iPhone 3G Illustrates What A Real Contract Looks Like

from the legally-binding dept

Thu, Jul 24th 2008 9:01pm — Timothy Lee

I spent most of my day last Friday acquiring an iPhone 3G. It was a long and tedious process involving several hours of waiting, a visit to the Apple Store, and two visits to AT&T. Part of the reason it took so long is that Apple wasn't willing to let me have the phone until I'd signed up for a 2-year contract with AT&T. Mike has previously discussed the pros and cons of cell phone subsidies, and the associated carrier lock-in. Whatever you think of that debate, the iPhone story is a good example of what a real contract looks like. I was required to sign up for an AT&T service plan and sign an AT&T service agreement before I was allowed to leave the Apple Store with my iPhone. I knew exactly what I was getting into, and had the option to decline before completing the transaction. I think there's little doubt that the courts would enforce the contract's terms if I tried to renege on my commitment.

Now compare that to the shrink-wrap "contracts" that retail software developers keep trying to foist on people who buy their products. When you buy a software product at Best Buy, the cashier almost never informs you about the license agreement, much less require you to read and sign it. In many cases, it's not even possible to open the box and read the agreement until after you've completed the transaction. One of the key differences here is that Apple spent valuable employee time informing me of the contract, giving me time to read it, and requiring me to sign it. This is annoying for Apple, but enforcing some minimum requirements for contract formation also serves an important function: ensuring that firms only resort to using formal contracts when they have a pretty good reason. Forming, complying with, and enforcing contracts consumes resources, so we don't want people forming contracts too lightly. It also ensures that the contracts actually get read, something Apple has had trouble with in the past. The software industry, in contrast, tries to get all the benefits of legally-enforceable contracts without shouldering any of the costs. That approach isn't fair to consumers or to taxpayers.

Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.

Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.

While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.

–The Techdirt Team

Filed Under: contracts, iphone
Companies: apple, at&t

28 Comments

If you liked this post, you may also be interested in...

Reader Comments

Subscribe: RSS

View by: Time | Thread

Eric Goldman (profile), 24 Jul 2008 @ 9:54pm

Another industrial strength contract process...
It reminds me of the contracting process I had to go through to skydive. The contract required me to sign in 17 different places, and the front clerk made sure that each and every spot was properly completed before I could proceed. I had zero ambiguity about the contract terms I had agreed to. Then again, this is a high transaction cost way of making marketplace decisions, and I doubt we want to go through such rigorous processes for every purchase we make. Eric.
[ link to this | view in thread ]
TimC, 24 Jul 2008 @ 10:24pm

Even worse...
Another unfortunate part of these license agreements is that publishers/service providers can and do change the terms via product updates or during the course of the service. The user might have actually reviewed the initial agreement but that same agreement could be completely different in 6 months with zero notification that it was changed.
[ link to this | view in thread ]
Alex, 24 Jul 2008 @ 10:32pm

It sort of draws a disparity between the "shrink wrap contract" people and the "actual big boy contract" people. I mean, is opening a box the same thing as signing a well-understood and explained contract? That's absolutely ridiculous. I mean, really, it's kind of silly to expect a similar legal protection from two radically different processes like that with entirely different aims.
[ link to this | view in thread ]
Anonymous Coward, 24 Jul 2008 @ 10:55pm

get a life fuc@#$$%$ bitc#$%
[ link to this | view in thread ]
Anonymous Coward, 25 Jul 2008 @ 3:02am

More bars in more places
No, you bought an iPhone BECAUSE you spent hours on end in line waiting for a a pos, overhyped phone with very little features over other carriers phones except for the fact that it plays iTunes bought music. (try Verizon's LG Dare - faster touch response and same features except for iTunes ability)

No one is going to pass on buying an iPhone, even if they dont like the contract, if they had waited in line for hours on end. Concept called Cognitive Dissonance.

You wait in line, read the contract, but dont like the contract or the the now increased price plans. Well, you cant change your behavior (waiting in line) since you're already in the store. So you can only change your thoughts about the iPhone/ATT - you now believe that even if the contract is crap, it must be worth it since you waited in line all that time.

