Online agreements are nothing new to the Internet but companies are still struggling to implement them in a way that will assure their enforceability.
The latest company to fail this test is Uber Technologies. A June 2018 decision issued by the First Circuit Court of Appeals in Boston held an online agreement presented to the users of the Uber smartphone app in 2012 and early 2013 was not sufficiently conspicuous to be enforceable. The terms and conditions stated that users of the app could not participate in a class action and were required to resolve any dispute with Uber by means of binding arbitration. Because the First Circuit held that this agreement is not enforceable the plaintiffs in this case—who claim that Uber engaged in unfair and deceptive pricing —will now be free to proceed with a class action against Uber.
In deciding this case the First Circuit applied Massachusetts contract law, specifically the 2013 decision of the Massachusetts Appeals Court in Ajemian v.… Read the full article
The first time I heard of a “buy/sell agreement” was around 1970 when I was 19 – just a few years before I fell in love with Steely Dan’s music.
Back then my father owned a textile business in Haverhill, Massachusetts with a 50-50 “partner,” and he explained that the business had insurance policies on both of their lives. If either partner died, the insurance would fund the purchase of the deceased partner’s shares, and the surviving partner would end up owning 100% of the company.
This, he explained was a “buy/sell agreement” – the deceased partner’s estate was bound to sell, and the surviving partner’s estate was bound to buy.
Fortunately, neither my father or or his partner ever had to exercise rights under this agreement – my father retired in 1981, and sold his half of the business to his partner.
It turns out that at around the same time that I first heard of a buy/sell agreement Donald Fagan and Walter Becker, the creative geniuses behind Steely Dan, were doing something similar.… Read the full article
I’ve often advised vendor-clients that one of the best ways to protect themselves is to include an acceptance clause in their agreements. This can be accomplished either through an explicit acceptance clause or a short warranty period, which can function as a de facto acceptance clause. For some reason, many customers seem to forget about the acceptance clause, giving the vendor a strong defense to a claim of breach.
This is what happened in Samia v. MRI Software, decided by Massachusetts federal district court judge Nathaniel Gorton on October 9, 2014.
Samia purchased computer software, consulting and technical support from MRI. The License and Services Agreement provided for a 30 day warranty period, during which Samia could notify MRI of any non-conformities and trigger a “repair-and-replacement” clause. This was, in effect, a 30 day acceptance period – Samia had 30 days to vet the software and notify MRI of any defects.… Read the full article
Online companies have often found it challenging to create enforceble terms of service (“TOS”), and the courts aren’t making it any easier. Perhaps the courts have concluded that, now that the Internet is an established commercial medium, they are not going to cut vendors any slack.
The latest decision illustrating this is the Ninth Circuit’s August 18, 2014 holding in Nguyen v. Barnes & Noble, holding that Barnes and Noble’s browsewrap agreement was not enforeable.
A website “browsewrap” agreement is where the online terms are posted on a site, typically via a link on the site’s homepage. By contrast, a “clickwrap” requires the website user to take some affirmative action before engaging in a transaction (such as an online purchase). Typically this amounts to clicking a box on the site indicating that the user agrees to the site’s terms and conditions.
Where the user is not asked to “check the box” and the website relies on the posting alone, things can get messy.… Read the full article