Court Rejects Online Terms Of Service That Reserve The Right To Change At Any Time

from the wow dept

Fri, May 8th 2009 8:49am — Mike Masnick

If you look at many online terms of service, they reserve the right to change the terms at any time. Some force you to re-agree to the terms -- but others don't. In the past, courts have ruled that if someone didn't agree to the changed terms, the new terms could be found to be unenforceable, but a recent decision has gone much further, effectively saying that the entire terms of service are void if they claim they can be changed at any time. Sent in by Blake, the ruling said that Blockbuster's online terms of service were "illusory" and unenforceable because it included a clause saying it could change the terms at any time. So, even though the term it was trying to enforce was in the terms that the person agreed to, the court found the entire terms unenforceable. This is quite a ruling that could have a pretty major impact on any online service that has terms that insist they can change at any time. While it's just a district court ruling and may be reversed on appeal, it's something anyone running an online service should pay attention to.

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Filed Under: changed terms, illusory, terms of service, unenforceable
Companies: blockbuster

38 Comments

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Ima Fish, 8 May 2009 @ 8:58am

"effectively saying that the entire terms of service are void if they claim they can be changed at any time"

Thank you, thank you, thank you... even though an appellate court will certainly overturn it.
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Eric, 8 May 2009 @ 9:16am

Lori Drew case??
Wouldn't this have an effect in the Lori Drew case then? Since I'm sure MySpace probably has one of those caveats in it's TOS.
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pat donovan, 8 May 2009 @ 9:27am

patents
I have seen the future and it is free. 20$ for 150 million hits free. Free apprenticeships (articling lawyers, 95. Vancouver, BC);
candy stripers in hospitals; free labor for newspaper reporters student posts, ottawa '09)

legal aid exploded from 30m to 250m since in BC. It's a real law abiding place right now, too. (NOT)

the patent bubble turf wars (notary publics, etc) will make the birth of the party quebec-quois (12 theiving conservative bagmen dead by car-bomb, appartently) look tame.

the broasdcast treaty (anything I can find can be patented as mine), takedown by request (the web);

realisticly, and putting a dandyloin in a labeled bottle can cost you your house right now.

the turf wars are gonna be LOTS of fun.

and free.

pat donovan may:09
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Rob R., 8 May 2009 @ 9:41am

As it should be
I hope the other courts do not overturn this ruling, as it was totally correct. No one should be able to change their terms and then try to enforce a rule that no one ever agreed to.

I understand that most people never even read the TOS, but right is right.
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A Dan, 8 May 2009 @ 9:45am

Re: As it should be
That's not what this ruling was. According to the summary here, the newly-added stuff had already been rejected in many other cases. This ruling says that if you have the "may be changed at any time" text in it, none of the terms are valid (even the ones you agreed to).
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The infamous Joe, 8 May 2009 @ 9:49am

Re: Lori Drew case??
You bring up an excellent point. Since they only charged her because she violated the TOS, if the TOS are null and void, then she didn't violate anything.

Good job, Eric. Now run any hide before the "Kill Lori Drew" angry mob hunts you down and stones you.
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Anonymous Coward, 8 May 2009 @ 9:50am

Re: Re: Lori Drew case??
Hey, if then can twist the law, we can use the loophole they make.
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Killer_Tofu (profile), 8 May 2009 @ 9:51am

Re: Lori Drew case??
Same thing came to mind here.
I am sure the feds will try to pull all the strings they can to make sure their precious grandstanding trial isn't ruined in any way for Lori Drew though.
We have seen how much they care about what the actual law says.
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Anonymous Coward, 8 May 2009 @ 9:56am

I wonder...
Could this ruling be applied to credit cards?
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Anonymous Coward, 8 May 2009 @ 9:58am

Abuse of the legal system
One of the abuses of the legal system is placing false claims or unenforceable clauses. Even if the clause is unenforceable, the little guy has virtually no chance of challenging it. This ruling restores some balance.
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The infamous Joe, 8 May 2009 @ 9:58am

Re: I wonder...
..and cell phone contracts..?
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Anonymous Coward, 8 May 2009 @ 10:01am

Tune to MSNBC
Is it just me or does it look like David Shuster has a hang over?
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Anonmyous12, 8 May 2009 @ 10:07am

WARNING: OFF TOPIC! DIVE...DIVE!