More bars in more places is only good if you are an alcoholic.
[ link to this | view in thread ]
TX CHL Instructor (profile), 25 Jul 2008 @ 4:46am

Waiting in line?
When I learned that the Apple fanatics where camping out on Thursday night, I scrapped my plans to go to the AT&T store for a new iPhone on my birthday (the 11th). That decision turned out better than I expected, given the hassles folks experienced that day getting their iBricks.

I might still get a 3G iPhone 2.0. Or maybe wait until 2.1, or until the price goes down again, or maybe just check out the competition. After all, I'm still amazed that somebody could call something a 'smart' phone when it doesn't have a search feature for its calender, or even a simple cut & paste between applications.

Sorry, SJ, I'm not one of your mindless minions.
--
www.chl-tx.com
Without the 2nd Amendment, the rest of the document is just wishful thinking
[ link to this | view in thread ]
michelle sickinger, 25 Jul 2008 @ 5:36am

I felt the same way and had a same experience waiting in line to buy the iphone just because I had already purchased the gift cirtificate for my son's graduation gift ($500). Since the iphone price went down to $300, we both bought the iphone. I wasn't sure if I should buy it because I have already have blackberry which I was happy with. I didn't realized that I had to wait so long (4 hours) but I once invested my time, I couldn't back out for waiting in line. I expected to wait about 30 Min... ATT contract scares me too. But I signed the contract and we both have to pay $130 per month. Wow! Apple wouldn't allow me to get ring tone from my music library unless I purchase through itune. It seems very mean marketing strategy. Michelle
[ link to this | view in thread ]
Anonymous Coward, 25 Jul 2008 @ 7:05am

"I felt the same way and had a same experience waiting in line to buy the iphone just because I had already purchased the gift cirtificate for my son's graduation gift ($500). Since the iphone price went down to $300, we both bought the iphone. I wasn't sure if I should buy it because I have already have blackberry which I was happy with. I didn't realized that I had to wait so long (4 hours) but I once invested my time, I couldn't back out for waiting in line. I expected to wait about 30 Min... ATT contract scares me too. But I signed the contract and we both have to pay $130 per month. Wow! Apple wouldn't allow me to get ring tone from my music library unless I purchase through itune. It seems very mean marketing strategy. Michelle"

And yet, you still bought it... Stupid consumer bitch.
[ link to this | view in thread ]
Sam, 25 Jul 2008 @ 7:51am

Come on, be fair - that doesn't make her a bitch... but I do have to agree with the stupid consumer part. That's dumber than Bush's parallel between the state of the economy and drunkenness.

Wow.
[ link to this | view in thread ]
Cygnus, 25 Jul 2008 @ 7:53am

Apple/ATT contract versus EULA: can we think of a significant difference between the two that justifies the different treatment?

You sure can: price. Apple/ATT can justify the added expense incurred in the contracting process because they are protected over $2400 in service fees. Considering that the infrastructure supporting the phone already exists, any individual buyer of the phone can be see as $2400 of pure money.

Now, let's think about software. For $39.99, you're getting 100% of the value of the application and, at sale, the developer has received 100% of the benefit.

$2400 of future income versus $0 of future income.

I think you can see the value in the added expense Apple/ATT incur to make sure you're captured in an agreement.
[ link to this | view in thread ]
Cygnus, 25 Jul 2008 @ 7:56am

Re:
The second sentence in my post should read: "Apple/ATT can justify the added expense incurred in the contracting process because they are PROTECTING over $2400 in service fees."
[ link to this | view in thread ]
Cory, 25 Jul 2008 @ 7:58am

Getting back on subject
Before this all degrades into a hate-on-the-iPhone free-for-all (I by the way, am happy with mine, and with the minimal wait I went through), I'd like to comment on what the article was actually about. One step toward improving the "shrinkwrap contract" process on software, at least boxed software, would be, more shrinkwrapping.

Put a copy of the contract into box, with the software key under a scratch-off panel. Scratching that off would constitute agreement with the contract. Also, shrinkwrap the media that the software comes on. So long as the shrinkwrap and scratch-off are still in place, the consumer would be allowed to return the product if they disagree with the contract.

