Nancy Kim's Annual Wrap Contracts Update

We've got all your contracts needs covered here on the blog.  If you need a legal Limerick, we've got them here.  If you need to learn about wrap contracts, Nancy Kim's book covers the basics, and her recent article, "New Developments in Digital and Wrap Contracts," forthcoming in The Business Lawyer,  keeps you updated on the latest developments.  

Last year's update followed courts' articulation and refinement of a reasonable or constructive notice and manifestation of assent requirement.  This year's installment features three cases involving Uber which clarify that standard by specifying what indicia of notice and assent must be present and which, if absent, negate consent to a wrap or digital contract.  The article then explores the pitfalls that await companies that use multiple versions of their contracts, some electronic, some on paper.  Finally, Nancy discusses cases that shows the downside of class action and class representation waivers when a company gets hit with huge filing fees after lots of employees avail themselves of the company's mandatory arbitration provision.

In the Uber cases discussed in Part II of the article, the courts first determine whether the contract terms were “reasonably communicated” to the plaintiff.  That part of the test turns on whether the terms are "sufficiently conspicuous."  They next evaluate whether the terms were accepted and, if so, how.  Courts engage in both a "high-level contextual analysis” and “micro-analysis of particular elements of that context,” and so the outcomes of the cases turn on a very detailed analysis of website/digital design.  For example, in one case, an Uber rider was not subject to the company's arbitration clause.  When she registered with Uber, she received notice that by registering, she was agreeing to Uber's Terms of Service (ToS), but she was not required to read those ToS or separately agree to them.  She was thus unaware that the ToS included an arbitration clause and therefore could not be bound to it.  Nancy summarizes the cases:

First, terms accessible only via a hyperlink . . . should be clearly labeled and marked so that the user’s intent to agree to terms is clearly and unambiguously expressed. Furthermore, conspicuousness of terms alone is not sufficient to establish reasonable notice. Rather, conspicuousness is one factor in determining assent. Finally, the reasonableness of notice depends upon the nature of the transaction because the parties may expect certain terms in some transactions but may not expect them in others. Term that are unexpected given the nature of the transaction require specific notice, and blanket assent to terms may not suffice to establish assent to these unexpected terms.

After discussing a few non-Uber cases that raise similar issues, Nancy sums up the recent developments in this area:

 Increasingly, courts are incorporating screenshots into their opinions and engaging in micro-level analysis that depends not simply on the color of hyperlinks, but the color of the text and other design elements, the placement of hyperlinks, the text used to attract the user’s attention, and whether there is specific notice of terms that would otherwise be unexpected

In part III, Nancy discusses a couple of cases in which financial services companies claimed to have provided customers with notice of arbitration provisions both through electronic contracting and through notice by mail.  In both cases discussed, the courts found the digital notice to be inadequate and that the financial services companies failed to establish that their customers had actually received notice of mandatory arbitration by mail.

 

Finally, in part IV, bwahaha!!  Companies that require individual arbitration are finding that arbitration fees add up.  When 5000 Doordash drivers brought individual actions against the company, the fees added up to $12 million!  Postmates is facing claims from a similar number of couriers and may have to pay $9.36 million.  Hey food delivery services that insist on calling your employees independent contractors, you just got served with a piping hot dish of karma!