’s call-to-action (expressed as “Download Terms And Conditions”) was insufficient:

the hyperlink is placed in the Managed Support Plan in isolation. Unlike the above-cited cases [Eric’s note: including Fjeta and Swift v. Zynga], there is no statement that signing the agreement indicated acceptance of the “Terms and Conditions,” nor is there an instruction to sign the contract only if Holdbrook agreed to the additional terms. The Court finds that the existence of the hyperlink in the document, without any statement to draw attention to the link, is insufficient to demonstrate that Holdbrook had “reasonable notice” that the “Terms and Conditions” were part of the contract.

Second, because the contract had to be printed to be signed, the signer may not have recognized the hyperlink.

I don’t think this case holds that printed contracts can never incorporate supplemental electronic documents by reference. Instead, look at the ways PCS should have been able to succeed:

* better call-to-action language. The court clearly explains how PCS could have easily used better words to cross-reference the T&Cs: PCS could have include a “statement that signing the agreement indicated acceptance of the Terms and Conditions” or “an instruction to sign the contract only if Holdbrook agreed to the additional terms.” For more discussion about the importance of a good call-to-action, see our blog post on the Nguyen case.

* incorporation of the T&Cs into the electronic file. Rather than linking to the T&Cs, PCS could have integrated the T&Cs into the same electronic file as the Managed Support Plan. This still would need better call-to-action language, but it would have been harder for the dentistry to deny the relevancy of material in the same file (especially when it all printed out together).

* use an online-only process. Hello! It’s 2015. Why is PCS still requiring customers to print and manually sign its contracts? PCS could have used an exclusively online contract formation process where customers accepted the terms online. PCS still would have needed stronger call-to-action language, but a contract drafter anticipating an entirely online formation process would have been more likely to pick the right words.

Case citation: Holdbrook Pediatric Dental, LLC v. Pro Computer Service, LLC, 2015 WL 4476017 (D.N.J. July 21, 2015)