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Pacta sunt servanda (Latin lawyers’ maxim: Agreements must be kept!)

recent case in the New York appellate court underscored this principle in a proceeding involving a hyperlink in an online document.  The plaintiff or claimant in that case was attempting to avoid settling his claim through arbitration.  He wanted to sue Uber and an Uber driver in court – presumably with a jury that would be sympathetic to his case.

Not an usual tactic for a plaintiff – especially in New York.

However, the online terms of service to which the claimant “agreed” online contained a hyperlink.  The document at the end of the hyperlink contained a clear statement that all disputes (with only specified exceptions) would be resolved via binding arbitration.  The claimant argued that the arbitration provisions hadn’t been properly “disclosed” since it could only be accessed by clicking on the hyperlink.

For those unfamiliar with the term, arbitration is a private procedure administered by a third party organization (e.g., American Arbitration Association, JAMS, International Institute for Conflict Prevention & Resolution (CPR)) with detailed rules about resolution of disputes.  Many feel that arbitration is a faster and less expensive process than lawsuits.  There are arguments on both sides of that issue.

One thing is clear, however.  There are no juries whose emotions can be enflamed by skilled and articulate trial counsel in search of large damage awards.  The decider or deciders of facts are typically lawyers, judges or former judges with a more analytical approach than may be taken by a jury.

Further, it’s possible to specify what qualifications the arbitrator needs to possess.  In the Uber case, the terms and conditions specified that the arbitration be conducted before a single arbitrator and that he or she be either (a) a former judge, or (b) an attorney licensed in the State where the claim arose who has experience in the law underlying the dispute.

So, as a practical matter, that typically takes the issue of potential outsized damages off the table – and results in lower settlements than Uber might otherwise be required to make.

Reading through the Uber arbitration terms, I found them more even-handed than I’ve seen in other standard terms & conditions for consumer contracts.  For instance, Uber has the arbitration conducted in the county in which the claim arose.  Many consumer contracts require arbitration – or litigation where permitted – to be conducted on the “home turf” of the business and under its laws.  That can make the process more complex and expensive for claimants.

Also, a number of types of claims (e.g., sexual harassment) are exempted from mandatory arbitration.  The provisions do however limit that ability of claimants to start a class-action proceeding where they collect similar claims of dozens to thousands of similarly-situated claimants.  The proceeding must be a single claim by a single claimant.

So, beware what you “click accept” online.  It’s advisable to review the hyperlinked documents.  You most likely can’t change them.  But at least you’ll know what you’re signing up for.

Crowley Law has a great deal of experience in drafting and analyzing contracts.  Contracts on which we work for our clients tend to be much more subject to negotiation than the “contracts of adhesion” (i.e., all terms mandated by the business party) you find in the consumer sphere.  There are many issues to analyze and frequently opportunities to better protect a client’s interests.

If you are, or anticipate, entering into a contract with another person or firm and have questions about protecting your interests, please reach out to us at (908) 663-8253 to set up a call with a team member.

We’re here to help.



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