Uber Case Adds Clarity to Click-Wrap Agreement Enforceability

The Problem: Your Terms of Use May Not Be Enforceable

Website owners or software developers who take the time to have advantageous terms of use drafted for them expect that they will be enforceable against users, but that is not always the case, as reported in this blog in 2015 and again earlier this year. Disputes involving whether a website's terms of use or a developer's EULA ("End User Licensing Agreement") are enforceable usually center around mandatory arbitration clauses. The underlying issue is whether a user has demonstrated assent, or in other words, has agreed to be bound by the provisions in the terms of use.

The Meyer v. Uber Case: A Blueprint for Enforceable Terms of Use

As case law has evolved, enforceability based on merely browsing a website (so-called "browse-wrap" agreements) has become disfavored, and "click-wrap" agreements have become the norm. In a recent case involving Uber's terms of service, the court provided detailed guidance on the precise features of a website that are needed to make an enforceable click-wrap agreement. The case came out of the Second Circuit, which also authored another informative decision on click-wrap agreements in 2016 that shows small business owners what to leave out of their websites.

The case, Meyer v. Uber Technologies, 868 F.3d 66 (2nd Cir. Aug. 17, 2017), was brought by a Uber user as a putative class action alleging antitrust claims. Uber promptly moved to compel arbitration based on its argument that Meyer agreed to a mandatory arbitration provision in the company’s terms of service when he registered his account. According to the district court, the terms were not reasonably conspicuous and therefore the user did not assent to arbitration; the motion to compel arbitration was denied.

The Second Circuit appellate court overturned this decision and remanded. The Meyer court said the reasonableness of Uber’s contracting process would be reviewed from the perspective of a “reasonably prudent smartphone user,” characterized as a typical smartphone user familiar with app registration and aware that hyperlinked text near the register button takes them to further information about the specific terms. The court concluded that the design of the screen and language used by the Uber mobile interface rendered the notice reasonable under the law, and that Meyer unambiguously manifested assent to Uber’s terms of service. The court ruled that a reasonable user would know that clicking the “Register” button meant agreement to the terms and conditions that were accessible via the hyperlink.

The court cited the following specific helpful design features that should be on every web developer's radar going forward:

  • "Uncluttered" Registration Screen: The screen used to complete user registration was “uncluttered” and presented the user with a simple choice: to click or not to click a button marked “Register,” with a statement underneath that said “By creating an Uber account, you agree to the TERMS OF SERVICE & PRIVACY POLICY.” Hyperlinks to the Terms of Service and Privacy Policy were included as well.
  •  No Scrolling Required: Users did not have to scroll to see that the Terms of Service became binding once the Register button was clicked; all of this information was visible in the same screen view.
  • Use of Contrast to Emphasize Important Information: Uber's app used dark print against a white background, and hyperlinks that were blue and underlined, to conspicuously draw the user's attention to the terms and conditions. On this point, the court stated “a reasonably prudent smartphone user knows that text that is highlighted in blue and underlined is hyperlinked to another webpage where additional information will be found.”
  • Keeping a Record of User Assent: Another crucial aspect of enforceablity is that a company must present evidence that the user actually accepted the terms of use, which requires preserving records of the user's acceptance, and any amendments that the user later accepted. Uber presented undisputed evidence of Meyer's acceptance of its terms of service.

A Study in How to Have Unenforceable Terms of Use: The Nicosia v. Amazon Case

The Second Circuit considered the same basic issues at play in the Meyer case in a 2016 case, Nicosia v. Amazon. In contrast to Meyer, the following elements led to questionable assent to Amazon's terms of use:

  • Cluttered Registration Page: Amazon’s registration page was considerably cluttered in the court's view. The court compared the page to an apple stand with a wall filled with signs, some prominently displayed and containing "necessary" information, and other information that could be quickly disregarded as unimportant. Buried in this clutter was one sign binding the user "to additional terms as a condition of...purchase.”
  • Inconspicuous Lettering: The court criticized the fact that Amazon’s lettering was “not bold, capitalized or conspicuous in light of the whole webpage."
  • Sloppy Record Keeping: Amazon’s earlier terms of use did not include an arbitration provision, and the plaintiff disputed whether the user had been presented with the earlier terms and conditions as well as Amazon’s later amendment of its terms and conditions. Amazon could have avoided this dispute by maintaining meticulous records of its users' assent each time a purchase was made.

In an interesting side note, on remand in the Nicosia case, a magistrate judge recently granted Amazon's motion to compel arbitration on other grounds, based on the fact that the plaintiff made 38 visits and purchases on Amazon’s website after the terms had been changed to include an arbitration clause, which meant the plaintiff had constructive notice of the provision.

Conclusion

These cases demonstrate the need for small business owners with websites, apps, or software products to coordinate with their legal team and web developers or software designers to ensure the implementation of features designed to manifest users' assent to terms of use, whether occuring in mobile apps, on the web, or in EULAs.

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