Uber’s TOS Formation Upheld Again–Wu v. Uber

December 15, 2024 · by · in E-Commerce, Licensing/Contracts

Goodness gracious, I could teach an entire semester of Internet Law focused solely on Uber’s TOS formation. It’s a source of never-ending, and sometimes avoidable, drama.

This opinion is a companion to the Massachusetts Supreme Court’s decision in Good v. Uber, which upheld an identical TOS formation process. The highest New York state court agrees.

The majority summarizes the general legal principles:

There is no sound reason why the contract principles described above should not be applied to web-based contracts in the same manner as they have long been applied to traditional written contracts….as with any other type of contract, formation of a web-based contract requires a “manifestation of mutual assent sufficiently definite to assure that the parties truly are in agreement with respect to all material terms”. Consistent with this principle, courts have examined whether the offeree of a web-based contract was put on inquiry notice of the contractual terms. The existence of such notice must be evaluated objectively, in line with our focus on the “objective manifestations of the intent of the parties as gathered by their expressed words and deeds.” Thus, as other courts have recognized, a user does not need to have actually read and understood the terms of an internet contract to be so bound; rather, where a “reasonably prudent user” would have been on inquiry notice of contractual terms, an offeree may still be bound by them. A reasonably prudent user is one who is neither “highly savvy” nor “a complete stranger” to computers or smartphones—that is, someone who has general familiarity with how to navigate a website, use a scroll bar, recognize a hyperlink, and download an application

The court applies the principles to this screen, which it calls a “clickwrap”:

The majority says:

The headline and the larger text in the center of the screen—“We’ve updated our terms” and “We encourage you to read our updated Terms in full”—clearly advised plaintiff that she was being asked to agree to a contract with Uber. The terms themselves were again made accessible by a hyperlink on the words “Terms of Use,” which were formatted in large, underlined, blue text. A reasonably prudent user would have understood from the color, underlining, and placement of that text, immediately beneath the sentence “encourag[ing]” users to “read [the] updated Terms in full,” that clicking on the words “Terms of Use” would permit them to review those terms in their entirety. Finally, Uber provided plaintiff with an unambiguous means of accepting the terms by including a checkbox, “Confirm” button, and bolded text expressly stating that, “By checking the box, I have reviewed and agree to the Terms of Use.” It is undisputed that plaintiff checked and box and clicked the “confirm” button…

Numerous courts have held that this very clickwrap process, or those substantially like it, satisfy the requirements for formation of an agreement to arbitrate. We agree. Uber’s clickwrap process put plaintiff on inquiry notice of the January 2021 terms—including the prominently placed arbitration agreement—and she manifested her assent to those terms by both clicking on the box and pressing the “confirm” button

The majority summarizes:

For essentially as long as there have been written contracts, parties have entered them without first carefully reviewing their terms. That failure can have legal consequences, whether the party is a sophisticated entity or an ordinary consumer, and whether the contract is presented on paper or through an electronic pop-up window. Here, the consequence of plaintiff’s purported failure to carefully review Uber’s updated terms of use is that she must make her arguments regarding Uber’s allegedly deceptive and unconscionable conduct to a neutral arbitrator, not the courts

Discussion

The majority analyzes this UI as a standard contract formation, but Uber already had a TOS in place with the plaintiff and was AMENDING that TOS. The court refers to TOS “updates” repeatedly but never once uses the term “amendment.”

The TOS amendment in this case may be factually distinguishable from the Good v. Uber case. In the Good case, the Massachusetts Supreme Court (in Kauders) had previously struck down Uber’s TOS, so Uber deployed the screen at issue to implement a new TOS to fill that gap. In other words, Uber wasn’t amending its TOS in Massachusetts because it had no terms in place to amend. That made Uber’s disclosures in Massachusetts confusing. The screen said Uber had “updated” its terms when, in fact, it was newly putting terms in place. The Massachusetts court ignored that obvious problem.

In contrast, Uber already had a TOS in place with this plaintiff and was amending the existing deal. Yet, the majority ignores standard amendment issues, like (1) what did the prior TOS say about the steps Uber promised to take to amend the TOS?, and (2) whether the disclosures adequately informed consumers about the incremental effects of the amendment. It’s a bit jarring to see the majority proceed as if this was a TOS formed on a blank slate, when an existing TOS already defined the parties’ relationship.

One way to make this make sense is to focus on the majority’s full-throated endorsement of “clickwraps.” Whether it’s forming an initial TOS or amending it, adhering to the highest levels of formation practice are likely to yield good results.

Case Citation: Wu v. Uber Technologies, Inc., No. 90 (N.Y. Ct. App. Nov. 25, 2024)

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