On Jan. 4, the Massachusetts Supreme Judicial Court issued a ruling in Kauders v. Uber Technologies Inc. that has important implications for the enforceability of online and/or app contracts, and the arbitration agreements included in them.[1]
In short, the court concluded that Uber's terms and conditions did not constitute a contract with the plaintiffs, because the app's registration process did not provide users with reasonable notice of the terms and conditions, and did not obtain a clear manifestation of assent to the terms.
In doing so, the court analyzed the features of the Uber app that undercut contract formation, and commented on features that might have worked better. This ruling seems likely to become a notable addition to the burgeoning body of case law addressing how contracts can be formed over the internet.
Background
The plaintiff, Christopher Kauders, registered as a rider with Uber using its app. After several Uber drivers refused rides to Kauders, who is blind and relies on a guide dog, he filed suit against Uber in 2016, alleging violations of a state antidiscrimination law.[2]
Uber filed a motion to compel arbitration, on the basis of an arbitration clause found within its app's terms and conditions. Kauders opposed the motion, arguing that the terms and conditions of Uber's app were not a binding contract. The trial court granted the motion, and arbitration concluded in Uber's favor on June 4, 2018.
However, when Uber moved to confirm its arbitration award, Kauders again raised the contract formation issue in a motion to reconsider, and the trial court reversed its earlier decision, citing a recent decision in which the U.S. Court of Appeals for the First Circuit decided that Uber's registration process did not create an enforceable contract.[3]
Uber appealed, and the Massachusetts Supreme Judicial Court assumed jurisdiction.
The Decision
After addressing two procedural questions,[4] the court reached the merits of the appeal, holding Uber's terms and conditions did not constitute a binding contract, because Uber's interface "did not provide reasonable notice ... of the terms and conditions" or "obtain a clear manifestation of assent," even though "both ... could have been easily achieved."
While acknowledging that federal policy favors arbitration agreements, the court stated that policy considerations did not override "the principle that a court may submit to arbitration only those disputes ... that the parties have agreed to submit." As a result, the court applied basic contract formation principles to online and/or app contract formation, just as it would to regular contracts, examining whether the offeror had provided reasonable notice and obtained clear assent.
The court concluded that Uber had not provided Kauders with reasonable notice under either an actual notice or totality of the circumstances test. The terms and conditions failed the actual notice test because Uber did not provide any evidence of actual notice — which occurs where the user is shown to have reviewed or otherwise interacted with the terms before agreeing to them.
Uber also failed to establish that the user had been given reasonable notice of the terms and conditions in the context of the totality of the circumstances. The factors assessed in this test include the form of the contract, the size and nature of the transaction, and the design and content of the interface.
The court found that Uber failed to provide reasonable notice because the presentation of its terms and conditions had multiple shortcomings.
First, Uber's particular terms and conditions were not at all obvious to users. Rather, they included near-complete releases from liability and other terms highly favorable to Uber, without any obvious notice to consumers that these important terms lurked in the terms and conditions.
Second, the...
