The Law Court recently weighed in on a matter of critical importance – the enforceability of online consumer contracts.  Confronting the issue in a case involving ride-sharing giant Uber’s efforts to enforce an arbitration provision, the Law Court held in Sarchi v. Uber Technologies that online contracts are enforceable only if the consumer (1) has reasonable notice of the online contract terms, and (2) has manifested consent to those terms.   

Sarchi is one of many cases that have tested the bounds of what companies must do to secure consumers’ consent to the terms of a contract through software applications – but it is the first decision of its kind from the Law Court.  The Uber rider app at issue in Sarchi allowed consumers to register for an account without having to view the contract terms or expressly acknowledge agreement to those terms.  The Law Court held that, given these circumstances, the consumer could not be bound to the contract’s arbitration provision.

The discussion in Sarchi is illuminating.  Writing for the Court, Justice Horton began with the basics:  in Maine, formation of a contract requires mutual assent to the terms of that contract, though it does not require a party to actually read those terms.  He then summarized the various types of online consumer contracts – scrollwrap, clickwrap, sign-in wrap, and browsewrap – while noting that these various types of agreements fall along a spectrum of enforceability.  The Court did not, however, adopt a rigid taxonomy that turns on the label applied to the contract.

Instead, the Court noted three important variables affecting the enforceability of online contracts:

    • Conspicuous terms or access to terms: Making it more likely that a consumer views the contract increases the likelihood that the contract will be binding. If consumers are not forced to view the terms, then an easily recognizable hyperlink should be provided.
    • Uncluttered screen: If notice is provided via hyperlink, the link should be rendered clearly noticeable. The link should be easily spotted, not easily missed.
    • Explicit consent: A consumer’s consent should be clearly indicated as such by use of language such as “I agree” rather than simply “continue.” As the Court said, “the more obvious the user’s assent to terms, the more likely the terms will be binding.”

The Court summarized these considerations by adopting the First Circuit’s formulation in Cullinane v. Uber Technologies:

Reasonably conspicuous notice of the existence of contract terms and unambiguous manifestation of assent to those terms by consumers are essential.

The Court then fleshed out this standard by articulating a two-step inquiry.

(1) Did the user have reasonable notice of the contract terms? That is, how likely is it that a reasonable user of technology would notice the terms or a hyperlink to them on the app?

(2) Did the user manifest assent to those terms? Phrased another way, did the app adequately inform the user that, by taking a particular action (such as clicking a button), the user was agreeing to terms?

The Court ultimately held that Uber’s contract was unenforceable under this test.  First, the Court concluded that the consumer was not provided reasonable notice of the terms.  It reached this conclusion because the hyperlink to the contract terms was not readily identified as a link through the use of underlining, blue text, or appearance as a button; was inconspicuous given the use of small font; and was unlikely to draw attention because the screen focused on payment information rather than the hyperlink.  Second, the Court concluded that the consumer did not assent to the terms by clicking the “Done” button on the payment screen.  The Court reasoned that the app did not explain the significance of clicking that button by, for example, stating that clicking the button would indicate the user’s consent to terms of agreement.

The decision in Sarchi gives clear guidance to companies with online contracts.  Terms should be clearly provided and assent clearly indicated to ensure enforceability.