Published Article

Split Supreme Judicial Court Issues Important ‘Update’ to Clickwrap Arbitration Clause Jurisprudence

October 31, 2024

The Massachusetts Supreme Judicial Court (SJC) in Good v. Uber Technologies, Inc., 494 Mass. 116 (2024) recently held in a 5-1 ruling that the ubiquitous rideshare company’s “clickwrap” arbitration agreement created an enforceable contract between the company’s riders and the company. 494 Mass. at 117. The SJC concluded that the prominence of Uber’s “clickwrap” terms through a blocking “pop-up” screen put the Plaintiff William Good (Good) on “reasonable notice of Uber’s terms of use,” which included a binding arbitration clause. Id.

This decision is a stark departure from the SJC’s ruling in Kauders v. Uber Technologies, Inc., 486 Mass. 557 (2021) and further reinforces the power technology companies can have in avoiding litigation and resolution of users’ disputes.

The Kauders Precedent

The Good case was the first test of Uber’s terms and conditions since the company was forced to revise them following the SJC’s 2021 decision in Kauders. The Kauders decision established a two-prong test to determine the enforceability of an online contract, in that each contract must have: (1) “reasonable notice of the terms” and (2) “reasonable manifestation of the [user’s] assent to those terms.” 486 Mass. at 572. The Kauders decision noted that the burden was on Uber, the party seeking arbitration, to ensure that its terms and conditions meet the requirements of the two-prong test. Id.; see also Kevin J. Conroy, Enforceability of Online Contracts Under Massachusetts Law: Kauders v. Uber Technologies, Inc., 65.3 Bos. Bar J. (Summer 2021).

In its assessment of Uber’s terms and conditions, the Kauders Court found that Uber “did not provide users with reasonable notice of the terms and conditions and did not obtain clear manifestation of assent.” Id. at 579. The Court based its reasoning largely on Uber’s decision to bury its terms and conditions within the app’s registration process. Id. at 576.

Following the Kauders decision, Uber revised its terms and conditions and their location within the app. The updated app now provides a “pop-up” notification about Uber’s “updated” terms, including the arbitration terms. Customers must click a link to review the revised terms and assent to the terms before booking a ride.

Case Background

After an April 2021 car accident that left him permanently quadriplegic, Good sued Uber to recover approximately $63 million in damages. Uber moved to compel its arbitration clause, but the trial court denied the motion holding the arbitration “agreement” was not sufficient because there was not reasonable notice of the terms of a binding contract. Good v. Uber Technologies, Inc. et. al., No. 2284CV00173, 2022 WL 16839250, at *9 (Mass. Super. Oct. 1, 2022) (Squires-Lee, J.). The Superior Court’s decision, following the SJC’s ruling in Kauders, found that Uber’s “pop-up” screen “would not have reasonably indicated that, by checking the box and clicking ‘Confirm,’ Good was entering into a contract,” much less one that contained a binding arbitration clause. 2022 WL 16839250, at *7. The trial court’s decision pointed out that Uber did not utilize ‘scroll-wrap,’ which would have required users to scroll through the terms before accepting the agreement, and underscored that users like Good, could still have ordered a ride through Uber even if they had not clicked on the hyperlink containing the updated terms. Id. at *8. It further noted that, “[a]lthough clickwrap agreements may be generally enforceable, and the inclusion of a checkbox ordinarily will satisfy the second prong of the Kauders standard, namely, reasonable manifestation of assent, the existence of a check box alone, without reasonable notice that the user would be bound to the terms, is insufficient to create an enforceable contract.” Id. at *9.

On appeal, Uber argued that its updated terms and conditions satisfied the two-prong test of Kauders, in that a user’s acknowledgment of Uber’s revised terms and conditions created a binding contract. Good argued that the app’s “clickwrap” link did not signal to users that their acknowledging Uber’s terms and conditions would manifest a binding legal agreement. He contended that without this signal, he neither had reasonable notice of the effect of Uber’s revised terms nor had he manifested an assent to those terms.

