Uber and Viacom’s E-Contract Disputes: Judicial Outlook on Click-Wrap and Browse-Wrap Agreements

Posted on December 16, 2020

Authored by Tanya Varshney*

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It is an established principal of contract law across jurisdictions that, regardless of the form of the contract, certain essentials such as offer, acceptance, capacity to contract, consideration, etc. should be met. Unlike e-mail where parties have several exchanges of written communications, click-wrap agreements such as terms of service, user agreements, privacy policies obtain the acceptance or consent by selecting an “I Agree” option. Where acceptance to any such online agreements is deemed by sharing an external link or allowing the user to browse the website, it is a browse-wrap agreement. The question that arises is whether there is a clear communication of notice and mutual assent to be bound by the terms of the e-contract. This article aims to examine whether click-wrap and browse-wrap agreements are valid e-contracts, and if so, what are the essentials for the enforceability of these e-contracts, through the case studies of Uber and Viacom’s e-contracts in the United States.  

Uber’s Terms of Service

In Meyer v. Uber Technologies[1]  in the United States, Uber sought to enforce the arbitration clause contained in the terms of service while users contended that they had not entered into a legally enforceable agreement. In this case, when users created an account on Uber, they agreed to be bound by the terms of service of Uber. The Court examined the operation of the app. When a user downloads this app, the first screen is a “Register” screen. Upon filling in the relevant details to register or sign up, the user is then directed to provide their payment data. Below the input fields and buttons on the Payment Screen is black text advising users that ʺBy creating an Uber account, you agree to the TERMS OF SERVICE & PRIVACY POLICY.ʺ The said text was a hyperlink which would direct the users to view the Terms of Service and Privacy Policy. The District Court had found that there was a “lack of reasonably conspicuous notice or an unambiguous manifestation of assent” with Uber’s Terms of Service. The Appellate Court noted that this agreement has to be analysed with respect to the principles of contract law, one of the most important being – mutual assent.

The Appellate Court in the Uber case analyses various judicial precedents concerning e-contracts. The Court quotes the following excerpt from the judgment in Sgouros v. Trans Union Corp[2]:

Courts around the country have recognized that an electronic ʹclickʹ can suffice to signify the acceptance of a contract,….there is nothing automatically offensive about such agreements, as long as the layout and language of the site give the user reasonable notice that a click will manifest assent to an agreement.”

The Appellate Court distinguishes between click-wrap agreements and browse-wrap agreements – “clickwrapʺ (or ʺclick‐throughʺ) agreements, which require users to click an ʺI agreeʺ box after being presented with a list of terms and conditions of use, or ʺbrowsewrapʺ agreements, which generally post terms and conditions on a website via a hyperlink at the bottom of the screen.” The Appellate Court finds that courts have previously upheld clickwrap agreements for the principal reason that the user has affirmatively assented to the terms of agreement by clicking ʺI agree.ʺ[3] However, browse-wrap agreements operate on a different footing and the determination of the validity of a  browse-wrap contract depends on whether the user has actual or constructive knowledge of a websiteʹs terms and conditions.[4]

The Appellate Court also acknowledged that there are other types of e-contracts as well, such as where online agreements require the user to scroll through the terms before the user can indicate his or her assent by clicking ʺI agree” (scroll-wraps); or agreements which notify and advise the user that he or she is agreeing to the terms of service by using the website (sign-in-wraps).

The Appellate Court first sought to examine whether there was a reasonable notice from the perspective of a reasonably prudent smartphone user – “a reasonably prudent smartphone user knows that text that is highlighted in blue and underlined is hyperlinked to another webpage where additional information will be found…. We conclude that the design of the screen and language used render the notice provided reasonable as a matter of California law. The Payment Screen is uncluttered, with only fields for the user to enter his or her credit card details, buttons to register for a user account or to connect the userʹs pre‐existing PayPal account or Google Wallet to the Uber account, and the warning that ʺBy creating an Uber account, you agree to the TERMS OF SERVICE & PRIVACY POLICY.ʺ  The text, including the hyperlinks to the Terms and Conditions and Privacy Policy, appears directly below the buttons for registration.  The entire screen is visible at once, and the user does not need to scroll beyond what is immediately visible to find notice of the Terms of Service.  Although the sentence is in a small font, the dark print contrasts with the bright white background, and the hyperlinks are in blue and underlined.” The Court also found that the language used was clear and unambiguous, and that a reasonably prudent smartphone user would have constructive notice of the terms.

The Appellate Court secondly sought to examine whether there was “manifestation of assent” to the contract. The Court found that since there was an objectively reasonable notice of the terms, Meyerʹs assent can be said to be unambiguous. The Court noted that use of the app, where it is clearly said it is subject to the specified terms, would be indicative of the user’s choice to employ such services subject to additional terms and conditions that may one day affect him or her. The Court states: “a reasonable user would know that by clicking the registration button, he was agreeing to the terms and conditions accessible via the hyperlink, whether he clicked on the hyperlink or not…. The registration process allowed Meyer to review the Terms of Service prior to registration, unlike web platforms that provide notice of contract terms only after the user manifested his or her assent.  Furthermore, the text on the Payment Screen not only included a hyperlink to the Terms of Service, but expressly warned the user that by creating an Uber account, the user was agreeing to be bound by the linked terms. Although the warning text used  the term ʺcreateʺ instead of ʺregister,ʺ as the button was marked, the physical proximity of the notice to the register button and the placement of the language in the registration flow make clear to the user that the linked terms pertain to the action the user is about to take…. Meyer located and downloaded the Uber App, signed up for an account, and entered his credit card information with the intention of entering into a forward‐looking relationship with Uber.  The registration process clearly contemplated some sort of continuing relationship between the putative user and Uber, one that would require some terms and conditions, and the Payment Screen provided clear notice that there were terms that governed that relationship.”

