Information operations

Federal court finds online agreements are binding

Uber Wins Ruling on ’Terms of Service’ Agreements

Federal court finds online agreements are binding, regardless of whether customers read or understand them

Greg Bensinger
Aug. 17, 2017 4:03 p.m. ET

A federal court Thursday ruled that the often lengthy online agreements customers face when registering for sites and apps are binding, even if customers don’t fully understand or take the time to read them, giving a boost to companies seeking to avoid class-action lawsuits.

The U.S. 2nd Circuit Court of Appeals found that Uber Technologies Inc. customers sign over their rights to sue in court when they click to agree to the ride-hailing company’s terms of service, which include a provision requiring arbitration.

The case had been closely watched by technology companies, which favor such agreements as a way to keep customers from taking them to court, where sensitive business practices and unfavorable rulings could become public. Arbitration typically allows businesses to reach settlements privately and may not require them to make broad changes to their practices—a possible outcome in class-action suits.

The case strikes at a fact of everyday life for users of websites and mobile phones, who come across these agreements before being allowed to use a site or app for the first time. There typically is no means for customers to strike out certain provisions or reject the terms outright and still hope to use the service.

Circuit Judge Denny Chin overturned a district-court ruling that found Uber’s terms of service were difficult for customers to access, and therefore couldn’t be enforced because customers didn’t always know what they were agreeing to. New Uber customers agree to terms that include resolving disputes through arbitration when they click to register for the mobile app—even though the full list of provisions is only available on a separate Uber website.

“The district court erred in concluding that the notice of the Terms of Service was not reasonably conspicuous,” Judge Chin wrote. “While it may be the case that many users will not bother reading the additional terms, that is the choice the user makes.”