Web Contracts Can't Be Changed Without Notice

RZG writes "The U.S. Court of Appeals for the Ninth Circuit ruled on July 18th that contracts posted online cannot be updated without notifying users (PDF of ruling). 'Parties to a contract have no obligation to check the terms on a periodic basis to learn whether they have been changed by the other side,' the court wrote. This ruling has consequences for many online businesses, which took for granted their right to do this (see for example item 19 in Google's Terms of Service)."

Comments

Booh

[Anonymous Coward]

What about the mega-corporation's rights to mercilessly screw their customers? This ruling ain't fair, you know.

Re:Booh

[pokerdad]

If Bill Gates punctured a tyre, do you think many Linux users would feel sympathy for him?

Nope. They would just wonder who that guy is getting out of the limo and into the helicopter.

And of Course

[OverlordQ]

Isn't this only applicable in the 9th Circus^Hit's jurisdiction?

Re:And of Course

[Wuhao]

No, the 9th Circuit is a federal court, and so this decision has consequences nation-wide.

Re:And of Course

[cpt kangarooski]

Well, that's true, but it's not binding precedent except for the district courts under the 9th Circuit. For everyone else, it is merely influential.

Re:And of Course

[Anonymous Coward]

The 9th circuit is overturned by the supreme court more often than cmdrtaco changes his underwear. However, any company based in california/west coast is affected by this ruling, so it does affect a lot of internet users.

Re:And of Course

[Anonymous Coward]

Wow. This guy knows the law, and CmdrTaco, too.

Re:And of Course

[cpt kangarooski]

No, that reputation is undeserved. The 9th Circuit is huge, and so it sends many more cases to the Supreme Court than any of the other circuits do. However, in percentage terms, it's actually pretty average IIRC. It really needs to be split, but unfortunately, there doesn't seem to be a good way of doing that.

Not a big issue

[MysteriousPreacher]

Well, it's not a big issue for sites that require a login. All they have to do is flash up the new terms for the users next time they log-in. World of Warcraft does this during patching if the licence has changed. WoW isn't a web site but the principle is the same.

Any site that would change its terms without some kind of notice to users has been operating in cowboy land anyway.

Re:Not a big issue

[ushering05401]

The main point, IMHO, is that the courts appear to be catching up with the tech world.

This is not an isolated incident, there have been numerous clarifications coming out that will help the internet become a more legally defined avenue through which to conduct business.

To see another example of courts starting to actually understand what they are ruling on you need look no further than today's /. front page... Check out the "Judge Permits eBay's "Buy It Now" Feature" story.

I have been following both court rulings and political decisions related to the internet for some time now, and I am finally starting to see some glimmer of hope that the most empowering utility of our time will not go down the crapper due to the ignorance of those empowered to regulate it.

Of course, there is still the net neutrality issue... but at least there is some movement toward understanding.

Regards.

Re:Not a big issue

[Esion Modnar]

Any site that would change its terms without some kind of notice to users has been operating in cowboy land anyway.

Brokeback Mountain land, that is.

Re:Not a big issue

[freedom_india]

Apple does it all the time with its various updates.
Without accepting the new license, itunes does NOT open.

Re:Not a big issue

[Gabrill]

The program that plays the files you licensed does not open, thereby depriving you of their use.

Re:Not a big issue

[mr_matticus]

The simple solution in that case would be not to install the new version. The license text is available when it asks you if you want to update. It's available on their website at any time. It is, in fact, presented to you before the update downloads and then AGAIN after.

If you managed to be so lazy as to not take any of those opportunities to know what you're getting into, then you deserve what you get. Even at that point, though, you could also use any number of resources to get the older installer with the older user agreement that you agreed to, while continuing to use your purchases.

It's not duress, plain and simple, because you're not being forced to do anything with your existing purchases. There's no leverage on money spent by you and no one threatening to make worthless your investment. The songs you already purchased won't stop working if you don't update. You just won't be able to make NEW purchases if they make changes to the store.

Re:Not a big issue

[Anonymous Coward]

The program that plays the files you licensed does not open, thereby depriving you of their use.

The program that plays the files you licensed DOES open, so that you can continue to play those files, as long as you don't install the upgrade. Click "decline" on the EULA.

Kind of sad

[CastrTroy]

It's kind of sad that something like this has to be decided in court, and isn't actually just common sense. I can't have someone sign a paper contract, and then go and change everything around, and them make them bound to said contract. I don't know why anybody would think an online contract would be any different. The whole idea of changing a contract after someone has already agreed it is ludicrous.

Re:Kind of sad

[Compholio]

The whole idea of changing a contract after someone has already agreed it is ludicrous.

