2 Critical Requirements for Enforceable Online Recurring Billing Agreements

Membership programs that incorporate a recurring billing model – where customers’ credit cards are charged periodically – have been under intense scrutiny by Congress and various courts.

In a recent opinion affirming the enforceability of an of an online contract for recurring billing, the 5th Circuit Court of Appeals analyzed the facts and applicable law for two critical requirements for enforceability.

The Vistaprint Case

The plaintiffs alleged that they ordered business cards from the vistaprint.com website. The cards were paid for by credit or debit card.

Plaintiffs’ key allegations were that, during the process of completing their purchases online, they were tricked into enrolling in membership programs that posted unauthorized charges to their credit or debit cards for monthly fees associated with the membership programs.

The Defendants disagreed, arguing that its sign-up process was not deceptive.

The 5th Circuit Court ruled in favor of the Defendants, thereby endorsing Vistaprint’s sign-up process for online memberships that incorporate recurring billing.

What’s important is that the lower court decision that the 5th Circuit Court upheld went into considerable detail regarding why it decided in favor of enforceability of Vistaprint’s online sign-up process, and the court’s analysis can be boiled down into two elements that are essential for enforceability:

  • prominent and conspicuous notice, and
  • clear and easily understandable terms.

Prominent and Conspicuous Notice

Plaintiff’s who argue that an online agreement is unenforceable are essentially saying: “I didn’t read the online disclaimer, and it’s the fault of the website, not me”. This is a powerful argument that attracts sympathy, especially if it’s made by a consumer.

The first way to undercut the argument is to provide for prominent and conspicuous notice of the contract terms. In the Vistaprint case, the court found these facts indicating prominent and conspicuous notice:

  • terms of the membership program were contained in a box located immediately beside the survey required for enrollment;
  • there was a disclosure that was presented above the space for entry of the consumer’s email address;
  • consumers were required to check a box indicating they had read the offer details;
  • consumers were required to enter their email address twice including a confirmation that they wished to enroll in the membership program; and
  • the offer was presented in essentially the same size and color as the other copy on the sign-up page.

Clear and Easily Understandable Terms

The second way to undercut the “I didn’t read” argument is to provide clear and easily understood terms.

The terms of Vistaprint’s membership program provided the following language: “The membership fee of $14.95 per month will be charged/debited by Vistaprint Rewards to the credit/debit card you used today”.

The court stated that: “a consumer cannot decline to read clear and easily understandable terms that are provided on the same webpage in close proximity to the location where the consumer indicates his agreement to those terms and then claim that the webpage, which the consumer has failed to read, is deceptive”.

U.S. Congress May Act Regarding Recurring Billing

In May of this year, the U.S. Senate Commerce Committee released the proposed the Restore Online Shippers’ Confidence Act, which if passed, will impose additional requirements on membership programs that incorporate recurring billing.

In addition to specific requirements regarding the two elements discussed above, the Act would require membership programs to send a notice at least 10 days before the charge with cancellation options by phone and online. This means that membership programs will have to send two emails:

  • the first email 10 days before the charge with the cancellation options, and
  • the second email after the charge in the nature of a receipt.


We don’t know at this time whether the Restore Online Shippers’ Confidence Act will become the law of the land.

Until we know whether the U.S Congress will pass the Act, the Vistaprint case will continue to provide a detailed and instructive analysis of the facts and applicable law for two critical requirements for enforceability of online agreements for recurring billing.

Copyright © 2010 Chip Cooper

This article is provided for educational and informative purposes only. This information does not constitute legal advice, and should not be construed as such.

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