Enforceability of Online Contracts under Massachusetts Law: Kauders v. Uber Technologies, Inc.

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by Kevin J. Conroy 

Case Focus

Earlier this year, in Kauders v. Uber Technologies, Inc., 486 Mass. 557 (2021), the Supreme Judicial Court provided further clarity on an issue likely to impact every resident of the Commonwealth and the businesses they interact with online – namely, the enforceability of agreements created through website and mobile apps, including the terms and conditions that purport to govern the use of those businesses’ online platforms.

The Test for Enforceability

In Kauders, the SJC evaluated the interface by which Uber had attempted to secure its users’ assent to its terms and conditions, including a mandatory arbitration clause. Recognizing that “[t]he touchscreens of Internet contract law must reflect the touchstones of regular contract law,” the SJC held that to create an enforceable online contract under Massachusetts law, there must be both reasonable notice of the terms and a reasonable manifestation of assent to those terms.” Id. at 572. Kauders’ two-part test is consistent with the approach taken by appellate courts from around the country as well as in a 2013 decision from the Massachusetts Appeals Court. Id. (citing Ajemian v. Yahoo!, Inc., 83 Mass. App. Ct. 565, 574-75 (2013) and Conroy & Shope, Look Before You Click: The Enforceability of Website and Smartphone App Terms and Conditions, 63 Boston Bar J. 23, 23 (Spring 2019)). See also Emmanuel v. Handy Technologies, Inc., No. 20-1378 (1st Cir. Mar. 22, 2021) (applying Kauders to find that plaintiff had formed an arbitration agreement with the defendant).

Uber had asserted that Kauders must pursue his claim in arbitration because he accepted Uber’s terms of use. According to Uber, Kauders had accepted those terms by proceeding to register an account after viewing a screen in Uber’s app with the language “By creating an Uber account, you agree to the Terms & Conditions and Privacy Policy” with embedded hyperlinks to the actual text of the terms. The SJC concluded that Uber failed to satisfy both the reasonable notice and reasonable manifestation of assent prongs of the contract analysis. By identifying several deficiencies in Uber’s interface, the opinion provides guidance on design choices that can contribute to enforceable online contracts in future cases.

Reasonable Notice of Terms

With respect to reasonable notice, the SJC clarified that actual notice will generally be found if the user has been presented and viewed the terms, or if the user is required to interact with the terms somehow before proceeding to use the app or website. Thus, interfaces that require the user to scroll through the entire text of the terms before being allowed to progress should satisfy the reasonable notice prong of the test under Kauders. Absent actual notice, the SJC indicated that clarity and simplicity of the presentation of the terms should be the focus. If the terms are not presented directly on the screen, the full text should at least be available (if not required to be accessed) by following a clear link with minimal intermediate steps.

The SJC explained that, ultimately, reasonable notice involves a determination of whether “the offeror [has] reasonably notif[ied] the user that there are terms to which the user will be bound and [has] given the user the opportunity to review those terms.” Id. at 573. The Court noted that Uber’s notice, in contrast, was not reasonable as the terms could be reached only by following two successive links which the user was not required to access to complete the registration process. The SJC also identified several other features of Uber’s interface that detracted from the clarity of the notice of the terms. For example, the nature of the transaction – registering for an account to enable future ride services – might not suggest to a reasonable user that the user is entering into a contractual relationship governed by the extensive indemnification and waiver provisions included in Uber’s terms. The SJC also observed that the language informing the user of the contractual consequences of proceeding with the registration was displayed less prominently than other elements.  That language appeared at the bottom of the screen, whereas the elements the user was required to interact with to proceed (e.g., entering payment information) drew the user’s attention away to the top of the screen.

Reasonable Manifestation of Assent

With respect to reasonable manifestation of assent, the SJC declared a clear preference for “clickwrap” interfaces in which the user is required to indicate express and affirmative assent to the terms by checking a box or clicking a button that reads “I agree” or its equivalent. The Court likened the affirmative act of clicking such a box or button of assent to “the solemnity of physically signing a written contract” and suggested that this would help alert the user to the contractual significance of their action. Where the interface does not require the user to expressly agree – as in the Uber interface at issue in Kauders – assent may still be inferred from the actions the user takes. However, the SJC cautioned that in such cases the courts would need to engage in careful consideration of the totality of the circumstances, and “it will be difficult for the offeror to carry its burden to show that the user assented to the terms.” Id. at 575.

The Court admonished that Uber’s interface obscured the connection between the user’s action and assent to Uber’s terms because the app only required the user to click a button labelled “DONE” (rather than “I agree” or “Create Account”) on the screen that provided notice of Uber’s terms. Id. at 577. To underscore that “uncertainty and confusion in this regard could have simply been avoided by requiring the terms and conditions to be reviewed and a user to agree,” the SJC compared Uber’s rider registration interface (at issue in the case) with its separate, driver registration interface. The latter required prospective drivers to confirm at least twice that they had reviewed and accepted the terms of the agreement by clicking a button expressly stating “YES, I AGREE.” In contrast, the SJC observed that the Uber rider interface at issue “enables, if not encourages, users to ignore the terms and condition.” Id. at 577.

The Substance of the Terms

The SJC also expressed skepticism about various aspects of Uber’s terms, including a provision that purported to permit the company to make unilateral changes to the terms without notice (placing “the burden on the user to frequently check to see if any changes have been made”). The Court likewise expressed doubt about a provision that “totally extinguishe[d] any possible remedy” against the company. While the Court did not reach the question of the enforceability of such terms given its determination that no contract had been made, it included the severe consequence of the terms in its analysis of whether reasonable notice was provided.

Conclusion

Kauders confirms that Massachusetts courts will closely scrutinize the manner in which websites and apps communicate, and attempt to secure users’ agreement to, the terms and conditions that purport to govern their use, particularly if there is any indication that the existence or import of the terms are minimized or obscured. Anything less than an interface that is designed simply and clearly to require (1) that the terms be viewed actively by the user (through direct display on the screen or a direct hyperlink to the full terms) and (2) that there be express and unambiguous assent (through check-the-box style interfaces or “I Agree” buttons) is likely to invite avoidable court challenges.

Kevin J. Conroy is a litigation attorney at Nystrom, Beckman & Paris in Boston.  Kevin’s practice focuses on complex disputes including contract claims, insurance coverage claims, and other business disputes.