Court Rules Website Terms of Service Agreement Completely Invalid

another random user sends this excerpt from Business Insider: "In January, hackers got hold of 24 million Zappos customers' email addresses and other personal information. Some of those customers have been suing Zappos, an online shoes and clothing retailer that's owned by Amazon.com. Zappos wants the matter to go into arbitration, citing its terms of service. The problem: A federal court just ruled that agreement completely invalid. So Zappos will have to go to court—or more likely settle to avoid those legal costs. Here's how Zappos screwed up, according to Eric Goldman, a law professor and director of Santa Clara University's High Tech Law Institute: It put a link to its terms of service on its website, but didn't force customers to click through to it."

Comments

Changes incoming

[Twintop]

You can bet the farm that because of this all major online retailers have already started work to change their registration and ordering systems to implement a clickthrough rather than ticking a checkbox that says 'I agree'.

Re:Changes incoming

[tambo]

> You can bet the farm that because of this all major online retailers have already started work to change their registration and ordering systems to implement a clickthrough rather than ticking a checkbox that says 'I agree'.

Ah, but many of those ToS'es include terms that are supposed to apply to activities that don't require registration or ordering - e.g., ToS restrictions on copying content to another site, linking to the site without permission, or suing the company due to information presented on the website.

So, coming next: Visitng ANY major site, even anonymously, will present you with a click-through ToS before you get ANYTHING from them. And to ensure that it remains legal and binding (especially as ToS frequently change), the selection will not be persisted in a cookie; you'll have to complete the ToS click-through at the start of every new session with the website.

Ugh. The web is about to become uglier.

Re:Changes incoming

[Tough Love]

You can bet the farm that because of this all major online retailers have already started work to change their registration and ordering systems to implement a clickthrough rather than ticking a checkbox that says 'I agree'.

Yes, piling idiocy on top of idiocy and making the Web a yet more unpleasant place to go about your business. The real problem is the idiodic culture of forcing web users to sign away their firstborn or whatever other terms suit the fancy of the online operator, in order to use their service. Do I have to sign a terms of service to buy groceries at a grocery store? No? Then what is this idiocy about needing to sign agreements in order to transact simple business on the web? Are the courts too lazy to start ruling on what is and is not fair, as has been the tradition for several hundred years of common law? (Rhetorical question of course.) Instead, the courts seem determined to make life as unpleasant as possible for average citizens, and they seize on this new internet thing as a marvelous new tool for achieving that. I say it's time to start replacing judges.

Re:Changes incoming

[jhoegl]

Despite the fact that FORCED ARBITRATION is one sided and Bull shit...
Yeah.. blame the lawyers not the law makers.

Re:Changes incoming

[iamnobody2]

aren't most of the law makers and judges also lawyers?

Re:Changes incoming

[Jessified]

That's why it's non-enforceable in many parts of Canada.

Re:Changes incoming

[Jafafa Hots]

I dunno... when I let my hair grow long as I do at times, suddenly every store I go into has a "long-standing policy" that I never seemed to notice before that allows them to demand that I leave my $150 backpack with them (with no insurance against theft, etc.) if I want the privilege of buying their stuff.

If I dress differently or have short hair, the stores don't seem to have that policy so much.

It's getting to the point where even brick and mortar stores consider it a privilege for you to be able to shop there.

You only get the advertised sale price if you use their "club card" which has your personal identifying information plus now your spending habits, etc.

Let's not even get started on places like Costco that charge you admission to get in to buy a tray of muffins.

It's not that the balance has shifted - the balance has been dismantled, removed and sold for scrap.

Re:Changes incoming

[smellotron]

You only get the advertised sale price if you use their "club card" which has your personal identifying information plus now your spending habits, etc.

Whenever I signed up for a club card, it was pretty clear to me that I was receiving a discount in payment for my spending profile. With Costco or other "membership-only" stores, this is built in; and the membership fee is a straightforward economic decision (do your marginal savings relative to a non-membership big box store outweigh the membership cost?) In either case, I am being compensated for the harvesting of my information, and there is no personal risk involved. What's being presented in the article—forced binding arbitration in lieu of actual legal recourse—is an entirely different situation, because it amounts to a risk transfer (company reduces legal costs, customers who are "wronged" lose the recourse to recover losses). It's very one-sided, and I find it unbelievable that the judicial system would go along with this idea.

