Like many e-commerce sites, Zappos.com’s Terms of Use was accessible by means of a hyperlink at the bottom of each page. Users were not required to click “I accept” when setting up an account or making a purchase (i.e., a “click-wrap” agreement). Instead, users were supposed to locate and click on the hyperlink to the Terms of Use that purportedly governed their relationship with Zappos. (This type of setup is sometimes referred to as a “browse-wrap” agreement.) The hyperlink to the Terms of Use was not prominently displayed.

This arrangement was weighed in the balance and found wanting. By the stroke of a pen, District Judge James denied Zappos the right to send their goof-up to arbitration (and thus save themselves a lot of money, further embarrassment and a massive headache) because Zappos’ customers never agreed the Terms of Use in the first place. In the judge’s words: