“I Might Have Agreed to the Terms of Service: When Can a User Be Bound to Provisions in Online Contracts?”

Kaytie Hobbs, Associate Member, University of Cincinnati Law Review

BACKGROUND

Most people who use the internet have been confronted with a simple, three-word phrase that denotes pages of legal jargon that none of us care to read: Terms of Service. Despite the fact that use of online services is frequently predicated on agreement of these Terms, the vast majority of online consumers do not read them. A recent study, using the fictional social media site titled NameDrop, found that 74 percent of people skipped the Privacy Policy and spent an average of 51 seconds reading Terms of Service.[1]

When checking the box “I have read and agree to the Terms of Service” and adding to the “biggest lie on the Internet,” people may miss what lurks in these agreements.[2] It most likely won’t be the promise of your first-born child – unless you’re signing up for NameDrop – but it likely has a provision requiring arbitration.[3]

The Federal Arbitration Act provides that written arbitration provisions in contracts “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.”[4] The Supreme Court has interpreted this provision to indicate a strong federal policy that favors arbitration.[5] By agreeing to these Terms requiring arbitration with one simple click, consumers of these online services are waiving their rights to trial.

Uber Technologies, Inc. (“Uber”) is a ride-hailing service that operates through its mobile application (“app”) on a smartphone or its mobile website.[6] Uber’s Terms of Service contain the following clause: “You acknowledge and agree that you and Uber are each waiving the right to a trial by jury. . . . Unless both you and Uber otherwise agree in writing, any arbitration will be conducted only on an individual basis . . . .”[7]

Enforcement of these types of provisions are determined by principles of contract law. The First and Second Circuits examined the manner in which the Uber app displayed its Terms of Service to users in order to enforce this clause. While the two circuits reached different conclusions, both results indicated the importance of making Terms of Service conspicuous and demonstrated that express assent to the Terms, while not mandatory, is a wise business practice.

 

SECOND CIRCUIT: MEYER V UBER TECHS., INC

In 2014, plaintiff Spencer Meyer downloaded the Uber app on his phone and registered for an account, using the service roughly ten times before filing a suit against the company and its co-founder for illegal price fixing.[8]

To register for an account, the app presented Meyer with two screens asking for information; the first was labeled the Registration Screen, and the second the Payment Screen.[9] The Registration Screen required Meyer to either fill in his name, email address, phone number, and password or to bypass this manual registration and instead register with Google+ or Facebook.[10] Meyer chose to create an account manually, according to Uber’s records.[11]

At issue is the Payment Screen. The Payment Screen required the registrant, Meyer, to enter credit card information or link his account with PayPal or Google Wallet to facilitate payments; Uber’s records established that Meyer entered his credit card information.[12] Below these fields contained the following: “[b]y creating an Uber account, you agree to the TERMS OF SERVICE & PRIVACY POLICY.”[13]  The first clause was in black text while the capitalized phrase was a hyperlink, signaled by blue, underlined text.[14] Clicking this hyperlink allowed the user to click another button that would show Uber’s Terms of Service and Privacy Policy.[15] Meyer said that he did not remember seeing the hyperlink and that he did not read the Terms and Conditions that contained the arbitration clause.[16]

The Second Circuit relied on California state contract law to determine whether a valid agreement to arbitrate existed.[17] Mutual manifestation of assent is required to form a contract.[18] However, where contract provisions are inconspicuous, offerees will not be bound even if there appears to be mutual assent.[19] To find this contractual agreement valid, the court identified two requirements: (1) the notice must be reasonably conspicuous and (2) the assent unambiguous.[20] California law evaluates this second prong of assent objectively, taking into consideration two further factors: what the offeree did and the context of the transaction.[21]

