Readers of this column will be aware that courts in the Second Circuit have had a complicated relationship with web-based contracts, and in particular with the idea of electronic consent to arbitration. Today, the vast majority of day-to-day commercial activity takes place through web-based services or applications (regardless of the complexity of the transaction or the sophistication of the parties) and in that environment online and electronic agreements have become ubiquitous. At this point, it would be difficult for an average person to get through a day without agreeing, in one way or another, to be bound by an agreement they have likely never seen or read.
Applying traditional contractual principles to increasingly non-traditional forms of agreement has presented a challenge to the courts. Generally, the fundamental question in a contractual dispute is whether both parties have manifested an intent to be bound by the terms of the agreement. But in what sense can a party manifest the intent to be bound by a contract they have never seen?
The answer—for a wide variety of agreements—comes from the doctrine of inquiry notice. Under that doctrine, courts consider whether a reasonable person would have notice that they were entering into a contract, sufficient to cause them to inquire into its specific terms. If so, the user is deemed to have done so (even if no one actually does). In the web or application context, the question is whether the user interface, as actually presented, sufficiently provides that notice.
Obviously, this is a highly fact-specific inquiry with few bright-lines rules. Two recent Second Circuit cases, Nicosia v. Amazon.com and Meyer v. Uber Technologies, demonstrate that principle by reaching opposite results as to whether users were on inquiry notice that they had agreed to mandatory arbitration provisions—one in Amazon’s terms of service and the other in Uber’s. A recent opinion from the Eastern District of New York explored the principles set forth in those cases, and it offers some good guidance for anyone trying to design an enforceable electronic contract process.
This article first appeared in the New York Law Journal on March 25, 2019. Jack Millson, an associate at the firm, assisted with the preparation of this article.