I feel compeled to say it: Lori Drew's actions while repugnant, and possibly (IMHO) rising to the level of harrassment (it shouldn't matter weather it is done on-line or off), were most likely not illegal. She should appeal her conviction. As for this ruling, GREAT news. A common sense decision? You mean terms of service that exist to provide a framework, shouldn't be able to be bent around the company's wishes? What an AMAZING concept.
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Paul Brinker, 8 May 2009 @ 10:25am

Great idea here
The court said the TOS was just a Contract, Contracts, even those that allow change, require both partys aggree to the change. In this case, the line saying "I can change the TOS anytime I want for any reason I want and I dont have to tell you about the change" caught the courts attention because in contract law you dont have that right.

Credit Card law does not count here because there only allowed to change terms with in stated limits (provided by the state) and your allowed to reject those changes (by paying off said credit card).
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Anonymous Coward, 8 May 2009 @ 10:33am

Re: Lori Drew case??
Ex Post Facto, past can't be affected by the present
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Stephan Kinsella (profile), 8 May 2009 @ 10:53am

The libertarian view on fine print
Mike, what are your thoughts on this? I'm not so sure I disagree--I say this as a libertarian. My own theory of contract is presented in my article A Theory of Contracts: Binding Promises, Title Transfer, and Inalienability.

On the issue of the enforceability of "fine print" and related matters (that may have a bearing on the issue decided here), see my comments here:

The problem with such an attack on shrinkwrap etc., is that if you prevent it, vendors will find a way around it. E.g. if you say EULAs are unenforceable b/c they are not known ahead of time, then the software vendor can simply sell only thru stores or outlets that make the customer sign an agreement upon purchase. Then the EULA-opponents will just shift their attacks and come up with another argument.

That said, I do think a better argument against even click-wrap agreements (which ARE agreed to before the purchase) is that there is often no meeting of the minds on the fine print. If the customers routinely just click the "I have read and agree to these terms" box but never do read it, and the vendor knows this, then it's a sort of fiction to assume both sides have actually agreed on these terms. For example supposed buried in fine print for a contract for sale of a $20 program, is the provision, "Buyer agrees to give 50% of his income to Vendor for life." Is this enforceable? Of course not. Why not? Because there was no agreement to this. So the "hidden" terms have to be in some sense reasonable, at the least.

Also here:

There's a lot of confident assertions about the law being made here by non-lawyers. I, an IP attorney, am not even sure what the law is, but I have a guess (I'd need to review the law on this to be sure). I think that the law is that in general, shrinkwrap and similar agreements can be binding, but if you try to do this to effectively get more protection than copyright law allows, this would probably not be enforceable on some kind of confusing monopoly/policy/preemption grounds. The state gives you a monopoly (copyright, or patent), but you are not supposed to abuse it or try to extend it.

(My main expertise is in patents, but I think something vaguely similar would apply for copyright. But for patents, for example, say you have 10 years left on the patent term: you may not do an 11 year license; this is considered to be an impermissible extension of your monopoly, and an abuse of it--of course, this makes no sense, b/c you could just do a fixed license fee instead, but whatever.)

As for libertarianism, my view is that the state is WRONG to strike down contracts that go beyond the patent and copyright type protections. I believe two consenting parties have the right to enter into whatever terms they want, even if they are stricter and more draconian than those set by modern IP law. But there are 3 strong caveats to this. First, I do not believe that something is part of the agreement *merely* because it is written down in the fine print of a click-wrap or similar type agreement; there needs to be true meeting of the minds (for example, suppose I sneak into the last clause of a long click-wrap agreement, "And the purchaser hereby agrees to give me half his income for the rest of his life." Well, I konw that you are just gonna click "yes" without reading, so I am aware that you are NOT consenting to this term, so there is no meeting of the minds; that should not be enforceable, and arguably neither should boilerplate, "unreasonable" terms in fine print that the publisher knows the customer is not even really aware of).

Second, there are many practical limits to the real-world enforceability of such terms. Suppose A sells B a book--rather, partial ownership in a book--but keeps partial ownership, the "right to show others." So B is like a borrower of the book, or a lessee--he has no right to use the book in such-and-such a way--he has no right to show it to his friend C. But let's say he does: C is visting and sees the book on the coffee table; and browses it. He thinks all he needs is B's permission, which he has; but in reality it is not B's book (completely); so C is seemingly trespassing against A's rights, by using A's property in a manner A has not consented to.

But I believe that in such cases, A does not always, or even usually win, vis-a-vis C. This is b/c by A permitting B access to an object where A's remaining rights in the object are not apparent to third parties like C, it is more A's fault than C's that C is unaware he has no permission. (My view here is similar to the way the law deals with stolen checks--usually if a check is stolen, and/or forged, the drawer is not liable or responsible for this; see UCC sec. 3-403. However, if the drawer is negligent (say, he leaves his checkbook in plain view when he knows unscrupulous people might take it), then he can't assert the forgery as a defense against others who took the check etc. -- see UCC - § 3-406. NEGLIGENCE CONTRIBUTING TO FORGED SIGNATURE OR ALTERATION OF INSTRUMENT.