Granted, it doesn't guarantee that the contract will be read, but then again, most people don't read "real" contracts that they sign anyway.
[ link to this | view in thread ]
J, 25 Jul 2008 @ 7:59am

contract/waivers
With a good lawyer you have a good chance of getting out of any contract/waiver you sign.
I ran a business that required contract/waiver be signed every visit plus we had orientation. The contract/waiver would only start to hold up into court after the person had done the full process at least 3 times.
It is very hard, if not next to impossible, to sign away your constitutional rights (something about protecting the very stupid people). The other reason was it was not what they expected.
Lucky we had insurance the the insurance company policy was to fight every case. This typically scared away most of the cash seeks. One guy got nearly 100K after he got injured on his second session and claimed, even though he signed the contact/waivers that he might injury or even die and told many times that if he could die if not careful, he do expect to be injured. His injury was minor and we did not even know about the injury until the court case.

In My opinion most contacts/waivers are just a first line defense against the money hungry people and that is about all they are worth.
[ link to this | view in thread ]
hegemon13, 25 Jul 2008 @ 8:02am

Re:
Except when the software you are buying is a $1500.00 Adobe product, or some such thing. They get all their money up front without the need to collect over 2 years. Yet, they still provide no more than a shrink-wrapped EULA that says the $1500 cardboard box and plastic disc aren't yours to resell.
[ link to this | view in thread ]
Bill G, 25 Jul 2008 @ 8:06am

Re: More bars in more places
sounds like someone could not get the iphone
[ link to this | view in thread ]
Nasch, 25 Jul 2008 @ 9:00am

Re:
If it's not worth a companies' time to engage in a real contract with me, then they should just sell the damn product and not try to engage in a fake one.
[ link to this | view in thread ]
Michael, 25 Jul 2008 @ 9:07am

Most of the complaints about EULAs are not really about the manner in which they were signed, but rather about the obnoxious content of those EULAs.

This is the price we pay for living in a country that believes in freedom of contract -- The only real solution to this problem is to have the government impose mandatory contract terms on all of our transactions, and I can just imagine how well that would go over with everybody. Until then, don't be surprised if people who want to do business with you also want to get the best advantages they can in that deal, and to take advantage of the cheapest way to get there. That's called capitalism baby.
[ link to this | view in thread ]
BTR1701, 25 Jul 2008 @ 10:56am

Re: Even worse...
> The user might have actually reviewed the
> initial agreement but that same agreement
> could be completely different in 6 months
> with zero notification that it was changed.

Yep, these companies now routinely put a clause in their initial written contract that says they can change the terms at any time via a posting on their web site. They put the burden on the customer to routinely check their web site in order to keep up to date on what legal obligations they've been drafted into.

My Cable TV company does business this way. They apparently expect me to check in with them regularly to find out how they're currently screwing me over.
[ link to this | view in thread ]
Lawrence D'Oliveiro, 26 Jul 2008 @ 5:40am

Free As In Freedom
"The software industry ... tries to get all the benefits ..." should be "The proprietary software industry ... tries to get all the benefits ...". Developers and distributors of Free Software, by contrast, do not try to con you into one-sided agreements--they tend to use licences like the GPL, that give you all the same rights that they have. Can't get more equitable than that, can you?
[ link to this | view in thread ]
Rose M. Welch, 27 Jul 2008 @ 2:37pm

Re: More bars in more places
Umm... I'm pretty sure you can turn around and leave without purchasing an iPhone. You might not choose to, but you have the option of doing so. The point is that you have a choice and you read it and agree to it before they will sell it to you.

You know, as opposed to paying money for a product that you think you're purchasing and then later you find out that you are being held legally liable for an agreement that you didn't see and didn't sign and hence, didn't agree to for a product that you didn't actually purchase.

I think you posted just to get that more-bars-alchoholic line in.
[ link to this | view in thread ]
Rose M. Welch, 27 Jul 2008 @ 2:41pm

Re:
"I couldn't back out for waiting in line...

Yes, you could have.

Oh, wait, did someone physically hold you in place and force you to sign the contract and pay for it?

If so, you should know that contracts signed under physical duress are not binding.

Otherwise, it was a choice. Deal with it, and quit blaming other people for your actions.
[ link to this | view in thread ]
Rose M. Welch, 27 Jul 2008 @ 2:45pm

Re:
"freedom of contract"

If I send you a letter, and put a EULA inside that says you have to pay me $29.99 for the envelope, and the agreement is binding upon the opening of the envelope, would you send me $29.99?

If so, what is your address?

