Making “Terms of Use” Stick

A recent Second Circuit decision (Meyer v. Uber Technologies (2017)) provides important guidance on ensuring that Terms of Use contained in websites and apps bind their users as contractual agreements. Terms of Use that may be particularly important for companies may include arbitration and no-class-action clauses.

The decision is notable because it held the terms to be binding, even though they were not visible during the registration process, though they could be accessed by a hyperlink.

Companies are well advised to have legal counsel review the layout and registration process on their websites and apps that are intended to bind users to such terms, and ensure that best practices are followed to maximize enforceability. What is critical is that “the layout and language of the site give the user reasonable notice that a click will manifest assent to an agreement.”

Key lessons that can be gleaned from the decision include:

  • require affirmative assent to the terms of use;
  • there should be a clear, easily readable statement positioned next to the registration (or assent) button indicating agreement to the terms; and
  • if the terms are on a separate page connected with a hyperlink, the hyperlink label should be clearly demarcated by color and underline.

More pointers are outlined in our detailed discussion of the case.

Meyer v. Uber Technologies (2017) involved price-fixing allegations by an Uber customer under federal and state anti-trust law; the complaint included class-action allegations. Uber moved to compel arbitration because its Terms of Use contained an arbitration clause. The district court denied the motion because it held the terms were too obscurely presented to provide notice. But the Court of Appeals reversed, holding that Uber’s registration process and the presentation on the registration page of its app sufficed to constitute reasonable notice and assent by the user.

In deciding the case, the Second Circuit carefully distinguished various prior cases. From that extended discussion, good advice can be gleaned to maximize enforceability. A picture of the Uber app display for registration (reproduced in the opinion) is helpful in understanding these pointers:

uber.jpg

Some of the guidelines one can glean from the opinion are:

  • The user should be required to affirmatively assent to the terms requiring the user to click “I agree” or “Register” (so-called clickwrap or click-through agreements) is much more likely to be enforced than terms presented passively with a mere assertion that browsing the site constitutes acceptance of the terms (so-called “browsewrap” agreements).
  • The overall screen should be clear and uncluttered. Overcrowding the screen with many information fields and statements distracts from clear notice that the user is assenting to the terms.
  • It is acceptable to combine registration for the service with agreement to the terms of use. But, there should be a clear, easily readable statement positioned next to the registration button indicating agreement to the terms. (E.g., “By creating an Uber account, you agree to the TERMS OF SERVICE & PRIVACY POLICY”)
  • The terms can appear on a separate page connected by a hyperlink – but the hyperlink needs to be clearly demarcated by color and underline on the words TERMS OF USE (or similar title). “[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.”
  • If instead of using a hyperlink, a scroll-box is usable, then it must be clearly stated to scroll down to see additional terms, or required to scroll before assent is accepted.
  • In the terms themselves, important sections (such as arbitration clauses) should be set off with clear headings, and critical sentences bolded.
  • There should be a “spatial and temporal coupling” of notice of the terms and assent. Meaning, the notice should be clear and near the assent (or register) button, and it should be clear that by clicking one is agreeing to the terms at the time of registration. Providing notice after sign-up will likely be rejected.
  • Amended Terms. What happens if the company revises the Terms of Use, as happens from time to time? Some companies rely on amendment clauses in the Terms of Use that reserve the right to amend. It is doubtful, however, whether these could be enforced against users who have already signed up under a prior version without providing conspicuous and clear notice that the terms have changed. Courts have on several occasions rejected reliance on amendment clauses where notice of the amendment was not clearly made.

    Ideally, companies should require a new, affirmative assent to the new terms, for example as part of the ordering process, or as a condition for continued access. If that is not feasible, at minimum companies should give clear notice – such as through an email or notice on the site or app – that the terms have been amended, a link to the new terms, and a clear statement that continued use of the site or service constitutes assent to the new terms.

As the Meyer case makes clear, what is critical is that “the layout and language of the site give the user reasonable notice that a click will manifest assent to an agreement.” Implementing these guidelines will maximize the chance that a court will find that standard met.