Was also their "we can change this contract at wil

[Derek Pomery]

That the judge found improper.

So. Not only a contract they wanted to make binding without any user agreement, but also a contract where the language could be rewritten after you agreed to it, without having to sign off on the new language.

Stupid.

[multiben]

The whole TOS crap needs to change. If Zappos had forced people through the TOS page not one single extra person would have read it. It's just an arse covering law with no benefit to customers or vendors.

Re:Stupid.

[debrain]

But it does benefit lawyers. Lawyers hate arbitration because you don't need a lawyer to arbitrate. Lawyers love class action suits because pretty much all the damages go directly to them, with the customers just getting a coupon for half off their next purchase from the company the screwed them.

This is nonsense. I've been a lawyer, arbitrator and class action litigator for nearly a decade now.

Let's break down your post.

First, lawyers do fine with or without arbitration clauses; I honestly don't care what the process is. Arbitration clauses do tend to increase the cost of litigation to individual litigants for several reasons, including:

1. Arbitrations are private; a finding of liability has no impact on subsequent cases, unlike a finding in Court;

2. Arbitration is generally more expensive than litigation, for several reasons including the obligation of the complainant to pay the arbitrator fees, contrary judges who are paid by taxpayers;

3. Arbitrations, except for the rare multi-party arbitrations, do not permit the resolution of common issues for all similarly situated litigants, unlike class actions.

All of the above discourage litigation against big, bad clients because the big bad clients increase the cost and risk of seeking compensation for wrongs. I have noted a trend across jurisdictions that those where the perceived costs of seeking compensation for wrongs is subject to high procedural barriers correlates with the pervasiveness of apathy and helplessness.

Class proceedings reduce (and often eliminate) risk to individual litigants.

As for class arbitration, the rules of arbitration generally do not permit class proceedings. However, there is nothing stopping individuals from agreeing to individual arbitrations heard and determined concurrently by way of contract. A properly crafted agreement would likely be as binding as an award from individual arbitration, and have many of the economies of scale inherent to class proceedings. This is rare because it would require the consent of a defendant, who has every financial (and public relations) incentive to increase the cost of and risk to every claimant.

As for lawyers receiving most of the damages, that is an entire topic to itself. Class proceedings exist for three purposes: (1) decrease the cost of individual litigation; (2) increase efficiency of the court system by determining common issues together; and (3) correct bad behaviour. On point one, it is almost always true, in my experience, that class proceedings are more cost effective than individual litigation --- you are almost certainly going to get more at the end of the day by being a member of a class proceeding than by hiring a lawyer to proceed on your behalf directly. All class proceedings in the world, as far as I know, give you the opportunity to opt out of the class and pursue your litigation on your own, in any case, so if you are quite so against the class proceeding benefitting the lawyers, you can bring pursue the litigation by yourself. It bears mentioning that many class proceedings are also highly speculative, and higher risk merits higher rewards - otherwise the competent lawyers would find something else to do with their time and many valid complaints would pass under the radar.

On the second point, arbitrations are typically significantly more expensive than litigation in court. You have to pay the arbitrator and due to the faster timelines it often proceeds to an actual determination more often, in my experience, than litigation (as litigation is often painfully slow and settlement is encouraged by way of process designed to be challenging and expensive - to encourage settlement).

Finally, correction of bad behaviour is a worthwhile goal in and of itself, and even if the lawyers achieved no financial compensation for the members of the class, it is worthwhile to reward those pursuing and advancing corrective behaviour through the adversarial process.

Which is all to say: Your post is not very well informed, and I would encourage you to bear the above in mind before posting similar nonsense in the future.

Still shitty consumer protections

[Quick Reply]

So their T&Cs is invalid because of a technicality, not because it limits consumer rights.

