Facebook lost a major legal showdown at the Supreme Court of Canada last week, as the court refused to enforce a forum selection clause included in its standard online contract requiring that legal actions against it be brought in California. In doing so, the court paved the way for a privacy class action lawsuit to proceed in British Columbia under provincial privacy law.
My Globe and Mail op-ed notes that a majority of the court ruled that the unequal bargaining power between consumers and companies such as Facebook meant that the clause should not be enforced. While the ruling can be narrowly interpreted as an affirmation of the importance of privacy rights and as a rebuke to companies that seek to contract out of those rights through forum selection clauses, the decision could have a far more reaching effect, forcing a re-examination of non-negotiated online contracts.
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My weekly Law Bytes column (Toronto Star version, The Tyee version, homepage version) examines the recent Supreme Court of Canada decision involving Dell Computer, online contracting, and mandatory arbitration clauses. Late on a Friday afternoon in April 2003, Dell Computer's Canadian website featured a pair of erroneous prices for the Axim, the company's handheld computer. Rather than listing the two versions of the device correctly at $379 and $549, the site indicated that the price was $89 and $118. Dell blocked access to the pages the following day, however, the mistakes remained accessible throughout the weekend via a direct hyperlink.
Dell typically sold about three Axims each weekend, yet on this particular April weekend, 354 Quebec-based consumers placed 509 orders. Olivier Dumoulin was among those consumers and when Dell refused to honour the mistaken price, he joined forces with a Quebec-based consumer group to launch a class action lawsuit against the company. Dell tried to block the suit, arguing that its consumer contract provided that all disputes were to be resolved by arbitration.
The Dell case wound its way through the Canadian court system, concluding with a Supreme Court of Canada decision last month. Quebec trial and appellate courts both sided with Dumoulin, ruling that the arbitration clause was not enforceable and that the consumer class action could proceed. The Supreme Court overturned those decisions, concluding that the arbitration clause was enforceable and that the use of a hyperlink was sufficient. Dell unsurprisingly welcomed the decision, maintaining that the ability to use arbitration "will lead to the fair and efficient resolution of cases for consumers and business alike." Consumer groups were furious, stating that the decision marked "a dark day for online shoppers in Canada.”
Yet a closer examination of the decision and the current state of e-commerce in Canada suggests that neither side is right.
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Appeared in the Toronto Star on July 30, 2007 as Dell Case Sets Standard for Online Contracts Late on a Friday afternoon in April 2003, Dell Computer's Canadian website featured a pair of erroneous prices for the Axim, the company's handheld computer. Rather than listing the two versions of the […]
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I've been silent thus far on the recent Supreme Court of Canada decision involving Dell Computer and online contracting (that will change next week), but in the meantime it is worth noting that the Washington Supreme Court issued a decision one day before the SCC handed down the Dell decision […]
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