ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Thursday, April 5, 2007

Google's Adwords Contract Upheld--Feldman v. Google

[cross posted to Technology & Marketing Law Blog]

Feldman v. Google, Inc., 2007 WL 966011 (E.D. Pa. March 29, 2007)

A law firm advertised via Google AdWords and allegedly was click frauded.  The lawyer then sued (on behalf of his law firm) Google for click fraud in Pennsylvania.  Google defended based on its AdWords contract, which has a mandatory venue provision specifying that all lawsuits shall be brought in California.  We saw virtually identical facts in the initial Person v. Google case, which also involved the AdWords contract (though that lawsuit was brought in NY).  The result was the same in both cases--each time, the court upheld the AdWords contract's mandatory venue clause and transferred the case to California.

Mechanically, Google's contract formation process is bullet-proof.  As the court describes:

To open an AdWords account, an advertiser had to have gone through a series of steps in an online sign-up process. (Hsu Decl. ¶ 3.) To activate the AdWords account, the advertiser had to have visited his account page, where he was shown the AdWords contract. (Hsu Decl. ¶ 4.)

Toward the top of the page displaying the AdWords contract, a notice in bold print appeared and stated, “Carefully read the following terms and conditions. If you agree with these terms, indicate your assent below.” (Hsu Decl. ¶ 4.) The terms and conditions were offered in a window, with a scroll bar that allowed the advertiser to scroll down and read the entire contract. The contract itself included the pre-amble and seven paragraphs, in twelve-point font. The contract's pre-amble, the first paragraph, and part of the second paragraph were clearly visible before scrolling down to read the rest of the contract. The preamble, visible at first impression, stated that consent to the terms listed in the Agreement constituted a binding agreement with Google. A link to a printer-friendly version of the contract was offered at the top of the contract window for the advertiser who would rather read the contract printed on paper or view it on a full-screen instead of scrolling down the window. (Hsu Decl. ¶ 5.)

At the bottom of the webpage, viewable without scrolling down, was a box and the words, “Yes, I agree to the above terms and conditions.” (Hsu Decl. ¶ 4.) The advertiser had to have clicked on this box in order to proceed to the next step. (Hsu Decl. ¶ 6.) If the advertiser did not click on “Yes, I agree ...” and instead tried to click the “Continue” button at the bottom of the webpage, the advertiser would have been returned to the same page and could not advance to the next step. If the advertiser did not agree to the AdWords contract, he could not activate his account, place any ads, or incur any charges. Plaintiff had an account activated. He placed ads and charges were incurred.

I always tell my students that the very best online contracts are "mandatory non-leaky clickthrough" agreements.  Like this one.

To get around this, the lawyer claims he was ignorant of the mandatory venue clause because he didn't read the contract.  Not a very persuasive argument.  Every lawyer learns very, very early in their first year Contracts course that a party is bound to contract terms they assent to, even if they chose not to read the terms. 

The court also rejects the plaintiff's other attacks on the contract:
* the contract didn't contain a definite price.  However, the contract contained the exact formula for computing the price.
* procedural unconscionability.  The court rejects this because the "Plaintiff was a sophisticated purchaser, was not in any way pressured to agree to the AdWords Agreement, was capable of understanding the Agreement's terms, consented to them, and could have rejected the Agreement with impunity."
* substantive unconscionability.  The court finds many of the contract terms reasonable.

This case is a nice win for Google for two reasons.  First, by upholding the mandatory venue clause, it should inhibit AdWords advertisers from suing Google all over the country.  Therefore, all lawsuits will have to be in Google's home court, which raises the costs of lawsuits for most plaintiffs and gives Google some other home-court advantages.  Second, by holding that this plaintiff is bound by the AdWords contract and those terms aren't substantively unconscionable, Google can now invoke its risk management clauses (like the warranty disclaimers, limits of liability, etc.) to cut the economic heart out of the click fraud claim.

[Eric Goldman]

April 5, 2007 in E-commerce, Recent Cases | Permalink | TrackBack (0)

Monday, April 2, 2007

Skittles Commerical Available

Update:  Thanks to Christopher Drahozal (Kansas), we have a link on the new skittles commercial, which can be found here.

The clip is even shorter than I remembered it, here’s the dialogue:

(Patron picks up pack of skittles and puts it on the counter)

Salesperson:  Three hundred dollars.

