Are the Terms and Conditions in Your Online Agreement Enforceable?

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Burns & Levinson LLP

[co-author: Henry Gaylord]

Like many mobile Apps, the one implemented by Uber Technologies includes a statement saying that users agree to abide by the company’s terms and conditions. One of those provisions is a mandate that all disputes with Uber be resolved through binding arbitration. Thus, imagine Uber’s surprise when the Massachusetts Supreme Judicial Court held in Kauders v. Uber Technologies, Inc. that one of Uber’s customers was not bound to arbitrate and could sue Uber in a court of law.

In 2014 Christopher Kauders signed up to use the Uber App in what appears to have been the same way most users do. After establishing his account, Kauders, who is blind, claimed that three Uber drivers refused to provide him with rides because his guide dog accompanied him. Based on this, Kauders sued Uber in Superior Court.

Uber filed a motion to compel Kauders to arbitrate his claim, and Kauders countered that the arbitration clause did not bind him because he had not received adequate notice of it, nor had he agreed to it. While the Superior Court initially sided with Uber and ordered that the dispute be arbitrated, that decision later was vacated, and the matter was appealed to the Supreme Judicial Court.

The SJC began its decision by reciting the long-held principle that a court only can require disputes to be arbitrated if the parties have agreed to arbitrate. It then went on to explain that for an “online” agreement to arbitrate to be enforceable:

There must be both reasonable notice of the terms and a reasonable manifestation of the assent to those terms.

The SJC then found that Uber’s App failed in both respects because:

The user could fully register for the service and click “done” without ever clicking the link to the terms and conditions. … [Further,] a user could create an account without ever affirmatively stating that he or she agreed to the terms and conditions, or even opening those terms and conditions. Instead, the final step in the process was to input payment information and click “DONE.””DONE” is also different from, and less clear than, other affirmative language such as “I agree.”

The SJC also noted that while it may not be necessary to use so-called “clickwrap” agreements – where a user is required to click a box stating “I agree to be bound by the company’s terms and conditions…” – to bind a user, implementing such a methodology probably is the easiest way to ensure a user will be bound. Indeed, the Federal District Court recently cited to Kauders and provided an excellent example of an enforceable clickwrap agreement in Immediato v. Postmates, Inc.: enforced a clickwrap agreement, saying:

Here, both [Kauders] elements are satisfied. First, plaintiffs were provided reasonable notice that they were entering into an online agreement because they could not complete the sign-up process to register as couriers without clicking on a link which opened the Fleet Agreement. This link was displayed beneath text which prominently read: “Before continuing, you’ll need to agree to the following terms.” Moreover, plaintiffs were further alerted to the Arbitration Provision by text, in all-capital letters, in the second paragraph of the Fleet Agreement. (“PLEASE REVIEW THIS AGREEMENT CAREFULLY, SPECIFICALLY THE MUTUAL ARBITRATION PROVISION IN SECTION 10. UNLESS YOU OPT OUT OF ARBITRATION . . . THIS AGREEMENT REQUIRES THE PARTIES TO RESOLVE DISPUTES THROUGH FINAL AND BINDING ARBITRATION ON AN INDIVIDUAL BASIS . . . .”). Second, after opening the link, plaintiffs were required to assent to the terms by clicking “Agree” before being able to return to the registration process.

So, the next time you are putting together an online agreement, take the time to draft and implement a clickwrap agreement to ensure you can enforce your terms and conditions.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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