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Are Your Online Terms Enforceable?

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Are Your Online Terms Enforceable?

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Ossian Law P.C. November 18, 2013 IT Law Alert

Are Your Online Terms Enforceable?

Businesses are increasingly incorporating online terms in contracts with customers, suppliers and others. Such terms are efficient and convenient for the contracting parties, but may not be enforced if not structured properly.

A recent decision of a federal court in Ohio illustrates this point. In 2009, Discount Drug Mart, Inc. of Ohio entered into a distribution agreement with Devos, Ltd d/b/a Guaranteed Returns, a New York based pharmaceutical reverse distributor. Under the agreement, Guaranteed Returns would process expired and overstocked drugs from Drug Mart. A dispute arose between the companies and Drug Mart sued Guaranteed Returns in federal court in Ohio.

Guaranteed Returns filed a motion to dismiss, arguing that the distribution agreement included a forum selection clause requiring Drug Mart to file suit in either Nassau County or Suffolk County, New York. The forum selection clause was incorporated by reference in the distribution agreement via a link to terms posted on Guaranteed Returns’ website.

The court found that the website terms were not properly incorporated into distribution agreement, because Guaranteed Returns could unilaterally modify those terms and did not demonstrate that the forum selection clause was actually part of the online terms when Drug Mart executed the distribution agreement. Ultimately, the court granted Guaranteed Return’s motion, but only because the same forum selection clause was also contained in a hard copy form that Drug Mart routinely used when sending drugs to Guaranteed Return.

Using online terms can be efficient and convenient, however, those benefits are lost if the terms are not enforceable. See the court’s decision here.

Contact us at Ossian Law P.C. regarding contracts or any other information technology law question.

 © 2013 Ossian Law P.C.
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