At least in theory, mutual assent remains a cornerstone of contract law and thus of arbitration.  The tricky part has become understanding what counts as mutual assent in a world where overwhelming empirical evidence, not to mention our own lived experience, demonstrates that no one reads standardized terms and conditions, including arbitration provisions buried in fine print, or more commonly these days, a maze of hyperlinks.

Basically, to get around the unilateral character of adhesive contracting, U.S. courts have, over the past five decades, refocused contract formation on constructive notice.  If a reasonable person in the position of the recipient of boilerplate should have seen the terms, the recipient will be bound by those terms, regardless of whether she ever actually read or understood the them.  Constructive awareness coupled with an individual purchasing something from a commercial party amounts to assent.  See, e.g., Starke v. SquareTrade, Inc., No. 17-2474, 2019 WL 149628 (2d Cir. Jan. 10, 2019) (“Where an offeree does not have actual notice of certain contract terms, he is nevertheless bound by such terms if he is on inquiry notice of them and assents to them through conduct that a reasonable person would understand to constitute assent.”) (citations omitted).

But a great deal of confusion persists about what counts as “reasonable notice.”  Liz has written about two conflicting cases involving Uber and arbitration.  She also wrote about a recent “shinglewrap” arbitration agreement – in a putative class action brought by homeowners against a vendor of roof shingles — upheld by the 11thCircuit.

This week, we’ll look at a recent Second Circuit case that might help make things just a tiny bit more tractable.

In  Starke v. SquareTrade, Inc., the Second Circuit concluded that the a purchaser of a consumer product protection plan did not have reasonable notice of an arbitration provision contained in the terms and conditions communicated via a hyperlink in a post-sale email.

The court starts with some generic stuff about conspicuousness.  It says that in determining whether an offeree is on inquiry notice of contract terms, courts look to whether the term was obvious and whether it was called to the offeree’s attention.  This usually “turns on whether the contract terms were presented to the offeree in a clear and conspicuous way.”  In the context of “web-based contracts, [courts] look to the design and content of the relevant interface.”

The court  goes on to list, in bullet points, various features of interfaces that were too inconspicuous and interfaces that were acceptably conspicuous.  But these bullet points sort of distill to whether the court thought that the interface was cluttered or not.  At best it feels like defining obscenity — you know it when you see it.  At worst, it feels like defining beauty — it’s in the eye of the beholder.  Either way, it’s not very helpful.

(I’ll just say, as an aside, that I was at an academic conference a week ago, and one of the presentations was on an empirical study about conspicuousness — still in progress, but if you’re interested, you could reach out to the author, Yonathan Arbel.  The study looks at the effectiveness — or more precisely, ineffectiveness — of all-caps.  Basically, all-caps seems to do nothing to help make things more conspicuous and may well make things far less readable.  That discussion reminds me that courts are offering opinions about what is or isn’t conspicuous with very little empirical evidence guiding them.)

Maybe the more useful rules of thumb that the court provides have to do with the fact that the relevant hyperlink was “neither spatially nor temporally coupled with the transaction.” The relevant link was given to the purchaser in a post-sale email.  Spatially, the court noted that the hyperlink could have (and should have?) been provided on the purchase page.  In the court’s view, doing so would have more clearly indicated that the terms and conditions, including the arbitration clause, were part of the purchase transaction. Temporally, the court concedes that “providing contract terms after a transaction has taken place may be an appropriate way to contract in certain situations,” but it found “little justification” for that sort of pay-now-terms-later structure in the particular case. Instead, “it would have been virtually costless for SquareTrade to provide the governing terms and conditions to Starke before he bought the Protection Plan.”

These “coupling” rules of thumb could be useful for drafters.  It’s not clear whether the court would have enforced the arbitration clause if it had been included in a hyperlink on the purchase page, but that’s certainly the suggestion.