New Jersey Consumer Protection Statute Poses Risks for Businesses with an Online Presence

contractNew Jersey businesses that provide online services, sell goods online, or otherwise interact with their customers via the internet should be aware of some recent developments involving New Jersey consumer protection law. Two pending consumer class actions are seeking a broad application of the New Jersey Truth-in-Consumer Contract, Warranty and Notice Act (TCCWNA), N.J. Rev. Stat. § 56:12-14, et seq. While neither case has produced a final ruling, they have the potential to significantly affect businesses with an online presence, specifically in relation to the terms and conditions of website user agreements. Specific provisions could cause a business to violate state law, even inadvertently. Exactly when and how this might happen depends on multiple factors, including the nature of the business and the goods or services it provides.

Businesses often include agreements on their websites as a means of clarifying the business relationship—if any—established when someone visits the site and limiting their liability in various circumstances. A good business attorney will tell you that presenting an agreement in this manner is generally a good idea, but the reality is that almost no one ever reads these agreements before agreeing to them. When a consumer is presented with a contract that they cannot negotiate, essentially on a “take it or leave it” basis, courts tend to scrutinize the terms of those contracts very closely. The TCCWNA provides additional protections for consumers in this situation.

Under the TCCWNA, businesses may not use consumer contracts containing any “provision that violates any clearly established legal right of a consumer,” nor may a contract omit any legal “responsibility of a seller, lessor, creditor, lender or bailee.” N.J. Rev. Stat. § 56-12-15. This is a highly ambiguous restriction. The general rule in New Jersey has been not to bother contractual clauses that have no impact beyond the parties themselves. “Exculpatory clauses in private agreements that do not adversely affect the public interest are generally sustained.” Kane v. U-Haul Int’l Inc., 218 Fed. Appx. 163, 165 (3d Cir. 2007). A few recent cases may have changed this principle somewhat.

New Jersey federal courts have allowed at least two TCCWNA class actions involving storage rental agreements to proceed in the past few years. In one case, the rental agreement imposed a one-year statute of limitations on any claims arising under the agreement, and it disclaimed the defendant’s liability for on-site injuries resulting from almost any cause, “including Defendant’s own negligence” but not its own fraudulent or willful acts. Martinez-Santiago v. Public Storage, 38 F. Supp. 3d 500, 503 (D.N.J. 2014). The rental agreement in the other case purported to disclaim liability for all injuries occurring on their premises, including those “arising out of Defendants’ own intentional or negligent acts or omissions.” Kendall v. CubeSmart LP, No. 3:15-cv-06098, opinion at 3 (D.N.J., Apr. 21, 2016).

Two class actions filed under the TCCWNA last year allege that online user agreements included unlawful provisions. Sweeney v. Bed Bath & Beyond, Inc., No. 2:16-cv-01927, complaint (D.N.J., Apr. 6, 2016); Roldan v. Toys R Us, Inc., No. 2:16-cv-01929, complaint (D.N.J., Apr. 6, 2016). The decisions in Martinez-Santiago and Kendall could affect the outcome of these cases.

Business formation attorney Samuel C. Berger represents entrepreneurs, businesses, and business owners in New York City and Northern New Jersey. Our fixed-fee legal-service packages cover a wide range of legal matters. To schedule a confidential consultation with a knowledgeable and skilled business advocate, contact us today online, at (201) 587-1500, or at (212) 380-8117.

More Blog Posts:

Businesses Cannot Bar Customers from Posting Negative Reviews Online Under New Federal Law, New York & New Jersey Business Lawyer Blog, January 19, 2017

FTC Issues Guidance for Businesses that Handle Private Medical Information, New York & New Jersey Business Lawyer Blog, December 15, 2016

Supreme Court Asked to Review State Law that Restricts Businesses from Crossing State Lines, New York & New Jersey Business Lawyer Blog, November 17, 2016

Photo credit: Catkin [Public domain], via Pixabay.