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.

Courts have typically been reluctant to reject forum selection clauses, citing the importance of contractual certainty. The majority noted that there is another issue at play, however. Justice Rosalie Abella asked the question that many Canadians might ask when asked to click “I agree” on the myriad of Internet sites and services that foist lengthy contracts on their users on a take-it-or-leave-it basis:

“What does ‘consent’ mean when the agreement is said to be made by pressing a computer key? Can it realistically be said that the consumer turned his or her mind to all the terms and gave meaningful consent?”

The court’s willingness to question whether it is appropriate to uncritically enforce all the terms contained in online contracts opens the door to rethinking a longstanding e-commerce approach that imposed sophisticated commercial contracting standards on unwary consumers.

In the days before the Internet and digital commerce, consumers rarely entered into formal contracts with large companies when interacting with friends, making copies of photographs to give to family, or purchasing music, videos, or other media. The advent of digital technologies did more than just facilitate social media and new online services. It also brought with it Internet companies that mediated these activities governed by contracts that consumers were required to accept as condition for accessing the service.

The enforceability of these contracts has often been assumed, relying on e-commerce laws that confirmed the validity of the electronic contracting as well as traditional notions of offer and acceptance with consumers implicitly aware that their actions would be governed by the site or service terms of use. Yet these contracts were distinctly different from business-to-business commercial contracts that often involve painstaking negotiation and trade-offs that are well-understood by the parties. Consumers now enter into hundreds of online contracts that no one is expected to read from start to finish.

Indeed, with no ability to alter the terms or negotiate any changes, consumers have little incentive to read the fine print. The only alternative is to reject the service altogether, but for students required to use cloud-based services or digital textbooks, entertainment fans searching for legal alternatives to access content, and individuals wanting to participate in social networks with their peers, there is no genuine choice.

Canada’s highest court has now pulled back the veil on the not-so-secret side of Internet contracting. Far from being limited merely to obscure forum selection clauses, the Facebook ruling could be applied in other circumstances, such as attempts to sideline local consumer protection laws or override fair dealing rights by establishing contractual usage restrictions that run counter to the balance found in Canadian copyright law.

As Justice Abella noted, “when online consumer contracts of adhesion contain terms that unduly impede the ability of consumers to vindicate their rights in domestic courts, particularly their quasi-constitutional or constitutional rights, in my view, public policy concerns outweigh those favouring enforceability of a forum selection clause.”

Last week’s ruling rightly recognizes the dangers of uneven bargaining power in online contracts and the reality that consumers regularly click away their rights. By taking a strong stand against non-negotiated terms that place consumers at a significant disadvantage, the court has forced online companies to reconsider whether their agreements are fully enforceable and emboldened consumers to stand up for their rights.