There needs to be baseline laws that guarantee a minimum amount of consumer protection, that can't be trumped by T&Cs, as Law > T&Cs.

Basically, as it stands now, a website could put in T&Cs that gives them the right to kill you and your pets for non-payment of services. Or more realistically, terms for $1,000,000 per day penalty for late payment on an account worth $10,000 in it's total life.

The excuse that we should settle with "you should have read the T&Cs" is unacceptable, not eveyone does, maybe it is because some people in our community find them too hard to understand or can not afford a lawyer to check it, is too trusting, or whatever the case may be, and it doesnt mean that these people deserve to be taken advantage of.

We need to look at Australia's consumer laws as a model for the world. These laws are just common sense for what a consumer would expect from a retailer, but put out in law that can't be trumped or rights taken away except in very specific circumstances where there is a fair reason to (not just trying to limit their liability for their own fuck ups) and this waiver has been made crystal clear to them by a requirement to explain this to the consumer until they understand, and sign a standardised form that says in big letters across the top "YOU ARE WAIVING SOME OF YOUR RIGHTS IN THIS TRANSACTION, PLEASE READ CAREFULLY" or to that effect.

Re:Still shitty consumer protections

[david_thornley]

I don't have the court decision here, but courts like to rule on the technical aspects, if they can, rather than to dig into more subjective issues. Maybe a click-through TOS would have saved them here, maybe not. Maybe the click-through will discourage enough customers so that it's not worthwhile anyway.

At least in the US, there's a special status for a take-it-or-leave-it contract of this sort, and it isn't as favorable as a written and negotiated contract. The court will look for odious provisions (this is subjective) and throw them out. Either of the penalties you suggest would normally be thrown out. It's not something to count on in all cases, but it will remove particularly bad penalties like those. I'm not fond of US consumer protection laws, such as they are, but they're not really that bad.

No more unilateral revision of terms

[Animats]

First, three blogs down, here's the actual court order. It's worth reading. A key point in this decision is what it has to say about agreements which allow one party to change the terms of the agreement. Such agreements were held to be "illusory" and non-binding:

Here, the Terms of Use gives Zappos the right to change the Terms of Use, including the Arbitration Clause, at any time without notice to the consumer. On one side, the Terms of Use purportedly binds any user of the Zappos.com website to mandatory arbitration. However, if a consumer sought to invoke arbitration pursuant to the Terms of Use, nothing would prevent Zappos from unilaterally changing the Terms and making those changes applicable to that pending dispute if it determined that arbitration was no longer in its interest. In effect, the agreement allows Zappos to hold its customers and users to the promise to arbitrate while reserving its own escape hatch. By the terms of the Terms of Use, Zappos is free at any time to require a consumer to arbitrate and/or litigate anywhere it sees fit, while consumers are required to submit to arbitration in Las Vegas, Nevada. Because the Terms of Use binds consumers to arbitration while leaving Zappos free to litigate or arbitrate wherever it sees fit, there exists no mutuality of obligation. We join those other federal courts that find such arbitration agreements illusory and therefore unenforceable.

This is an example of the classic "an agreement to agree is not an agreement".

An example of a site that's now in trouble is WePay. See Paragraph 50 of the contract.

Re:Next up... a Quiz based on small print...

[Hatta]

Great idea. Can we get Congress to undergo the same when they vote on a bill too?

Disappointing

[RazorSharp]

I read the headline and got excited. The conclusion is disappointing. The biggest injustice when it comes to contracts, either ToS or not, is the ability to include stipulations that the signee may not engage in a class action suit or that the terms of the contract can be arbitrarily changed. I'm sure someone will argue that one doesn't have to sign any contract if they don't want to, but I don't see how one can function in society without 'agreeing' to outrageous contracts. If I never agreed (downloading software, visiting websites, purchasing something, working somewhere, etc.) to outrageous contracts I'd be forced to live like the Unabomber or worse . . . like Richard Stallman.

The results of this ruling could potentially just lead to a lot of annoying ToS splash screens when visiting web sites.