Examples:

• • John required surgery for his arm fractures, leaving him with reduced sensation and function in his wrist.
  • Georgia endured multiple surgeries and invasive medical treatments, leaving her incapacitated and unable to return to her job as an attorney for more than 12 months as a result of the severe trauma she suffered in the crash.
  • The couple says they never saw or agreed to Uber’s terms themselves, as it was their daughter who clicked “accept.” The court ruled that the issue of whether the daughter had the authority to bind them to the terms would be decided by an arbitrator.
  • Uber tried to compel the case to arbitration, but a lower court found the terms unenforceable. The company appealed.
  • On September 20, 2024, an appeals court sided with Uber, finding the arbitration agreement valid because it clearly stated disputes would be resolved in arbitration and not in court, even though the McGintys claimed they had no knowledge of the terms.
  • The appeals court ruled that under the arbitration clause, an arbitrator must decide certain key issues, including the enforceability of the agreement and whether the daughter’s actions bind her parents.

Key Lesson:

• • Ride-share crashes can cause catastrophic injuries, but pursuing a legal claim is complex when the company tries to enforce a binding arbitration clause you may not have agreed to directly.

FAQs:

• • Can minors legally agree to terms of service? The validity of a minor’s acceptance of a contract is a complex legal issue that depends on various factors.
  • Does Uber’s insurance cover serious passenger injuries? Yes, Uber provides $1 million in third-party liability coverage, but the court’s ruling enforces arbitration, limiting the McGintys’ ability to pursue their claims in court.
  • Can I sue Uber if I’m injured in a crash? You can try, but the company will likely attempt to enforce the arbitration clause in its terms of service first.
  • What happens now in the McGinty case? The couple may petition the NJ Supreme Court, but unless the high court intervenes, they will likely have to arbitrate their claims against Uber.

Examples:

• • Uber’s records showed Georgia’s account agreed to the terms 3 times, including once after her daughter ordered the pizza.
  • The appeals court found that Uber’s clickwrap method provided reasonable notice, and the terms clearly stated disputes would be arbitrated, not litigated. Uber’s records showed the terms were accepted three times, including after the daughter placed the pizza order.
  • The agreement delegated issues of arbitrability to the arbitrator, so the court couldn’t decide certain gateway issues.
  • Federal and NJ law both favor arbitration, so courts are reluctant to invalidate clear delegation and arbitration clauses.
  • The Federal Arbitration Act (FAA) establishes a strong policy favoring arbitration, requiring courts to uphold valid arbitration agreements unless they are unconscionable or illegal. This statutory framework makes it challenging to challenge arbitration clauses in many consumer contracts. In cases like the McGintys’, courts are often bound by this pro-arbitration policy, which limits access to public courts and jury trials for consumers.
  • The couple argued the terms were invalid since their 12-year-old daughter couldn’t legally assent, but the court ruled that the arbitrator, not the court, would decide whether the daughter had authority to bind her parents under the agreement.

Key Lesson:

• • Companies often bury important legal provisions in online terms of service that most people click through without reading. Courts are increasingly enforcing these ‘click-to-agree’ contracts, even if someone other than the account holder, like a minor, agrees to the terms, as long as the app provides reasonable notice and opportunity to review.

FAQs:

• • How can I be bound by terms I never read? Failing to read an agreement generally isn’t a valid legal defense if you had reasonable notice and opportunity to review it.
  • What makes an online contract enforceable? Clear notice of the terms, unambiguous assent (like clicking “I agree”), and no illegal or unconscionable provisions.
  • Can minors enter into legally binding agreements? It depends, but generally contracts with minors are voidable at the minor’s option. Some “necessaries” are exceptions.
  • What if my kid agrees to terms without my knowledge? If you permitted them to use your account, a court may find apparent authority to agree on your behalf existed.
  • How can I avoid unwittingly agreeing to unfair terms? Always read the terms of any product or service you use, and don’t click “I agree” if you’re not comfortable with the provisions. Easier said than done, though.

Examples:

• • The McGintys will likely have to arbitrate their claims against Uber but may still be able to sue the driver in regular court.
  • Agreeing to arbitration severely limits what evidence the couple can get from Uber to prove the company’s potential liability.
  • Even if an arbitrator makes a legally or factually wrong decision, the McGintys will have very limited ability to appeal in court.
  • Uber may argue the arbitrator has to decide certain gateway matters of particular importance to the McGintys’ case, like if their daughter’s minority makes the clause unenforceable.
  • Though Uber will have to pay some arbitration fees, the proceedings are still likely to be more expensive for the couple than a single jury trial would be.

