Contract Law Nudged Back Towards Actual Acceptance

Contract Law Nudged Back Towards Actual Acceptance

The Ninth Circuit just ruled that contracts can't be unilaterally changed by a service provider without notifying customers of the change. This sounds like common sense – it's not a contract unless both sides agree on it – but you'd be surprised how many contracts nowadays reserve the right to modify the terms on their website at any time, without notice.

Joe Douglas (how's that for an ordinary guy name?) had a contract for long-distance telephone service from America Online. AOL sold their phone business to Talk America, who added several provisions to the user agreement, including a clause requiring arbitration to settle disputes instead of going to court, and a provision waiving users' right to file class-action lawsuits. Since our Joe had his bill automatically deducted from his bank account, he never saw a revised contract or had any reason to visit the Talk America website. When he became aware of the changes to the contract, he sued, and the District Court tossed the case out pursuant to the arbitration clause. The Ninth Circuit reinstated his class-action suit, since it held the new terms unenforceable.

Allowing one party to a contract without notice would obligate the other party to check every day for changes, the court noted, which would be a huge burden. The Ninth Circuit also held the new provisions could be both procedurally and substantively unconscionable, and thereby unenforceable. Unconscionability is a doctrine in contract law that says where a contract or a term is so blatantly unfair (as when a giant telecom offers a take-it-or-leave-it contract limiting the rights of consumers who don't have any other choice) – procedural unconscionability is unfairness in the bargaining positions of the parties; substantive unconscionability is unfairness in the terms of the contract itself. Following on the heels of T-Mobile's arbitration clause being held unconscionable, contract law seems to be taking baby steps back to the traditional you-actually-have-to-agree-to-things model



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JC's Demon Slayer

So why hasn't any1 tagged Steam with the Unconscionability part yet? They do the same crap.


D Waterhouse

I really enjoy these legal posts. This one got me several tabs into wikipedia about contract law. Thanks for giving me something interesting to learn!

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