Patron:  Three hundred dollars?

Salesperson:  Or you can buy your skittles at some other store around here.

(Camera pans to show that they are surrounded by clouds)

Announcer:  Value the rainbow, taste the rainbow

[Miriam Cherry]

April 2, 2007 in Film Clips | Permalink | TrackBack (0)

Limerick of the Week

Winternitz v. Summit Hills is a useful case for illustrating why the difference between law and equity might still matter in a modern court.  It is also a useful case for illustrating why tort law might matter in a modern court, if anyone is interested in such things.  The interplay between the real and the imaginary in the case gives it the feel of a Dr. Seuss book, and so this Limerick has a bit of a Seussical feel to it:

Winternitz v. Summit Hills

Hard cases result in bad laws.
But there's a solution because
The court can resort
To a sort of a tort
To remedy equity's flaws.

[Jeremy Telman]

April 2, 2007 in Famous Cases, Limericks, Teaching | Permalink | Comments (0) | TrackBack (0)

When Real Estate Deals Fall Apart

Ma00741cbeaconstreetbostonmassachusWhen a real estate deal falls through, what contract damages are available to the seller? Recently, the Massachusetts Supreme Judicial Court addressed this question.

Buyer and seller had a $2,250,000 contract of sale for real estate located on Beacon Street in Boston. The contract of sale was rather unremarkable. It contained an acceptance of deed clause: “acceptance of deed by the BUYER, shall be deemed to be a full performance and discharge of every agreement and obligation herein contained or expressed.” It also contained a liquidated damages clause: “[if] the BUYER shall fail to fulfill the BUYER’s agreements herein, all deposits made hereunder by the BUYER shall be retained by the SELLER and this shall be SELLER’s sole remedy at law or in equity.” The contract did not contain a mortgage contingency clause, and recited that time was of the essence.

The buyer paid the $150,000 deposit. The buyer was not ready to close on the contract date because his financing had not been finalized. The seller’s attorney sent a notice to the buyer that, because the closing did not occur, the contract was breached and deposit was forfeited. Shortly thereafter, the buyer’s financing came through. Nevertheless, the seller put a new “for sale” sign on the property (an effort that was thwarted when the buyer obtained a lis pendens).

A trial judge ordered specific performance, directing that the sale take place at the contract price. The seller still sought liquidated damages. The issue: whether the seller is entitled to liquidated damages for the buyer’s breach of the contract of sale where, subsequent to the breach, the seller obtained court-ordered specific performance. The Massachusetts Supreme Judicial Court held:

When seeking specific performance of a contract, the seller offers to surrender title to the property and collect the purchase price. In bringing an action for damages on the breach of the contract, the seller proposes to retain the property and have his compensation in damages. While these remedies many not be inconsistent in the sense that they are both premised on the validity of the contract, ordinarily a seller is not entitled to seek both remedies; the retention of a deposit as liquidated damages is an alternative to specific performance, not an additional remedy.

The court held that “[t]he only additional damages the seller was entitled to seek under the contract were for carrying costs he incurred as a result of the delay between the expected date of performance and the time of actual conveyance. These carrying costs were separately provided for in the contract and ancillary to its performance.” In other words, these additional damages were not inconsistent with an award of specific performance.

The court concluded:

The law of contracts is intended to give an injured party the benefit of the bargain, not the benefit of the bargain and a windfall. . . . To award liquidated damages against the buyer for his failure to close and also specific performance to the seller requiring the buyer to acquire the property by a date certain at the contracted price, would violate the fundamental principles of contract law.

Perroncello v. Donahue.
Link to oral argument video.
Boston Herald article.

[Meredith R. Miller]

April 2, 2007 in Recent Cases | Permalink | TrackBack (0)

Sunday, April 1, 2007

Great New Skittles Ad

I'm wondering whether anyone else has seen this new skittles commercial.  It features a man in the clouds, who is trying to buy a snack (some skittles) from a convenience stand.  The salesman wants to charge $300, and when the patron argues that this is exorbitant, the salesman asks whether he has any other options.  Is this price gouging in the clouds?  I couldn't find a clip on Youtube, but if anyone knows where I can find this, email me here.

[Miriam Cherry]

April 1, 2007 in Film Clips | Permalink | TrackBack (0)