“I carefully read through the terms and conditions for a smartphone application before clicking I agree,” said no consumer ever. In a recent decision from the New York Court of Appeals, the state’s highest court made clear the consequences of “I agree,” holding that an online “clickwrap” process used to update the terms and conditions for site use created a valid and legally binding agreement even when the customer clicked through after the services at issue were used.
The Case: Wu v. Uber Tech., Inc., 2024 NY Slip Op 05869 (N.Y. Nov. 25, 2024)
Plaintiff Emily Wu was injured after her Uber driver let her out of the ride-share car in the middle of the street, causing her to be struck by an oncoming vehicle. The plaintiff filed a personal injury action against Uber in November 2020. In January 2021, almost two months after the plaintiff served her complaint, employees of Uber circulated an email to millions of Uber’s customers, informing them that in the upcoming days, they would be prompted to agree to updated terms of use to continue using Uber’s services. In this three-paragraph email to its customers, Uber stated: “We recommend that you review the updated Terms. Some of the updates include changes to the Arbitration Agreement . . . and procedures and rules for filing a dispute against Uber.”
The email also contained hyperlinks that led to the updated terms of use, which included a provision requiring binding arbitration of any dispute or claim arising out of Uber’s services at any time, including accidents resulting in personal injury, whether the claim accrued before or after the date the consumer agreed to the terms. Shortly after the plaintiff received and opened this email, she logged into her Uber application and was presented with an in-app pop-up screen with the headline “We’ve updated our terms.” This screen again encouraged the plaintiff to review the new terms of use and included a hyperlink to those terms. Toward the bottom of the screen was the notorious checkbox and bold text stating: “By checking the box, I have reviewed and agreed to the Terms of Use and acknowledge the Privacy Notice.” Like any other ordinary person, the plaintiff checked the box and clicked “confirm.”
After the plaintiff blindly agreed to Uber’s updated terms, Uber filed a notice of intent to arbitrate the personal injury claims she had filed in New York state court. Plaintiff’s counsel opposed and alleged that the process by which Uber solicited the plaintiff’s agreement to the updated terms violated Rule 4.2 of the Rules of Professional Conduct, and threatened to seek sanctions if Uber did not withdraw its demand. When Uber refused, the plaintiff moved to stay the demand for arbitration, arguing that, inter alia, she had never validly agreed to the terms. Uber cross-moved to compel arbitration and stay the litigation, arguing that the email and pop-up screen put the plaintiff on notice of the arbitration agreement.
The trial court denied the plaintiff’s motion and granted Uber’s cross-motion to compel arbitration and stay the litigation. The court sided with Uber in finding that the company’s communications put the plaintiff on inquiry notice of the arbitration agreement in the updated terms of use, and that the plaintiff assented to that agreement “through conduct which a reasonable person would understand to constitute assent.” The Appellate Division unanimously affirmed but granted the plaintiff leave to file an appeal. Over a vigorous dissent, the Court of Appeals, “apply[ing] centuries-old principles of contract law” to the terms of use update, concluded that the “clickwrap” process Uber used to solicit the plaintiff’s assent resulted in the formation of a valid, legally binding agreement to arbitrate, and affirmed the order of the Appellate Division.
Takeaway
In its closing lines, the Court of Appeals cautioned that a party’s failure to carefully review a contract’s terms before entering into it could have irreversible legal consequences, whether the contract is presented on paper or through an electronic pop-up window. This holding may be a small solace to consumers, who are in no position to bargain with app companies over their terms of use. However, it is welcome news to businesses in New York who utilize “clickwrap” agreements and now have certainty that those terms are binding on their customers.