During the oral arguments before the Supreme Judicial Court, the justices seemed skeptical of Uber’s measures in reasonably communicating those binding terms, including the arbitration clause, because those terms were not presented as part of an initial registration process, but instead only when the user is actively seeking transportation.

Majority Opinion

In its June 2024 decision, the SJC reversed the Superior Court’s decision. Writing for the 5-1 majority, Justice Dalila Argaez Wendlandt found that Uber had met the Kauders two-prong test through its interface that not only reasonably presented the app’s terms and conditions to Good, but also obtained his assent through the app’s “blocking” feature. 494 Mass. at 130-32. Because Good had to check a box “indicating that he had ‘reviewed and agree[d]’ to the terms and activated a button labeled ‘Confirm,’” he assented to Uber’s terms and conditions. Id. at 117. The Court also pointed to Uber’s blocking interface, which “included a large graphic image of a clipboard holding a document; near the bottom of the document was an “X” alongside a graphic of a pencil poised as if to sign a legal instrument” as a clear indication of Uber’s intent to put its users on notice of its revised terms and to encourage them to review them. Id. Although Good argued that Uber’s interface should have required a user to open the terms and conditions and “scroll” through them, the Court held that Good’s failure to read the terms did “not detract from the reasonableness of the notice provided” by Uber. Id. at 142.

Dissenting Opinion

In his dissent, Justice Scott L. Kafker pointed out that it was rare for Uber users (much less users of any technology app) to actively open any hyperlink within the app to review terms and conditions. Id. at 147. Kafker noted that a “sophisticated technology company” like Uber was “undoubtedly aware of its users’ practices” and could easily revise its notice procedures with a “simple software update” that could have allowed it to confirm whether the user had actually clicked on the hyperlink that led to the terms of use. Id. Justice Kafker noted that, unlike the interface for the agreement between Uber and its drivers, the pop-up interface for the agreement between Uber and its rideshare passengers did not contain the words “contract” or “agreement”. Id. The dissent further questioned whether Uber’s users are reasonably aware of the wide scope of the agreement’s binding legal terms when customers typically only use Uber to order rides:

At a minimum, in these circumstances, the blocking pop-up screen should alert users that they are entering into a legally binding contract, and that pursuant to the contract Uber is not responsible in any way for ride services procured using the Uber app, including for injury or death resulting therefrom.

Id. at 148. Finally, the dissent cautioned about the need to refine the “law of contract” in Massachusetts so as to ensure the law keeps abreast of burgeoning technology, as a “simpl[e]” hyperlink “will not meaningfully inform consumers of the rights and objections they take on by using Internet services.” Id.

Future Implications for Uber’s Users

While the SJC’s ruling is certainly a win for Uber, it does not mean that all technology companies that rely on similar “clickwrap” agreements will be successful in future litigation. While the majority decision was rooted in the specific circumstances of Uber’s interface, other companies may take note of this and update their software to ensure that users’ assent to any terms and conditions still meet the Kauders two-prong test and address the considerations articulated in Good. See, e.g., Doe v. Morgan Stanley & Co., LLC, No. 1:24-cv-10391-JEK, 2024 WL 3677615 (D. Mass. Aug. 6, 2024) (Kobick, J.) (applying the Good and Kauders factors and finding that bank’s interface did not present the terms of its arbitration clause in a reasonable manner to a lead a reasonable person into believing they were assenting to a binding arbitration).

Conversely, Uber users in Massachusetts should be on heightened alert that agreeing to the updated terms as part of their simple ride request could have lasting consequences if an accident occurs. By “clicking” their assent to Uber’s terms and conditions, users essentially waive many of their legal rights by agreeing to binding arbitration, which could significantly reduce the amount of damages a user could recover.

This item was originally published in the Boston Bar Journal Fall 2024 Vol. 68 #4.