Recently, there has been a significant increase in claims involving e-commerce websites, including unfair competition claims and claims involving the California Invasion of Privacy Act and other similar statutes. In many instances, e-commerce companies try to compel such claims to arbitration through the arbitration provisions contained in the terms and conditions of their website. However, a recent California Court of Appeal decision serves as a warning to businesses relying on online "sign-in wrap" agreements to impose arbitration clauses. In Cruz v. Tapestry, the court refused to enforce an arbitration provision contained in the retailer's Terms of Use, finding that the checkout page design did not adequately notify consumers that placing an order constituted agreement to those terms.
The ruling underscores a growing judicial trend. Courts are increasingly unwilling to enforce arbitration provisions, and other significant contractual terms, where notice is obscured by cluttered web design, muted colors, or font choices that fail to capture user attention. For businesses, the decision highlights the need to revisit website and app interfaces to ensure that arbitration clauses and other critical terms are presented with clarity and prominence.
Factual Background
This appeal arises from an order denying a motion to compel arbitration filed by appellants Tapestry, Inc.; Kate Spade LLC; and Coach Services, Inc. The trial court determined appellants failed to provide respondent, Leslie Cruz, with adequate notice that by clicking a button to submit her online orders, she was also agreeing to the arbitration clause contained in the website's Terms of Use.
At checkout, a hyperlink to the Terms of Use appeared in gray font beneath the order submission button. The accompanying text stated: "By clicking submit your order, you are agreeing to our terms of use and privacy policy." Appellants did not require Cruz to affirmatively indicate her agreement by checking a box or clicking a button, before completing her purchase. Cruz argued she did not understand that a simple retail transaction would be governed by extensive contractual provisions. The existence of an enforceable arbitration agreement turned on whether the notice text on appellants' checkout pages sufficiently alerted Cruz to the Terms of Use.
The trial court concluded it did not. The notice appeared in small, gray font and was overshadowed by other prominent visual elements on appellants' two-column checkout page, including large graphics, marketing content, and the brightly colored action button. The court also noted the transactional context in which the agreement to the Terms of Use was presented. The fact that it was placed in the middle of a purchase of consumer goods, rather than the formation of an ongoing contractual relationship, made it less reasonable to expect consumer to anticipate extensive legal terms.
Since, overall, the design rendered the notice inconspicuous, on appeal the court affirmed the trial court's order denying the motion to compel arbitration.
Applicable Law
A court may grant a motion to compel arbitration if it determines that an arbitration agreement exists. Code of Civ. Proc. §1281.2; Western Bagel Co., Inc. v. Superior Court (2021) 66 Cal.App.5th 649, 662. The party seeking arbitration bears the burden of proving the existence of such an agreement by a preponderance of the evidence, while the opposing party bears the burden of establishing any applicable defenses. Id.
Whether an agreement exists is determined under general principles of California contract law. A valid contract requires mutual assent, or consent, which is evaluated objectively based on the outward manifestations of the parties rather than their unexpressed intentions. B.D. v. Blizzard Entertainment, Inc. (2022) 76 Cal.App.5th 931, 943-944. Notice- whether actual, inquiry, or constructive- is the touchstone of assent.
These principles apply equally to contracts formed over the internet. The absence of face-to-face interaction or a physical copy of terms does not alter the fundamental requirement of mutual assent. Instead, courts look to whether the consumer was presented with the terms in a manner that reasonably signaled that completing a transaction amounted to an agreement. A provider must therefore present its terms in a way that makes clear to a reasonable user that clicking a button or checking a box constitutes acceptance.
Because the threshold issue of contract formation is for the court to decide, conspicuousness is treated as a question of law. In practice, however, this requires a fact-intensive inquiry into the website's design, including factors such as the size, color, and placement of text; the visibility of hyperlinks; and whether the page is cluttered with competing elements. Blizzard Entertainment. Inc., supra, 76 Cal.App. 5th at pp. 946-947.
Courts have emphasized that website operators bear full responsibility for ensuring consumers are placed on notice of contractual terms. Weeks v. Interactive Life Forms, LLC (2024) 100 Cal.App.5th 1077, 1086-1088. Given the wide range of consumer sophistication, users cannot be expected to hunt for buried hyperlinks or anticipate that routine purchases will trigger binding contractual provisions. Instead, important terms- particularly those imposing arbitration- must be displayed prominently. Berman v. Freedom Financial Network, LLC , 30 F.4th 849, 855-57 (9th Cir, 2022). To be enforceable, a website's design must capture the user's attention and adequately signal the existence of contractual terms, rather than diverting attention away from them. Id. at 857-58.
The Checkout Pages Failed to Provide Reasonable Notice
The appellants argued that when Cruz completed her purchases online, she consented to the Terms of Use, including the arbitration clause, through a "sign-in wrap" agreement. Under this format, users are deemed bound by terms when clicking a button necessary to complete a transaction, even though they are not required to review the terms or expressly agree. Courts recognize that because assent under this model is "largely passive," enforceability turns on whether a reasonably prudent consumer would have been on notice of he terms. Blizzard Entertainment, Inc. (2022) 76 Cal.App.5th 931, 946.
Sign-In Wrap Agreements Require Heightened Notice
The trial court found that appellants used a "sign-in wrap" format. Unlike clickwrap or scrollwrap designs, which require an explicit act of consent, sign-in wraps rely only on proximity of notice text to the action button. Courts therefore scrutinize whether the placement and design of the notice would have alerted a typical consumer.
Appellant argued that because Cruz purchased "expensive" merchandise online, she should have expected contractual terms to govern the transactions. The court rejected this argument. It found that the relevant inquiry is whether the transaction is one in which consumers reasonably expect an ongoing contractual relationship. Routine purchase, even of higher-priced items, do not typically create that expectation. Blizzard at 950-51. Thus, Cruz was not on notice that clicking "Place My Order" would bind her to arbitration or other lengthy terms.
The Checkout Design Obscured the Notice
Appellants also asserted that the notice was sufficiently conspicuous because it appeared directly below the action button, in all capital letters, with "TERMS OF USE" underlined. The court disagreed. Several design features rendered the notice inadequate:
- The gray notice text was half to three-quarters the size of the action button's white text and difficult to read against an off-white background.
- The two-column format place the notice in a cluttered environment where prominent elements (pricing, promotions, graphics, customer service information) drew attention away from it.
- In other cases, the court upheld agreements where notice text used contrasting colors and appeared uncluttered. Patrick v. Running Warehouse, 93 F.4th 468 (9th 2024). By contrast here, appellants' pages lacked visual cues strong enough to capture user attention.
Therefore, the court held that the appellants' checkout pages failed to provide reasonably prudent consumers with notice that completing a purchase would bind them to the Terms of Use, including arbitration. Accordingly, the order denying the motion to compel arbitration was affirmed.
Moving Forward
The Cruz decision is a good reminder of how court’s look at websites to determine whether a consumer or website visitor has adequate notice of a site’s terms and conditions. Authorization for website cookies, tracking, or other essential terms and conditions, such as arbitration, must be presented in proper form and be conspicuous, legible, and designed to draw consumer attention. Companies relying on arbitration clauses, cookie or tracking consents, class action waivers, or other liability-shifting provisions should evaluate whether websites as a whole, including their checkout or registration flows, meet this heightened standard. Failure to do so risks leaving businesses unable to enforce the very protections they wish to rely on when disputes arise.