Key Lesson:

• • Forced arbitration clauses are powerful tools companies use to limit their legal exposure and avoid public accountability. Consumers are often unaware of these provisions and what rights they are sacrificing by agreeing. Always read the fine print and consider the implications before accepting an arbitration clause.

FAQs:

• • What are the main differences between arbitration and a lawsuit? Arbitration is private, less formal, has limited evidence gathering, and restricted appeal rights compared to a public court case.
  • Can I get a jury trial if I agreed to arbitrate? Generally no – an arbitration clause is a waiver of your right to a jury trial. You’d need to invalidate the clause first.
  • Who picks the arbitrator for my case? The company’s arbitration clause usually specifies an arbitration organization and selection process that will govern.
  • Does arbitration cost more than going to court? It depends, but for plaintiffs it often is, as they may have to pay the arbitrator fees on top of their legal costs. Companies save money by avoiding jury verdicts though.
  • Do I have any leverage to avoid a bad arbitration clause? Not much for everyday services, but sometimes public pressure or a mass of similar claims can make companies back off the provisions, as in a recent Disney case. In that instance, Disney attempted to force a wrongful death lawsuit into arbitration based on Disney+ terms, but later reversed its stance following public backlash.

Examples:

• • A similar case against Amazon was dismissed when a woman’s husband clicked to accept terms that included an arbitration clause.
  • Ticketmaster has a clause forcing arbitration and barring class actions, helping the company avoid accountability for allegedly anticompetitive practices.
  • California passed a law trying to bar forced arbitration in employment, but it’s being challenged as conflicting with the Federal Arbitration Act.
  • The U.S. Supreme Court has repeatedly upheld arbitration clauses, even when they make pursuing small individual claims impractical.
  • Some federal lawmakers have proposed bills to prohibit mandatory arbitration in consumer and employment contexts, but they’ve stalled.

Key Lesson:

• • The court’s decision in the McGinty case is part of a larger trend of enforcing arbitration and other corporate-friendly contract terms, even against non-signing parties. This has serious access to justice implications, as more people may lose their day in court and ability to hold companies publicly accountable.

FAQs:

• • How common are mandatory arbitration clauses? Very – one study found they cover over 60% of retail workplaces and 80% of cell phone, TV, and internet services.
  • What’s wrong with arbitration if both sides agree to it? Many object to “forced” pre-dispute arbitration clauses in take-it-or-leave-it contracts where a party has no meaningful choice.
  • Are there any limits on what companies can put in their terms? Yes, terms that are unconscionable, illegal, or violate public policy can be voided – but the bar is usually high.
  • Didn’t the couple authorize their daughter as their agent? Probably not expressly, but companies argue letting a minor use your account can establish agency to agree on your behalf.
  • How can I protect my legal rights? Consider whether any mandatory arbitration clauses apply before using a product or service. Advocate for legislative solutions to limit forced arbitration.

Mandatory Arbitration

• • Contractual clause requiring parties to resolve disputes in private arbitration instead of public court
  • Binds parties to decision of neutral third-party arbitrator rather than judge or jury
  • Takes away right to public trial and limits appeals
  • Often appears in adhesion contracts where consumer has little bargaining power

Clickwrap / Browsewrap Agreements

• • Digital contract terms that require user to click a button or check a box to accept
  • Clickwrap clearly displays terms and requires affirmative assent, browsewrap only accessible via hyperlink
  • More easily upheld than paper contracts of adhesion as user has clear notice of terms
  • Courts look at conspicuousness and clarity of terms in assessing validity

Agency Principles & Third-Party Beneficiaries

• • Principal can be bound by contracts agreed to by their authorized agent
  • Minors generally can’t serve as agents but courts look at whether parent gave child actual or apparent authority to agree to terms on their behalf
  • Intended and foreseeable beneficiaries of a contract may be able to enforce its terms
  • Uber argues McGintys are third-party beneficiaries of daughter’s agreement bound by the arbitration clause

Contract Law vs. Public Policy

• • Traditional contract law principles hold competent parties to voluntarily agreed upon terms
  • But contracts that are illegal, unconscionable or violate public policy can be voided
  • Critics argue mandatory arbitration in adhesion contracts is unfair and should be limited as a matter of public policy
  • Federal Arbitration Act currently preempts most state attempts to restrict arbitration though

