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  • Maine Supreme Judicial Court affirms denial of arbitration in online contract formation case

    Courts

    Earlier this year, the Maine Supreme Judicial Court affirmed a lower court’s decision to deny a ride-sharing company’s motion to compel arbitration in case concerning the enforceability of contracts formed through a smart phone application. In agreeing with the plaintiff that the terms and conditions were not binding under the circumstances, the Court concluded that the plaintiff was not provided reasonable notice of, nor manifested her assent to, binding arbitration when she clicked “DONE” after setting up her account and entering payment information. The Court characterized the company’s rider registration process as a “sign-in wrap agreement,” in which the plaintiff was informed she was assenting to the terms by creating an account, instead of having to affirmatively signify agreement with the terms. The Court stated that while it has not yet considered the enforceability of online contracts, “other courts have held that the formation of online contracts is governed by the same principles as traditional contracts.” The Court analyzed the enforceability of a sign-in wrap agreement using the following three components: (i) “Conspicuous terms or access to terms: The more likely that the user must at least view, if not read, the terms themselves as a condition of utilizing the website or the product, the more likely that a court will hold that the terms are binding”; (ii) “Uncluttered screen: Where notice or the hyperlink to agreement terms appears on an interface that is cluttered with other features and therefore is not easily spotted, an agreement is less likely to be binding on the user”; and (iii) “Explicit manner of expressing assent: The more obvious the user’s assent to terms, the more likely the terms will be binding.”

    The Court determined that the plaintiff did not have reasonable notice because the hyperlink containing the terms was presented in muted gray coloring, was “not obviously identifiable as a hyperlink,” and the sequence in which it appeared during the registration process “render[ed] it relatively inconspicuous” and made it less likely to draw the user’s attention, particularly because the focus of the registration process was on entering payment information rather than on the terms. The Court distinguished its conclusion from a decision issued by the U.S. Court of Appeals for the Second Circuit in Meyer v. Uber Technologies Inc., et al. (covered by InfoBytes here), which the company heavily relied upon. In Meyer, the 2nd Circuit upheld contract formation on the grounds that a “reasonably prudent smartphone user” would have been on “reasonably conspicuous notice” of the terms and conditions of service and that the text beneath the registration button put the plaintiff on notice that clicking “REGISTER” meant acceptance of those terms—regardless of whether he actually reviewed them. “The interface in Meyer increased the likelihood that the terms would come to the user’s attention—the hyperlink text to the terms in Meyer was underlined and in blue, and the hyperlink itself appeared in close proximity to the “REGISTER” button,” the Court wrote.

    The Court further concluded that the plaintiff did not manifest her assent to the terms because a reasonably prudent user would conclude that by clicking “DONE” she was only entering her payment information given the heading of the window read “LINK PAYMENT.” While the court acknowledged that the hyperlink containing the terms was on the same page as the “DONE” button, the notice did not state that “By clicking DONE, you agree to the Terms.” 

    The Court concluded that the company “could have designed its rider app to incorporate scrollwrap or clickwrap contracts that provided adequate notice of [the company’s] original and updated Terms and required consumers to express actual assent” but “apparently decided not to do so.” Furthermore, the Court found that a subsequent email notifying users of updates to the terms (which also required arbitration) did not obligate the plaintiff to arbitrate her dispute because the email did not require users to read or acknowledge the updated terms to remain registered as rider.

    Courts Maine Arbitration Online Contract

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