Unconscionability of a Standard Form Services Agreement
January 2021 Charity & NFP Law Update
Published on January 28, 2021

By Luis R. Chacin


One of the most important legal developments in 2020 was the Supreme Court of Canada decision in Uber Technologies Inc. v. Heller, 2020 SCC 16 (“Heller”), released on June 26, 2020. Uber Technologies Inc., Uber Canada, Inc., Uber B.V. and Rasier Operations B.V. (collectively, “Uber”) are part of an international corporate group that provides software applications for drivers and customers to arrange personal transportation and food delivery using their smartphones in what is referred to as the “sharing economy”. In Heller, the Court considered the validity of the arbitration clause in Uber’s standard form services agreement, which required that any dispute between a driver and Uber be submitted to mediation and arbitration in the Netherlands. In the result, the majority of the Supreme Court of Canada dismissed the appeal against the decision of the Court of Appeal for Ontario and found that the arbitration clause was unconscionable based on the inequality of bargaining power between the parties and the improvident bargain involving the substantial cost of arbitration proceedings in the Netherlands for a driver in Canada.

Online platform agreements are typically in standard form contracts of adhesion where the user is presented with the take it or leave it option “I Agree”, with no room for bargaining or negotiation. Online platform agreements are drafted to manage the potential risks to which the provider is exposed in dealing with large numbers of users in different jurisdictions and circumstances. However, as in Heller, when the terms of an online platform agreement are unfair or unreasonably one-sided, particularly in situations where users are not freely accepting the terms, or there is a “cognitive asymmetry”, and the agreement unduly advantages the stronger party or disadvantages the more vulnerable, such as where the weaker party did not understand or appreciate the meaning of important terms leading to an “unfair surprise”, then those terms may be not enforceable.

Generally speaking, the doctrine of unconscionability is intended to protect vulnerable persons in transactions where there is an inequality of bargaining power resulting in an improvident bargain. A similar approach was considered by the Court in Douez v. Facebook Inc., 2017 SCC 33 (“Douez”), regarding the forum selection clause and choice of law in Facebook’s standard terms of use, which required that disputes be resolved in California according to California law. In Douez, the majority of the Court found that the forum selection clause was unenforceable as a matter of public policy.

In Heller, the majority of the Court said that unconscionability has a meaningful role to play in examining the conditions behind consent in contracts of adhesion and in encouraging drafters of such contracts to make them more accessible to the other party or to ensure that such contracts are not so lop-sided as to be improvident, or both.

As a general rule, charities and not-for-profits should carefully review all their online agreements before entering them, either as customer or provider, and ensure that the terms, particularly any choice of law, forum selection, and arbitration clauses, are not potentially unconscionable.


Read the January 2021 Charity & NFP Law Update