No it's not, many contracts get changed after they have been agreed to. An example I've seen myself is lease agreements - when you renew your lease it can be a lot easier to revise the original contract (corrections are made and signed by both parties). I've also seen where the renewal is an "addendum" to the original contract (signed by both parties). Times change, contracts get renegotiated - you just need to be fair about the renegotiation and make sure both parties are aware of (and have agreed to) any changes.

Re:Kind of sad

[Penguinisto]

Actually, no. Any clause that has the potential or actuality of violating your rights as granted by law is automatically null and void. It's pretty obvious that "we can change the terms at any time" has a huge potential of doing just that.

The reason they still get written in is because most people haven't the clue or desire to assert that aspect of contract law.

/P

Re:Kind of sad

[Volante3192]

Ahh, but you made sure to state that the changes are "signed by both parties."

That's entirely different. But what if two parties signed a lease agreement, then the property owner goes and makes changes to it and then sues you for violating the new changes that you never signed to.

Re:Kind of sad

[CastrTroy]

The point is, is that these companies are not being fair about the renegotiations. There are actually no negotiations going on at all. They just change the contract, tell you if you don't like it, you can leave, and you may not even have any idea that we've changed the contract until it's too late. You're landlord can't just come to you 6 months after you've signed the lease, and take away your stove, fridge, and dishwashers, and say, sorry, we changed the terms of this contract, and you're not entitled to that stuff anymore. If you don't like it, you can leave. Oh, but you now have to give us 4 months warning before moving out, or you'll be held accountable for the extra rent.

Re:Kind of sad

[sco08y]

The point is, is that these companies are not being fair about the renegotiations. There are actually no negotiations going on at all. They just change the contract, tell you if you don't like it, you can leave, and you may not even have any idea that we've changed the contract until it's too late.

IANAL, but taking Google's TOS as an example, I think it's a license, not a contract. Reasons: 1. They don't call it a contract; it's a "legal agreement." 2. There are no negotiations, and no way to submit ammendments. 3. You're not paying for the services and they're not promising to deliver anything. 4. You are never identified as being party to the agreement.

It's perfectly reasonable to update a license. For example, if someone comes to my house, I'm implicitly granting them license to come in. If I decide one day that I'm not going to allow smoking in my house, I don't have to tell them about that, even if I let them smoke in it earlier.

Open Directory License

[sepluv]

Would this affect clause 4 of the ODP (DMoz) License (and similar copyright licenses)? Maybe that isn't considered a contract or only having to make "reasonable efforts" to check for changes is acceptable.

Good!

[iknownuttin]

It always pisses me off that some web services say in their very long agreement that they have the right to change the terms at any time. I refuse to do business with those people.

Talk America....their telemarketers used to always bother me everyday (before the Do Not Call List) and they always gave me the creeps.

The appeals court also said the district court was wrong to grant Talk America's request for arbitration.
Arbitration panels are usually loaded with industry folks and you, the consumer, will rarely get a fair shake.

...as well as how they use their personal information after mergers or acquisitions is one that privacy experts and others have been grappling with since the emergence of e-commerce in the 1990s.
When I took a class on buying businesses, one of the ways to finance the deal was to sell off the customer list of the company you're acquiring - regardless of any privacy statement they may have stated to their customers. It's not just eCommerce sites. It's also the Mom and Pop bakery.

I'm all for capitalism and business and everything, but, sometimes, some of the things that are done makes my stomach churn. It does give me some empathy and understanding for the anti-corp folks here, though.

Furthermore...

[keraneuology]

It should be illegal to impose unilateral changes to a contract without clearly highlighting and specifying the specific changes. In other words, simply providing a new copy of the contract should be considered to be a clear and unquestionable violation of basic contract law.

• Consumers aren't lawyers. They can not be expected to read and understand all terms. Furthermore, the odds of a customer spotting a minor change (yet one that significantly alters the relationship) are slim to none. With no awareness (and full knowledge of that lack of awareness) there is no meaningful offer and therefore no meaningful acceptance. In other words there is no meeting of the minds.

• Most of these unilateral changes are of the exclusive benefit to the provider - nothing of value is offered to the user of the service. In other words, the alteration of the contract (which brings about a new contract) is utterly and completely devoid of consideration, which should likewise be enough to render the contract null and void. The contracts are entirely too one-sided.

• Many (if not most) of these changes fall well within the realm of being unconscionable. Again, enough to declare the contracts null and void. (If they would only revoke the license of any lawyer who signs off on any contract that violates these simple tenets it would take only a few days before fairness would reign).

Uninteresting

[Cadallin]

These "contracts" are mostly invalid in the first place. Conditions like "waving the right to sue" make them so. At least in the USA, you always have a right to sue, always. You may not win, but that's an entirely separate issue. A judge and/or jury is completely free to choose whether or not to take any such agreement into account or not. These are largely included as a psychological weapon, if you're dumb enough to think you can't sue, then you're less likely to.