The Second Circuit stepped into the shoes of a reasonable smartphone user to determine conspicuousness, finding that a reasonable smartphone user knows that highlighted blue text is a hyperlink to another website. [22] Also relevant was the design of the Payment Screen. All of the information, including the hyperlink to the Terms of Service, was visible the entire time and without a need to scroll.[23] The only other fields on the screen were input boxes for payment methods.[24] Further, the background – being white – offered a contrast to the dark print of the relevant sentence’s first phrase, and with the blue hyperlink.[25] Complementing this spatial proximity was the temporal notice; it was offered with the initial creation of the account.[26] The Second Circuit found that a reasonable smartphone user would appreciate that the Terms of Service were connected to registering for an account. In light of all of these factors, the Court found that the hyperlinked text was reasonably conspicuous.[27]

Meyer’s assent was unambiguous, fulfilling the second prong.[28] Evidence proved that a reasonable smartphone user would be on notice of the Terms, and the registration process made it possible for Meyer to read the Terms of Service.[29] The transactional context also provided a basis for clarity as the process of registering for an account signaled a continuing relationship that would require certain conditions.[30] Thus, the agreement was found to be valid.[31]

 

FIRST CIRCUIT: CULLINANE V UBER TECHS., INC

In this case against Uber, four Massachusetts plaintiffs filed suit alleging violation of a consumer protection statute by charging unnecessary fees.[32]

The plaintiffs in this case went through a slightly different registration process than Meyer because the registration process had changed in the interim time period. Here, the plaintiffs each saw the same first and second screens.[33] The first screen (“Create an Account”) asked for a user’s e-mail address, phone number, and a password.[34] The second screen (“Create a Profile”) asked a user to enter his full name and a picture.[35]

The third screen, though achieving the same goal in both displays, varied in display among the four plaintiffs. Two plaintiffs’ screens were titled “Link Card” and the remaining two plaintiffs’ screens were titled “Link Payment.”[36] Both screens required a user to enter payment information.[37] Both screens featured a black background with a blank white box for users to enter credit card information.[38] The Link Payment Screen differed in that it offered a button for PayPal underneath the white box.[39] Both screens had the same language at the bottom, in dark grey text: “By creating an Uber account, you agree to the.”[40] Immediately beneath this phrase was a grey box displaying the bolded white phrase “Terms of Service & Privacy Policy.”[41] Uber argued that this presentation of a box signaled it could be clicked.[42]

The First Circuit applied Massachusetts state contract law, consisting of a two-prong test, to determine whether to enforce this clause.[43] The first prong requires the contract Terms to be reasonably communicated, and the second prong requires the Terms be accepted.[44]

To be conspicuous, the Terms must be presented in such a way that a reasonable person would have noticed it.[45]  The Court listed examples of characteristics to consider, including larger font, capital letters, or otherwise making the term set off by using other symbols.[46] If Terms are available only by clicking on a hyperlink, considerations of the language notifying users that this is the only path to the term and the prominence of the link are also evaluated.[47]

Uber’s design of this third screen did not meet the standards for conspicuousness.[48] Uber did not use the common method to signal a hyperlink by underlining blue text, and a reasonable user might not have realized a grey box is a hyperlink.[49] Further, the additional information on the screen – including the PayPal button and textual instructions – were displayed in such a way as to diminish the prominence of the hyperlink. [50] Plaintiffs could not have assented to these Terms, of which they were not reasonably notified.[51]

 

THE LESSON

The major differences in these versions of the same app are notable. The fact that, in designing the page, Uber chose not to hyperlink the Terms of Service in the typical manner in Cullinane was significant. The page there also did not make the phrase stand out with larger text or other symbols to emphasize its importance. The version in Meyer, however, did enough to alert a reasonably prudent smartphone user of the existence of the Terms by using the typical hyperlink format. Another notable outcome of these cases is that an absent requirement for users to check a box that expressly says “I agree to the Terms of Service” will not render the agreement unenforceable if other steps are taken to draw attention to the Terms. Both cases use language to inform users that creating an account is an acceptance of those Terms; if there is not a check-box signaling express agreement, there should be language indicating the users are signing up for the services subject to the Terms.

