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)."

Time Limited Contracts

[Anonymous Coward]

So now sites will just say "good for the next three months", and then have you look at a new agreement when you login three months from now?

And of Course

[OverlordQ]

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

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.

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.

Probably not a binding contract anyway...

[Boss, Pointy Haired]

...so it doesn't really matter. Big companies like Google etc. only have ToS because their lawyers said they must have a ToS (well they would, wouldn't they), and little companies only have ToS to make themselves look like big companies.

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.

Is this still true if...

[Aranykai]

Is this still the case if the contractor states in the contract agreement that they reserve the rights to do exactly this?

I remember in many TOS or EULA type documents that they often state something of the following:
"We reserve the right to change these terms at any time without notice."

Does this negate all those agreements?

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).

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.

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: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.

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 [uscourts.gov] 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 [theregister.co.uk]. 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.

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: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: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.