Questions: Case Facts & Outcome

• • 1. What happened to John and Georgia McGinty while riding in an Uber?
    • A) Their driver hit a parked car
    • B) Their driver ran a red light and crashed into another vehicle
    • C) Another driver rear-ended their Uber
    • D) The Uber got a flat tire causing it to swerve
  • 2. What serious injuries did the couple suffer in the crash?
    • A) Concussions and whiplash
    • B) Lacerations and sprains
    • C) Fractures to spine, ribs, sternum, arm and wrist
    • D) Knee and ankle tears
  • 3. What did the couple do after sustained such serious harm?
    • A) Filed an insurance claim with Uber
    • B) Sued the McGinty’s Uber driver in civil court
    • C) Sued Uber in New Jersey court seeking compensation
    • D) Participated in private mediation with Uber
  • 4. How did Uber respond to the McGinty’s lawsuit?
    • A) It denied any responsibility or liability
    • B) It offered a small settlement to make the case go away
    • C) It agreed to pay the couple’s medical bills
    • D) It insisted the couple had to arbitrate their dispute per the app’s terms
  • 5. What did the appeals court ultimately rule in the case?
    • A) The McGintys could proceed with their lawsuit against Uber
    • B) Uber was not responsible for the driver’s negligence
    • C) The arbitration agreement was invalid and unenforceable
    • D) The couple was bound by the arbitration clause and couldn’t sue in court

Answers: Case Facts & Outcome

• • 1. B) According to court records, the McGinty’s Uber driver ran a red light and crashed into another vehicle in the intersection.
  • 2. C) The crash left John with a broken sternum, fractured arm and reduced wrist function. Georgia sustained spine and rib fractures, a hernia, and abdominal injuries.
  • 3. C) In 2023, about a year after the accident, the couple sued Uber in New Jersey court seeking compensation for their extensive damages.
  • 4. D) Uber moved to compel the couple to arbitrate their claims privately, citing the mandatory arbitration clause in the app’s terms of service.
  • 5. D) The appeals court reversed a lower court and held that the arbitration agreement was valid and enforceable against the McGintys, blocking their lawsuit.

Questions: Key Legal Issues

• • 1. What was the key dispute regarding the arbitration clause?
    • A) Whether it applied to personal injury claims
    • B) Whether the McGintys had proper notice of the terms
    • C) Whether the couple’s daughter had authority to bind them to it
    • D) All of the above
  • 2. What evidence did Uber present that the McGintys agreed to arbitrate?
    • A) The couple signed a paper arbitration agreement
    • B) The couple verbally agreed to arbitrate any disputes
    • C) The couple’s Uber account digitally accepted the terms of service with the clause 3 times
    • D) Uber had no evidence of the couple’s agreement to arbitrate
  • 3. What was a key factor in the court finding the clause enforceable?
    • A) The clause was prominently displayed in large print
    • B) Uber offered the couple an incentive to agree to arbitration
    • C) The clause clearly stated disputes would be resolved in arbitration and not court
    • D) The couple initialed next to the arbitration provision
  • 4. How did the court handle the argument that the McGintys’ daughter lacked authority to agree for them?
    • A) It found the daughter had apparent authority from her parents
    • B) It ruled the daughter’s minority made the agreement void
    • C) It said that issue was for the arbitrator to decide under the delegation clause
    • D) It held the daughter’s acceptance didn’t bind the parents either way
  • 5. What is a potential implication of this ruling for consumers?
    • A) Easier to sue big companies in court
    • B) More incentive to carefully read terms of service
    • C) Less ability to have grievances heard by a jury
    • D) Expanded rights to appeal unfair arbitration decisions

Answers: Key Legal Issues

• • 1. D) The key enforceability issues were whether the clause covered personal injury claims, if the McGintys had notice of and assented to the terms, and if their daughter could bind them as their agent.
  • 2. C) Uber’s records showed someone using the couple’s account agreed to updated terms containing the arbitration clause 3 separate times, including after the daughter’s pizza order.
  • 3. C) The appeals court emphasized the clause clearly stated disputes would be resolved in arbitration “and not in a court of law,” finding this sufficient notice of waiving court access.
  • 4. C) The court ruled the arbitration agreement’s delegation clause left the issue of whether the daughter could bind her parents to the arbitrator to decide, not the court.
  • 5. C) The ruling enforcing the arbitration clause means more consumers may lose access to public court proceedings and jury trials when harmed by a company’s negligence.