ContractsProf Blog

Editor: Jeremy Telman
Valparaiso University Law School

Tuesday, January 19, 2021

More Reasonable Notice

(This post is a continuation of yesterday’s post on “Reasonable Notice”)

The second case reflecting the evolving understanding of reasonable notice is Kauders v. Uber Technologies .  The plaintiffs sued Uber in Massachusetts Superior Court alleging that three Uber drivers refused to provide one of the plaintiffs, Christopher Kauders, with a ride because he was blind and accompanied by a guide dog.  Uber sought to compel arbitration, but plaintiffs argued that they had not entered into an enforceable arbitration agreement. 

The backstory to this case is interesting.  The lower court judge initially granted Uber’s motion.  Subsequently, the arbitrator ruled in favor of Uber on all the plaintiff’s claims.  Then, the U.S. Court of Appeals for the First Circuit issued Cullinane v. Uber Tech., Inc., 893 F.3d 53, 62 (1st Cir. 2018) which found that Uber’s registration process did not provide reasonable notice and so did not create a contract.  The judge in Kauders who granted the motion to compel arbitration allowed a motion for reconsideration after Cullinane and then reversed his earlier decision, finding that there was no enforceable contract requiring arbitration.  Uber appealed to the Massachusetts Supreme Judicial Court claiming that the lower court judge should have confirmed the arbitration award because the plaintiffs failed to challenge the award within 30 days.  The appellate court disagreed and found that the issue of arbitrability was preserved for appeal.  The court went through Uber’s registration process in detail, noting website design details such as color, location and wording at each step. It concluded that  Uber’s terms and conditions did not provide the plaintiffs with reasonable notice and that the user did not clearly manifest assent to the terms.

The court noted with some distaste Uber’s unilateral modification clause, noting that:

“Uber can amend the terms and conditions whenever it wants and without notice to the users that have already agreed to them.  In fact under the terms and conditions, the burden is on the user to frequently check to see if any changes have been made.  Yet, even if a user somehow detects a change, there is no way for the user to or contest any of the changes, as the changes are automatically binding in the user.”

The court noted that many of the provisions were “extremely favorable to Uber” including a broad limitation of liability provision.  In addition, the court noted the warranty disclaimer, a strict no-refund policy, a provision stating that Uber was not a provider of transportation (that by-now familiar and disingenuous Big Tech claim that “I’m just a little ol’ platform and not an employer/principal argument never mind my billion dollar valuation”) and a one-sided indemnification clause where the passenger indemnifies Uber from pretty much everything.  It was refreshing to finally have a court take umbrage at the extreme one-sidedness of “standard” TOS.

The court noted that it had not previously considered what standard should be used for online contract formation.  (This might sound surprising but in fact, few state courts have actually addressed this issue.  Most of the cases deciding wrap contract formation have come out of federal court as noted in footnote 20 of this article here).  The court adopted the “reasonable notice” and “reasonable manifestation of assent” test and noted that the tricky part was not which test to apply but how to apply it.  The court concluded that the notice was not reasonable and cited several reasons including that the user did not have to scroll and could register and click “done” without clicking the link to the terms and conditions.  It contrasted the registration process of drivers versus users and concluded that “a user may reasonably believe he or she is simply signing up for a service without understanding that he or she is entering into a significant contractual relationship governed by wide-ranging terms of use.”

Both of these cases are chock full of interesting comments by the court and insights into what is more likely to result in a finding of reasonable notice.  The takeaway? Reasonable notice is fact intensive, not a one-size-fits-all.  Simply because the user is asked to “click” doesn’t mean the contract will be found enforceable.  These two cases reflect part of a trend that looks at the registration process from the standpoint of the user rather than a court.  This ex ante rather than ex post approach is a more realistic and appropriate way to assess the reasonableness of notice and another sign that courts are starting to take the notion of “reasonable notice” more seriously.

https://lawprofessors.typepad.com/contractsprof_blog/2021/01/more-reasonable-notice.html

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