Well drafted online terms and conditions rescue eBay

A US court has ruled in favour of a website owner sued for libel over defamatory material concerning a user of the site posted on the site by another user. Crucially, however, it was the well-drafted exclusion clause in the website’s terms and conditions, rather than web-immunity legislation, that saved eBay from liability for libel.

The provision in the UK’s Electronic Commerce (EC Directive) Regulations 2002, and also in the US’s Digital Millennium Copyright Act 2000, commonly known here as the “Notice and Take Down” exception, is routinely relied upon by websites and ISPs to avoid liability for the most common internet-related claims by third parties. These laws, however, require that the website or ISP promptly remove objectionable material after being put on notice by a complainant.

In Grace v eBay, the California Court of Appeal held recently that, failing such prompt removal, there can be no statutory immunity even where the website or ISP had no connection to the source of the material. The court stated that US lawmakers had never intended to “preclude liability where the provider or user knew or had reason to know that the matter was defamatory.”

As a second line of defence, however, eBay relied on their User Agreement which provided that each “user releases eBay from claims and demands of every kind and nature, known and unknown, … arising out of or in any way connected with …a dispute [with another user].”

The claimant had argued that such language was over-broad but the court disagreed, stating that, in accordance with traditional standard contractual interpretation, “If contractual language is clear and explicit and does not involve an absurdity, the plain meaning governs.”

The court further held that the term ‘dispute’ covered any dispute with another user relating to comments posted by the user on the website and that the broad language of the clause covered any claim or demand against eBay based on the display of objectionable material posted by a user, or failure to take down such material.

Whilst this is, of course, only a Californian decision and does not directly affect internet law in the UK, it does provide some encouraging guidance for e-commerce throughout the world:

  1. The spirit of the “Notice and Take Down” laws cited above is bolstered and there is clearly a tendency to find that website owners and ISPs should not be liable for third party material posted onto their service without their knowledge, provided they remove such material promptly when put on notice; and
  2. Careful drafting of User Agreements is likely to be at least as effective as standard hard-copy terms and conditions, based on those basic principles of contract law that are largely consistent throughout the world.

This case, the judgment of which can be read at www.courts.ca.gov/documents/WS101104.PDF, yet again demonstrates that the hitherto “wilds” of the internet are becoming increasingly tamed and settled for the purposes of civilised online commerce.

Bulletins are for general guidance only. Legal advice should be sought before taking action in relation to specific matters. Where reference is made to Court decisions facts referred to are those reported as found by the Court. Please note that past bulletins included in the Archive have not been updated by any subsequent changes in statute or case law.