Category Archives: Terms of Service

UI/UX Invalidated your Contract

Online contracts are only effective if implemented correctly.   I’ve written on different processes for implementing online contracts, which is often easier to accomplish in the web context.  In the mobile context, implementation is challenging given the need to balance user experience with contract formation.

How you structure contract formation in your mobile application involves negotiation between the UI/UX team and legal counsel and a balancing of user experience against the risks of the contract unenforceability.  With millions of DAU, the risks are enormous.

A recent case illustrates this risk and shows that even sophisticated startups can run the risk of a weaker contract formation process and be burned.  Lyft presented users with this acceptance screen:

LI Image

It includes the typical web approach to contract acceptance, with a check box stating: [I agree] to the Terms of Service (link).  Recently, a NY court determined that this process did not clearly indicate to users that a contract was being agreed to.  The combination of a series of “Next” screens, the small size of the contract formation text (relative to the large, pink “Next” button) and that the contract was presented in the context of an unrelated phone number request all contributed to the court’s conclusion that users were not sufficiently notified of what they were agreeing to and, as a result, did not accept the Lyft Terms of Service.

Luckily for lyft, prior to the lawsuit, a new contract formation process was implemented, one I’ve advocated for myself:

One mobile approach is to present the agreement to the user, require that they scroll through the agreement and, once scrolled through, the user is presented with the following button at the bottom of the page:  [I agree] to the Terms and Conditions.

Take away:

  1.  At a minimum, mobile applications should have prominent language indicating that a contract is being presented to users (ideally as a separate screen labeled “Terms of Service” or similar).
  2. Contract language should be noticeable and not blend into the background as a user registers for the application.  Try to alter the flow of the registration process so the user recognizes that something new is occurring.
  3. Any button on the contract page should state “I agree” or “I accept”, rather than “Next” and this button should not overwhelm the contract link.

In my opinion, the scrolling process described above is one of the better approaches for implementing a contract into a mobile application.  Other approaches are available but your UI/UX team needs to work with legal counsel to ensure that design considerations do not overwhelm contract enforceability.

Implementing Terms of Service and Other Electronic Agreements

All too frequently, Terms of Service, Terms of Use and End User License Agreements (see our post on the differences between each) are found unenforceable when challenged in court because the agreements are not properly implemented.

To simply describe the implementation process (see our post on the technical aspects):

  1.  Present the agreement to the user; then
  2.  Require the user to affirmatively agree, usually through a click, to the agreement.

In the web context, implementation typically looks like this:

[Check box] I agree to the Startup Company Terms and Conditions (linked to the terms and Conditions)

[Continue] (or similar language, such as “Purchase” etc.)

In the above implementation approach, the user cannot proceed unless they check the box and click the button at the bottom of the page.

In the mobile context, implementation is more challenging given the need to balance legal implementation and user experience.  While the above approach can work, it may not be ideal from a UI/UX perspective.

One mobile approach is to present the agreement to the user, require that they scroll through the agreement and, once scrolled through, the user is presented with the following button at the bottom of the page:

[I agree] to the Terms and Conditions.

Given the differences between each mobile application, agreement implementation on mobile takes many forms and the above approach may not work for you.

Spending the time to determine the most effective way to implement your electronic agreements is vital as the agreements are worthless if found to be unenforceable.

Incorporating Online Agreements into a Printed Contract

While many agreements are entered into online, some online companies continue to operate partially offline.  Challenges arise when offline contracts require agreement to an additional online contract, such as a Terms of Service.  This is not to say that offline contracts can’t incorporate online contracts, rather, the online contract must be properly presented to the user signing offline to be enforceable.

When integrating an online contract into the terms of an offline contract, include a clear call-to-action on the part of the signatory.  This is a statement that signing the contract indicates acceptance of the online contract OR to only sign the contract if the signatory agrees to the online contract as well.  Ultimately, you want the signatory to indicate acceptance of the online contract clearly and in an informed fashion.

What calls-to-action don’t work?  A recent U.S. court case considered a link, above the signature line, to the terms and conditions (“Download Terms and Conditions”) and determined that this was insufficient to establish acceptance of the online contract.  As such, the mere existence of a hyperlink, without anything more to draw attention to the link, does not establish acceptance of an online contract.

Admittedly, while this post is more technical than most we put online, our goal is to remind our readers that caution should be exercised when trying to incorporate online contracts into the acceptance of an offline agreement.  While not impossible, contract language is pivotal to ensure enforceability of the online contract.

 

Using the DMCA to Limit Liability for 3rd Party Copyright Infringement

Worried about lawsuits resulting from 3rd parties infringing copyright through your website or application?  The US Digital Millennium Copyright Act (“DMCA“) may be a solution!  The DMCA contains a safe harbour that protects online service providers from liability for copyright infringement committed by 3rd parties on/through the service.  At the outset, you should already qualify as a service provider as it is any businesses that operates a website or other Internet services (mobile applications, games connected to the Internet etc.) or facilities.

In order to take advance of the DMCA, your company will need to comply with a number of simple steps (in part):

1.  Designate a Copyright Agent to receive DMCA notices with the US Copyright Office;

2.  Post the Copyright Agent’s contact information on your website;

3.   Adopt, implement and communicate to users a policy to prevent/terminate repeat infringers; and

4.  Quickly respond to DMCA notices.

In addition to meeting a number of additional elements that are not covered in this post.

The focus of this post is on the Copyright Agent.  Frequently, companies are denied the above DMCA safe harbour simply because they have not complied with the Copyright Agent terms, a shocking result especially as compliance is relatively simple.

The first requirement is to appoint the agent.  This is done by filling out a form (http://copyright.gov/onlinesp/agent.pdf) that designates the agent and by sending it, along with payment, to the US Copyright Office.  The agent’s role is to respond to DMCA notices and, as such, needs to be a person within the company that understands the DMCA notice process or the company’s legal counsel.  Typically, the company’s legal counsel acts as the Copyright Agent barring sufficient internal DMCA expertise.

The second requirement is to post the agent’s information on your website.  Again, another simple step.  Usually the agent’s contact information is placed in the Terms of Service Agreement governing your website in a separate section concerning the DMCA, the copyright agent and the DMCA notice process.

If you are a U.S. company, check to see if you are in compliance with the DMCA so that you may take advance of the safe harbour described above.  Additionally, for certain Canadian companies, it may be a prudent business decision to comply with the DMCA (check with your legal counsel).