The real solution to this is for judges to strike mighty blows upon the people who put EULAs in thier boxes. Say, "Sorry, that wasn't good enough." when the EULA writing companies sue for copyright infringement. The software selling world would change overnight.
[ link to this | view in thread ]
matt, 28 Jul 2008 @ 8:30am

Time Warner's Definition of a "CONTRACT"
I got their Price Lock Guarantee terms & conditions in the mail.

Great -- they cannot change your price for any reason.

BUT the contract allows them to charge me for broadband overages (I don't live in Golden Triangle/Beaumont testing grounds for metered service), allows them to change ANY programming package or basically change *anything* as long as it is not the price. So they could take all my HD channels away and put them in a new (extra cost) package. Or they could decide my internet is now capped at 10Gb and charge me $1 per Gb after. All retroactively, after I "signed" (no real signature just a verbal "yes" to a computer program on the phone).

Since when do corporations get to make us sign agreements that say, in so many words, "Your commitment is non-negotiable and cannot be altered. Per the terms of this contract, COMPANY can change or do anything they want without changing your commitment to us."

There needs to be a precedent case where a contract is a contract. If they change the terms, they must renegotiate, get a second agreement, and have a signed copy on file. This whole deal where per the contract they can do anything and you have no rights is absolute bullsh!t.

It's not a contract when one party can change the rules during the contract term. It would be like buying a fire insurance policy and then, midterm, having the insurance company send you a letter saying per the terms of your contract we have the right to change your wording to exclude fire as a covered cause of loss.
[ link to this | view in thread ]
Yani, 1 Jul 2009 @ 3:50pm

3g
Is it true that the new phones are quickly discoloring? I read about it on pandalous. It's here: http://www.pandalous.com/nodes/iphone_3gs_discoloring
[ link to this | view in thread ]
دردشه, 5 Jul 2009 @ 3:17pm

tankyo
[ link to this | view in thread ]
Diego Brown, 22 Nov 2009 @ 3:49pm

FOR SALE NEW:: Apple Iphone 3GS 32GB,Motorola Droid and Sony Ericsson XPERIA X2
FOR SALE NEW:: Apple Iphone 3GS 32GB,Motorola Droid and Sony Ericsson XPERIA X2

We offer shipping service Worldwide at affordable rate.We ship Internationally! All items provided by us are Brand New, Boxed and with Full Warranty.

We offer a 2 Year Return Policy for defective items from the date of arrival (DOA) at your location.We offer prompt shipping from OUR Warehouse,Typically the product will arrive within 2/3 Days Via Either Fedex/Ups or private Courier Sevices

NOTE: Shipping Charges are Base On Destination,So when Placing Order with Us Kindly Include your Location Such as State and Zipcode.

BUY 2 PIECES GET 1FREE AS A DISCOUNT OK.

Iphone 4GB .............$ 200USD
Iphone 8GB Version 1.1.3 ..........$ 230usd
Iphone 16GB Version 1.1.4 ..........$ 280usd
Iphone 3G 8gb New Software Version 2.0 ...........$ 280usd
Iphone 3G 16gb New Version Software 2.0 ...........$ 300usd
Iphone 3G-S New Version Software ...........$ 350usd

Nokia N97 32GB..........$ 300usd
Nokia N96 16GB ....................$ 270usd
Nokia Aeon ........................$ 400usd
Nokia N80 ........................$ 200USD
Nokia 8800 Arte ..................$ 380usd
Nokia N95 8GB .............$ 250usd
Nokia N95 ...................$ 270usd
Nokia N81 8GB ............$ 250usd
Nokia 5300 XpressMusic .................$ 200USD
Nokia 5800 XpressMusic................$ 260usd

Motorola Droid............... $ 400 usd
BlackBerry BOLD 9000 ...............$ 300usd
BlackBerry Storm ...............$ 250usd
BlackBerry Pearl 8800 ..........$ 200USD

Samsung B & O Serenata F318 ========$ 400usd
Samsung i8910 Omnia 16GB HD =====$ 320usd
Samsung i900 Omino=== $ 300usd

Sony Ericsson Aino .........$ 300usd
Sony Ericsson Satie (Idou ).......$ 340usd
Sony Ericsson W1 Unlocked ....$ 400usd
Sony Ericsson C905 ...............$ 250usd
Sony Ericsson XPERIA X2 ......$ 300usd

Do place your order in the below manner....