Consumers should be aware of the risks posed by not reading the Terms of Service. Entering in contracts is easier than before with the rise of the Internet. A whopping 77 percent of Americans go online daily, and 26 percent of those adults have said they are online “almost constantly.”[52] Terms of Services are required by a plethora of mobile apps and websites, and it is all too easy to ignore – or to pretend to skim while scrolling. These cases turn on how conspicuous the Terms of Service are – not how conspicuous the arbitration clauses themselves are. Skipping reasonably conspicuous Terms coupled with an absent click of agreement can bind users to these arbitration clauses.

In the future, online services should use these cases to guide how they direct users to their Terms of Service. When in the design stages, conspicuousness must be a main concern. Although Uber’s app may have had some quality design elements, the absence of a typical hyperlink appearance connecting users who are registering for accounts to those Terms was significant enough to hold against enforcement. Of course, a large number of people could have realized that the box at issue in Cullinane indicated the presence of a hyperlink, but the same number of people could have easily overlooked it. There should be a more conscious effort to make the Terms stand out, as well; larger text and different colors would probably be sufficient in most courts. Meyer proves that it is not necessary to have a user expressly manifest assent by clicking an additional button that says “I agree.” However, while not dispositive, it would be wise to have users check a box indicating agreement to the Terms in order to prove express assent. Even if users do not read the Terms, doing this can signal to registrants more of a responsibility.

With the growing prevalence of online contracts, website and mobile app designers should use these methods to ensure Terms of Services are conspicuous enough that a reasonable user would be put on notice. As a matter of good policy, these same designers should require express assent so consumers of these services have an even more explicit notice of the binding agreement.

[1] Obar, Jonathan A. and Oeldorf-Hirsch, Anne, The Biggest Lie on the Internet: Ignoring the Privacy Policies and Terms of Service Policies of Social Networking Services (June 1, 2018) https://ssrn.com/abstract=2757465

[2] Id. So few people actually read these terms that it has been referred to as the biggest lie on the Internet.

[3] Id. at 12. The Terms of Service also provided that every person who signed up for NameDrop became the property of NameDrop.

[4] Federal Arbitration Act, 9 U.S.C. § 2 (2018)

[5] AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011)

[6] Uber, https://www.uber.com/about/

[7] Uber Terms of Service, https://www.uber.com/legal/Terms/us/

[8] Meyer v. Uber Techs., Inc., 868 F.3d 66, 70 (2d Cir. 2017).

[9] Id. at 70-71.

[10] Id. at 70.

[11] Id.

[12] Id. at 71.

[13] Id.

[14] Id.

[15] Id.

[16] Id.

[17] Id. at 74. The Second Circuit applied California law, but observed that New York applies considerably similar concepts to determine mutual assent in a contract.

[18] Id.

[19] Id.

[20] Id. at 76.

[21] Id.

[22] Id. at 77. This perspective did not require the courts to assume that the reasonable smartphone user never used an app before.

[23] Id. at 78.

[24] Id.

[25] Id.

[26] Id. at 78.

[27] Id.

[28] Id. at 80.

[29] Id.

[30] Id.

[31] Id. at 82. The case was remanded to determine the separate issue of whether Uber waived its right to arbitrate based on its actions in litigating this suit.

[32] Cullinane v. Uber Techs., Inc., 893 F.3d 53, 57 (1st Cir. 2018)

[33] Id. at 56.

[34] Id.

[35] Id.

[36] Id.

[37] Id.

[38]Id. at 57-58.

[39] Id. at 58.

[40] Id. at 57.

[41] Id.

[42] Id. at 58.

[43] Id. at 61.

[44] Id. at 62.

[45] Id.

[46] Id.

[47] Id.

[48] Id. at 63.

[49] Id.

[50] Id.

[51] Id.

[52] Andrew Perrin and Jingjing Jiang, About a quarter of U.S. adults say they are ‘almost constantly’ online, Pew Research Ctr., (2018), http://www.pewresearch.org/fact-tank/2018/03/14/about-a-quarter-of-americans-report-going-online-almost-constantly/.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s