The conditions cited in this article are, however, particularly asinine. What if a car dealership could change the terms of the sale any time they wanted after the sale, without your approval? How well do you think that would hold up?

Big corporations heaving a big sigh of relief.

[140Mandak262Jamuna]

The ruling affects only the contracts posted on line. The right of credit card companies, banks, brokerages, phone, electric and water utilities etc to include a piece of paper printed in unreadable font using ununderstandable language with their monthly bills and claim that their customers have been notified about the change in contracts will continue without any change.

The online companies just have to include "Contract terms have changed Click here to read, click here to ignore it and go to the site" flash screen to comply with the new ruling.

So it is all fine and wonderful and dandy in the corporate world, and peace and serenity will continue to reign in Ye Olde Country Club.

Re:Bad news

[PPH]

IANAL, but from what I understand, the weakness of most of these shrinkwrap or click to activate contracts is that the product has already been purchased prior to the imposition of these terms. That's not the way contracts are supposed to work. All parties must come to an understanding prior to the exchange of consideration.

Update To My Credit Card Policies

[nick_davison]

Imagine if consumers could pull the same crap with changing contracts, updating terms and expecting the businesses to check online for any updates that businesses pull on consumers.

Henceforth, the customer [Me] doesn't have to make any payments and will face no consequences for doing so. Further, the lender [You] agrees to assume existing and future debts whilst continuing an open line of credit. This was posted somewhere on the net so it's the lender's [your] obligation to check for it.

Re:Time Limited Contracts

[ShieldW0lf]

This isn't particularly relevant for companies offering a free service, except perhaps inasmuch as how they use the data they collect about you, because they have no contract with you.

It would appear the relevance of this is that you can insist that service providing companies be bound by the contract that you signed up with, rather than whatever their lawyers came up with in the meantime. In other words, that favorite phrase "we reserve the right to change the particulars of this contract" is non-enforceable.

Re:Does this kill GPLv2 "or later"?

[Jeffrey Baker]

That doesn't make any fucking sense at all. How can it be restrictive to say you can have these terms, or any future terms, whichever you find more advantageous? The worst case is that all future GPLs are disadvantageous, so you stick with the current one. I fail to see how that could be considered restrictive.

Re:Probably not a binding contract anyway...

[stubear]

Why is this comment moderated insightful? Whoever moderated this insightful did so because they agreed with the comment but nowhere is it insightful. "Probably not" means the commenter has some deep desire to have this legal issue considered not legally binding but at no time have EULAs or ToS contracts been deemed NOT legally binding. Until such a time as they are tested in court, they most certainly ARE legally binding. Will a company enforce them? Well, you might get a "probably not" for that question but again, until research into the issue has been done, one should not try to answer the question at all, stating instead "no one knows for sure, however, I am...[fill in your position here]."

Moderators, please quit moderating comments insightful simply because you agree with the comment. Make sure the comment is actually insightful first.

An agreement to agree is not an agreement

[Animats]

This is a sound decision. There's a classic principle of English common law that says "an agreement to agree is not an agreement at all". A contract to agree to terms not yet defined is not an enforceable contract. This is standard contract law.

The actual decision says:

Parties to a contract have no obligation to check the terms on a periodic basis to learn whether they have been changed by the other side. Indeed, a party can't unilaterally change the terms of a contract; it must obtain the other party's consent before doing so. Union Pac. R.R. v. Chi., Milwaukee, St. Paul & Pac. R.R., 549 F.2d 114, 118 (9th Cir. 1976). This is because a revised contract is merely an offer and does not bind the parties until it is accepted. Matanuska Valley Farmers Cooperating Ass'n v. Monaghan, 188 F.2d 906, 909 (9th Cir. 1951). And generally "an offeree cannot actually assent to an offer unless he knows of its existence." Samuel Williston & Richard A. Lord, A Treatise on the Law of Contracts 4:13, at 365 (4th ed. 1990); see also Trimble v. N.Y. Life Ins. Co., 255 N.Y.S. 292, 297 (App. Div. 1932) ("An offer may not be accepted until it is made and brought to the attention of the one accepting."). Even if Douglas's continued use of Talk America's service could be considered assent, such assent can only be inferred after he received proper notice of the proposed changes.

Companies have been trying to get away with something that has no basis in law. Finally, someone sued on that issue, and won.

The Register points out that this is consistent with UK law. That's not surprising. This goes back to ancient common-law traditions. The Register also points out that the issue of whether terms can be changed when the consumer has an ongoing obligation to the seller (like a cell phone service agreement) has been argued in Britain and decided in favor of consumers.

Re:Time Limited Contracts

[dk.r*nger]

The point of a contract is that it's two-ways. If they say "good for the next three months", then after three months their right to do anything covered by the contract (including storing your information in their system) is void. So to comply to their own contract, they'd have to contact you every time the three months are up and get you to agree to the new contract. Which is a lot more trouble than just doing that when you actually need to change it.