Thus, the Appellate Court concluded that Uber’s arbitration clause was enforceable.

Viacom’s User License Agreement

In Rushing v. Viacom Inc.[5], the United States District Court of California examined whether the arbitration agreement contained in Viacom’s End User License Agreement (“EULA”) is valid and enforceable. The EULA, which contains an arbitration clause, states that users agree to be legally bound by it “by installing, accessing and using the Software.” The Court found that since Viacom is the party seeking to enforce the arbitration, the burden to prove “the existence of an agreement to arbitrate by a preponderance of the evidence” would be on Viacom. Viacom argued that the Plaintiff, in its complaint, had relied upon a section of the EULA which, according to Viacom, is indicative of the fact that Plaintiff is well aware of the EULA and the arbitration clause contained therein. The Court observed that this argument does not have much merit because it does not indicate that the Plaintiff would have accessed and viewed the entirety of the EULA. The Court observed – “But the undisputed state of the evidence is that the section of the app description in question became visible only when a user clicked on a hyperlink titled “more,” and that it was not necessary for a user to click on that “more” hyperlink to “get” the app.” Explaining the nature of browse-wrap agreements, the Court referring to the excerpts from Nguyen v. Barnes & Noble Inc. stated:

Browsewrap agreements do not “require the user to manifest assent to the terms and conditions expressly,” and a party “instead gives his [or her] assent simply by using the website.” “The defining feature of browsewrap agreements is that the user can continue to use the website or its services without visiting the page hosting the browsewrap agreement or even knowing that such a webpage exists.” Where, as here, the proponent of the arbitration agreement has failed to provide sufficient evidence of actual notice, the validity of the browsewrap agreement “turns on whether the website puts a reasonably prudent user on inquiry notice of the terms of the contract.”. The burden is on website owners to “put users on notice of the terms to which they wish to bind consumers.”.”

The Court found that Viacom’s browse-wrap agreement fails the test as the arbitration clause was not visible to users unless they clicked on “more,” and there was no need for users to click on the “more” button in order to start downloading the game. The Court observed that in situations where the users would be “unlikely” to see a browse-wrap agreement, the Courts would be keen to refuse to enforce such agreements. The Court also observed – “The parties do agree that there was a “Privacy Policy” link on the home screen of the app, which a child presumably would have encountered each time he or she launched the game but that is a far cry from “an explicit textual notice that continued use will act as a manifestation of the user’s intent to be bound” by the EULA.” Therefore, the Court concluded that despite having a visible link, the same did not amount to a reasonable notice to be bound by the terms of the EULA.

Conclusion

The contrast in the decisions of the courts in the Uber and Viacom case above demonstrates that e-contracts in the forms if click-wrap, browse-wrap, shrink-wrap, scroll-wrap, etc. should have a clear and ‘reasonable’ communication to the user that they are agreeing to be bound by the terms of such e-contract and a clear manifestation of assent.

In India, in regards to contracts made by electronic means, such as email, click-wrap and browse-wrap agreements, the Information Technology Act, 2000 of India (“IT Act”) under Section 10A has acknowledged the validity of the contracts where offer, acceptance or revocation are expressed in electronic forms.  Specifically, it mentions that a contract cannot be deemed invalid solely on the basis of it being an online exchange of offer and acceptance. Further, Sections 85A, 85B and 85C under the Indian Evidence Act, 1872 which were introduced by the IT Act, also deal with electronic records and signatures. It is provided that agreements in electronic form containing an electronic signature shall be deemed to be concluded when the parties have affixed their electronic signatures. Agreements in electronic forms would nonetheless have to comply with the essential requirements of a contract under the Indian Contract Act, namely – offer, acceptance, intention to be legally bound, lawful object, lawful consideration and free consent.

While legal recognition has been given to contracts made through e-mails, Indian laws still don’t specifically provide any rules or regulations governing click-wrap, shrink-wrap or browse-wrap agreements. It is advisable to opt for an e-contract through email or a click-wrap agreement containing free and clear communication of acceptance. The validity of the e-contract is further reinforced if the party has affixed an electronic signature. Under the Evidence Act, electronic records are admissible in courts as documents. However, it is certain there should be clear mutual assent to such contracts.


*Tanya Varshney, Founder and Chief Editor of IntellecTech Law, is a practicing lawyer based in New Delhi focusing on Intellectual Property, Technology-Media-Telecommunications, Data Protection, Commercial Disputes and Corporate-Commercial work.

[1] 868 F.3d 66 (2d Cir. 2017)

[2] 817 F.3d 1029 , 1033‐34 (7thCir.2016)

[3] Fteja v. Facebook, Inc., 841 F. Supp. 2d 829, 837 (S.D.N.Y. 2012)

[4] Nguyen v. Barnes & Noble Inc., 763 F.3d 1171, 1177 (9th Cir. 2014) at 1176

[5] Case No. 17-cv-04492-JD

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