Full Name:.
Shipping Address:.
City:.
State:.
Country:.
Zipcode:.
Tel:.
Model of your unit order:.
Quantity(How many unit do you want to buy):.

We strive to have excellent communication & customer service.

Contact Us for more information by E-mail!!!

Email to contact..... applemobiles.limited@live.co.uk
Email to contact..... applemobiles.limited@gmail.com

Chating Hotmail Msn.......... applemobiles.limited@live.co.uk

Chating Yahoo Msn.......... applemobiles.limited@yahoo.com
Contact Number: +447024073514

ALLAHU WE BLESSED YOU ALL....
MASSALAM.
[ link to this | view in thread ]
Malik, 16 Feb 2010 @ 5:15am

We are online wholesaler for unlocked gsm cell phones and accessories and they comes with one year international warranty.
We provide convenient, cost-effective way to purchase your cell phone. you email us and obtain information about the latest products at a very competitive price.

Our latest promo is BUY 2 GET 1 FREE!!!

INTERESTED BUYER SHOULD CONTACT US THROUGH
CONTACT EMAIL: NEXTLEVELELECT.INC@HOTMAIL.COM
SKYPE: NEXTLEVELELECT.INC
Tel#: +447024071637

Brand new Apple iphone 3gs 32gb for $300usd
Brand new HTC Hero for $350usd
Brand new Sony Ericsson Satio for $300usd
Brand new Motorola Droid for $360usd
Blackberry Bold 9000====$250usd
Blackberry Curve 8320====$240usd
Blackberry Curve 8310====$220usd

HTC Touch Pro========$340usd
HTC Touch Diamond=====$250usd
HTC Touch Dual===$200usd

Nokia N97 ===========$350usd
Nokia N96 (16GB)=====$320usd
Nokia N95 (8GB)=====$280usd

Nikon Digital Cameras

Nikon D700 Digital camera ..700usd
Nikon D40 Digital Camera with GII 18-55mm Lens $300usd
Nikon D80 Digital Camera 400usd
Nikon D90 Digital camera 500usd
Nikon D3 12.1MP DSLR Camera..$1200.00USD
Nikon D60 $230.00USD
Nikon D300 Camera .$600USD
Nikon D200 Digital Camera 550usd

1)Flash player support
2)Quick back option without going to home screen while switching between apps.
3)File browsing and storing
4)Option to attach images, file etc from email app itself.
5)Multiple signature options
6)Manual rotate gesture option
7)Notes app should be more powerful word process (fonts, text size etc)
8)All Grouping of contacts for test message e.g. friend and family groups.
9)App for grouping key social networking sites(for posting universal photos, text to all social networking sites together.
10) Auto spell check in safari browser (like mozilla) when adding text in twitter, facebook leaving comments at blog etc.
11)Build in Flash in camera for night photo shot
12) Front facing camera for video Chat
13) Use cover flow for using multitasking third party apps (limit to 5 apps, not to drain the battery life)
14)Thin quick time player app to run video downloaded from web.
15)Group notification alert or not attended tasks(missed MMS, SMS, PHONE, Chat message, meeting, event etc)on single screen.
INTERESTED BUYER SHOULD CONTACT US THROUGH
CONTACT EMAIL: NEXTLEVELELECT.INC@HOTMAIL.COM
SKYPE: NEXTLEVELELECT.INC
Tel#: +447024071637
MAY GOD BLESS YOU
[ link to this | view in thread ]
smith ashley, 4 Mar 2010 @ 7:16pm

Re: Re: More bars in more places
Carrier: AT&T (GSM based), T-Mobile, and Other GSM carriers*
Please check compatibility with your service provider
Technology: 3G AT&T Standard , Quad Band 850/900/1800/1900
Feature: 3+ Megapixel Camera, Bluetooth, Calendar, Camera, Candy Bar Form, Edge, Email Client, GPS / Location, High-Speed Data GPRS, Megapixel Camera, MP3, Smartphone, Speaker Phone, Touch Screen, Video Capture, Video Clip, Voice Dialing, Wi-Fi

Weight: 4.76 oz
Talk Time: Up to 5 hours on 3G
Stand By Time: Up to 300 hours

Product Includes
Apple iPhone 3G S 32GB Unlocked
Apple Earphones with Remote and Mic
Dock Connector to USB Cable
USB Power Adapter
Documentation
SIM eject tool
[ link to this | view in thread ]