TechLaw

After long distance provider Talk America bought America Online's long distance business, it made several additions to the service contract: inserting a class action waiver, an arbitration clause, and a choice of law provision calling for New York law. Typical risk-shifting strategies.

The contract modifications were posted on Talk America's Web site -- but, one customer alleged, no additional notice of the modification was given. No e-mail notice, no mention stuffed into a monthly billing envelope. Only a modified contract posted to the provider's Web site.

The Ninth Circuit, in a case of apparent first impression at the circuit level, held that the Web posting alone was insufficient to bind the customer to the terms of the new deal. "Parties have no obligation to check the terms on a periodic basis to learn whether they have been changed by the other side," the court wrote.

The court said that it would be unreasonable to expect the customer to periodically visit the provider's Web site to inspect the contract for possible changes. "Without notice," the court wrote, "an examination would be fairly cumbersome, as [the customer] would have had to compare every word of the posted contract with his existing contract in order to detect whether it had changed."

So, in the Ninth Circuit, at least, online postings of contract modifications will be effective only when (1) the customer is informed of the change, and (2) the precise nature of the change is explained to the customer in the notice. Merely including language in the original contract informing the customer that the contract could be modified at some future date by posting changes to the Web would seem to fall short of the court's test.

The case is Douglas v. U.S. District Court for the Central District of California, No. 06-75424 (9th Cir. July 18, 2007).