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If you're like most small business e-commerce will have to modify its agreement with the client from time to time. You may want to add an option new members … adding a clause or a money-back guarantee, to name just a few examples.

Note that the agreement with the customer can go through any of several names – such as SaaS Agreement, Membership Agreement, Subscription Agreement, terms of sale, content licensing contract, etc.

Your amendments are effective? That is the question you should ask. If the new provisions is worth adding, it pays to make sure they are legally enforceable.

Until now, the solution adopted across the industry was to ensure that the original agreement had a clause that goes something like this:

"We can change the contract at any time, your continued use of this site indicates acceptance of these modified terms. "It was generally believed that

such a clause is probably legally effective … that is until the case of Douglas v. Talk America, No. 06-75424 (9th Cir. 18 July 2007).

Douglas v. Talk America

Talk America needed to make modifications typical of his online agreement that includes additional charges, a clause requiring arbitration of disputes rather than litigation, and a change of control of state law. The plaintiff filed a class action against Talk America arguing that the amendments were not enforceable because of lack of notice.

Talk America sought to dismiss the lawsuit by the arbitration of weight, but the 9th Circuit said it would be "incorrect application of the fundamental law of contract" in finding that the plaintiff was bound by the terms of the revised contract when he was not notified of revisions.

For Douglas, the 9th Circuit ruled that the revisions of contracts are not enforceable in the notice is limited to publishing online the revised contract. With this decision, the 9th Circuit became the first federal appellate court to rule on the applicability of such provisions of contract. This decision has the effect of shifting a significant burden in terms of management contracts for you. It is an important obstacle to avoid.

The Court held that the plaintiff could have learned of new contract terms after visiting only discussion site in America, but if he had visited the site, would have had no reason to seek revisions to the terms of the contract.

In its opinion, the Court stated: "[P] arties to a contract are not required to check the terms periodically for have been changed by the other side." The court was even more further stating that if "the continued use of Talk America service could be considered assent, such consent can only be inferred after adequate notification of the proposed changes.

How to provide notice?

The 9th Circuit did not provide an explanation of how notice is to be provided. At the moment, online ads by email or by posting on the user account appears to be sufficient if the agreement online provides for such notice with the intent of the amendment of agreements online. Of course, the ads were sent by outdated, "snail mail" also should be sufficient, but that's a very expensive alternative.

So, following the case of Douglas, who is encouraged to add similar clauses to which your client agreements:

"Modification of Agreement. We reserve the right to modify this Agreement at any time by posting of an amended agreement that is always accessible on this site's home page and to give prior notice of such changes. Your continued use of this site after notification of a change indicates your acceptance of the amended agreement. You should check this Agreement through this link periodically changes, click the link provided on the top of the Agreement for a list of major changes and their effective dates. "

"Notices. We can give the notice by (i) a general notice on the account information, (ii) by e-mail to your e-mail in your registration data record, or (iii) by written communication sent by first class mail to your registered address on your registration data. Such notification shall be deemed to have been given to the expiry forty-eight (48) hours after mailing or posting (if sent by first class mail) or twelve (12) hours after sending (if sent e-mail). "

Conclusion

The lesson learned … online offer agreements significant flexibility in terms procurement and contract management. However, the important lesson to learn from the Douglas v. Talk America is that flexibility has its limits. You just you can not post the changes to the contract and expect to be enforceable.

You must give notice.
About the Author:

Chip Cooper is a leading intellectual property, software, and Internet attorney who advises software and ecommerce businesses nationwide. Chip’s 25+ years of experience include 20 years as Adjunct Professor of Computer Law at Wake Forest University School of Law. Visit Chip’s digicontracts.com site and download his FREE newsletter, Website Law Alert, and also learn about his “Do-It-Myself” and “Do-It-For-Me” service options.

Article Source: ArticlesBase.com – Saas, Membership, and Subscription Agreements — How to Avoid Unenforceable Amendments

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