Click/shrink wrap terms usually binding

[AHumbleOpinion]

Actually clickwrap contracts have often been ruled valid. See http://slashdot.org/comments.pl?sid=257287&cid=200 34401 to avoid a redundant thread.

Re:Clickwrap/shrinkwrap usually binding contracts

[Courageous]

In the U.S. I believe it is called an adhesion contract and they are generally valid as long as the terms are reasonable, reasonable to a judge not slashdot readers. :-) To be unreasonable, or more accurately legally unconscionable, oppression or surprise is usually involved.


Or something that wouldn't have been agreed to, had any reasonable person actually read the contract. Another way of looking at it is that if the offerror of the contract had reason to believe it wouldn't have been agreed to had the terms been known, the terms are definitionally "unconcionable."

C//

Re:Changing on-line agreements in not uncommon

[madcow_bg]

"UNLIMITED" with respect to internet access generally refers to your connect time, not your bandwidth usage.

The fact that the service is called 'unlimited' doesn't mean all aspects of the service need to be unlimited.
Sorry, but this is deceptive practice. Actually, it is a plain lie. If the ad is written in a way that all normal people will think that sounds as unlimited bandwidth, then doing otherwise would be lying.

Suppose you had subscribed to an unlimited service contract - allowing you an unlimited number of support incidents per year for your server. And . then in the fine print you read that the service contract only applies to 1 server. Would you jump up and down because they won't provide you the 'unlimited support incidents' for any machine you want -- after all clearly that's a limit!
The wording of the ads and contracts matter. If they disagree, the advertisement is lying.

Do you get mad when you order the 'unlimited buffet' for 9.95 and they won't let you make 20 trips bringing back a plate for everyone in your extended family? That they won't let you bring a cooler and fill it up with marshmallow salad? That you can't come back tomorrow and keep eating?
The wording of the ads and contracts matter. If they disagree, the advertisement is lying.

Of course not!
Of course?! The wording of the ads and contracts does matter. If they disagree, the advertisement is lying.

Moreover, in the case of bandwidth. The reason they don't specify a cap is because if they did it would be much lower than it would need to be. Suppose based on their revenue/expenses/etc they can *afford* to give *everyone* 1GB of bandwidth per month. Now the reality that most people don't come anywhere near needing that so they leave it as a soft cap -- if some people use 5 or 6GB per month, its really no big deal.
Bull-fucking-shit. If they calculate that people will use 2 GB per month on average, they can still put 100GB on the ad and come out fine. The problem is they don't want to clutter the ads with useful information, they just want to lie, take your money and serve what they wish.

Then some guy comes along and uses 20GB per month, and starts straining part of the system so they advise him to throttle back because his usage is 'too high'. Now that guy screams bloody murder - "why didn't you tell me what the cap was in the contract" and the simple answer is that its in the customers best interest for that NOT to happen. If the ISP HAD to specify a cap they'd specify 1GB because that is all they can gaurantee. So if you wanted even 5GB you'd have to be paying extra for that.
No, they don't want to tell you 5GB, because then you'd actually have a reason to switch to another provider, who's giving you more for less.
Please, tell me I did not read that correctly: they have ads that say one thing (or every sane person will think they say it, which as a matter of fact is the same when advertisement is involved in court), but the contracts say another thing, and people should just swallow their 1 year contracts?! And of course it is best when users don't know the actual limits, you want to keep people happy, and it is easier to achieve this if they don't know they're ripped off.

Re:Time Limited Contracts

[pvera]

The bigger web-based companies usually try to be proactive about this. I am positive that I have received advance warning from at least Amazon, eBay and Pay Pal whenever a new user agreement would kick in.

Those agreements are redacted by lawyers and go through countless revision cycles before they are approved. It doesn't hurt them to use their next sales email to point out that effective whatever date, new terms kick in, a link to read the new terms, and instructions on what to do if you do NOT agree with these. For example, if you don't agree with the new terms, you are allowed to close your account without penalty.

Re:And of Course--An Excellent Reason...

[anagama]

What full damage? This sounds like a very reasonable opinion. All it says is that if one party decides to change the terms of a contract, it has to tell the other party (and I would assume without RTFO -- if the other party doesn't like the new terms, the other party can say no). Without this, you could "sign" a contract in July that says "we will keep your info private" and then in October, without notice to you, it could be changed to "you owe us one million dollars". I guess you think that would be fair? Give me your address, I have a harmless little contract I want to send you.

Re:Does this kill GPLv2 "or later"?

[Qzukk]

If one side can't just choose a different license without informing the other, would this apply in reverse? The "or later" part does not modify any existing contracts. If I received a piece of software under GPL2 "or later" and someone else wants to distribute the program under GPL3, my copy of the software is not magically GPL3.