Online service providers typically seek to mitigate risk by including arbitration clauses in their user agreements. In order for such agreements to be effective, however, they must be implemented properly. Babcock vs. Neutron Holdings, Inc., a recent Southern District of Florida case involving a plaintiff who was injured while riding one of the defendant’s Lime e-scooters, illustrates that courts will closely scrutinize the details of how an online contract is presented to users to determine whether or not it is enforceable.
As we have noted, online contracts are more likely to be enforced where (1) the terms are conspicuously displayed so that users have notice of them, and (2) users are required to take some affirmative action (e.g., checking a box or clicking a button) to indicate acceptance of the terms.
In Babcock, the relevant terms were provided to users within the Lime App, a smartphone application that users must download before renting a Lime e-scooter. After downloading the app, the user is prompted to create an account. During account creation, the user is prompted to agree to Lime’s User Agreement and Terms of Service.
We have often expressed skepticism of courts’ penchant for categorizing online contracts into one or another variety of “-wrap” contract – e.g., “browsewraps,” “clickwraps,” “scrollwraps,” “hybridwraps,” etc. In this case, after analyzing the user interface, the court characterized the Lime User Agreement as a “sign-wrap” agreement, citing Selden v. Airbnb, Inc. According to the Babcock court, a sign-wrap agreement exists where “a user signs up to use an internet product or service, and the sign-up screen states that ‘acceptance of a separate agreement is required before the user can access the service’.”
The court spent some time analyzing the details of the Lime app’s user interface, a screenshot of which is included in the published opinion:
The court noted that:
[T]he blue boldface hyperlink to the User Agreement’s terms (where the user could read the full arbitration provision) combined with the unambiguous warning that “by tapping “I Agree” the user confirms that he or she “read and agreed to Lime’s User agreement,” is conspicuous enough to put a reasonably prudent smartphone user on inquiry notice of the [a]rbitration [p]rovision.
According to the court, any reasonably prudent smartphone user knows that blue text surrounded by black text is a hyperlink. The court further states, “the large black boldface User Agreement title, the non-bold black User Agreement acknowledgement, the blue boldface User Agreement hyperlink, and the lime-green ‘I Agree’ confirmation created a user friendly display.”
The court goes on to say that the assortment of contrasting colors, the use of bold versus non-bold fonts, and the empty white space contribute to a visual separation of information that makes the user clearly understand that, by tapping the “I Agree” button, he or she is agreeing to be bound by the hyperlinked user agreement.
This visually clear design is repeated in the user agreement itself where the first sentence of the first paragraph is bolded and in all caps. This sentence informs the user that the terms are binding and that accessing and using the services signal agreement with the terms. The second sentence of the user agreement, which is also bolded and in all caps, informs the user of the arbitration clause and warns the user not to use the Lime service if she or he does not agree with the arbitration provision.
Taken together, the court held, these features of the Lime app’s user interface and registration process resulted in a binding contract between Lime and the plaintiff. Accordingly, the plaintiff was bound by the arbitration provision contained in the Lime user agreement.
The result in Babcock is not surprising and is consistent with prior cases upholding online contracts with similar implementations. But the case is a useful illustration of the fact that details matter when implementing an online contract, and that clarity of the user interface and design—including fonts, color, bolding, underlining, titles, hyperlinks, presentation of screens, etc. —may determine whether arbitration clauses and other crucial risk-mitigation provisions are enforceable against users.