(a) A person whose failure to exercise ordinary care substantially contributes to an alteration of an instrument or to the making of a forged signature on an instrument is precluded from asserting the alteration or the forgery against a person who, in good faith, pays the instrument or takes it for value or for collection.

(b) Under subsection (a), if the person asserting the preclusion fails to exercise ordinary care in paying or taking the instrument and that failure substantially contributes to loss, the loss is allocated between the person precluded and the person asserting the preclusion according to the extent to which the failure of each to exercise ordinary care contributed to the loss.")

Third, I believe practicalities of the business world would tend to make abusive or unreasonable restrictions on the use of products purchased, or information dissemination, very unpopular, and thus to impose pressure on publishers/sellers to minimize all this.

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TheStupidOne, 8 May 2009 @ 10:54am

So now I can't ...
Get people to agree to awesome terms of service but with an I can change it on you clause and then change it to say i own their souls? sad
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Jason, 8 May 2009 @ 10:58am

Re:
Ssssssshhhhhh! Don't let them hear you!
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Matt, 8 May 2009 @ 11:01am

re:
don't be so sure.

The fact that the terms you agree to are not necessarily the ones that end up later, is indeed something that will eventually reach supreme court.
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Jason, 8 May 2009 @ 11:02am

Re: Re: As it should be
I think even that is perfectly legitimate. I mean it's grossly inequitable for just one party to be able to change the rules of an agreement anytime they see fit. Essentially the court is leveling the field, saying: If you can change the rules anytime you want, then so can the other party - thus, all rules are void.
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Jason, 8 May 2009 @ 11:07am

Re: Re: Lori Drew case??
Actually, in this case maybe not.

IF (big if here) the case is still eligible for appeal, then a current case law decision might be brought to bear. It's not the same as though it were new legislation, which can seldom be applied retroactively.

Also, it fully depends upon whether the period for appeal has lapsed. If so, then ex post facto applies. If not, the ball may still be in play.
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Anonymous Coward, 8 May 2009 @ 11:30am

Re: The libertarian view on fine print
tl; dr
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AnonCow, 8 May 2009 @ 11:31am

Common sense prevails however fleeting it may be...

If one party to an agreement can change any aspect of the agreement at any time without prior notification or acceptance by the second party, there isn't really much of an agreement. It's really just the more powerful of the two parties telling the other party the way things are going to be...
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Lickity Split, 8 May 2009 @ 11:52am

Re: patents
WTF are you talking about?
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New Mexico Mark, 8 May 2009 @ 12:17pm

Darth ISP
Whenever I see fluid terms of service, I picture the company as Darth Vader...

(breathe, breathe) I have altered the deal. Pray I do not alter it further. (breathe, breathe)
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Killer_Tofu (profile), 8 May 2009 @ 12:49pm

Re: Darth ISP
Lol.
This is made slightly more hilarious by my recent watchthrough of Chad Vader.
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Jason, 8 May 2009 @ 12:54pm

Re: So now I can't ...
The Dreh Pi-yuht Wobbuts has come...

FAH You SOOOOOES!!!!
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Clueby4, 8 May 2009 @ 4:14pm

while in the commision of a felony concept
Seems perfectly reasonable to me. Just like "while in the commission of a felony" concept.

To me the "make any changes" and arbitration clauses are quite unconscionable and illustrate plainly the intent to obstruct reasonable consideration.

It pretty discouraging that anyone needs to point this out, worst it had to be done so in the courts.

An agreement where one party can change the terms without the consent of the other, is NOT an AGREEMENT, scam perhaps maybe even a flim-flam.
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nasch, 8 May 2009 @ 4:24pm

Re: Great idea here
You don't have to pay off your credit card to reject the new terms, you just won't be able to continue using it if you reject them. That is, you can continue paying it off under the old terms, but can't add any new charges.
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ECA (profile), 8 May 2009 @ 4:39pm

LOVE IT
NOW can we do this with credit cards and BANKS??

I find it funny that as a Cit, we cant change a contract A NEEDED. but the CC can and the bank can and the LANDLORD CAN..
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Robert A. Rosenberg, 8 May 2009 @ 5:11pm

TOS are not valid contracts in the first place
A contract is a meet of the minds. One party presents the contract to the other who then can either agree to it or make changes and present them to the original party. This alteration and passing back-and-forth process continues until the current receiving party agrees to the terms as they then read. Since a TOS is presented on a "Take It or Leave It" basis with no capability of the customer to alter the terms, this does not represent a valid contract even when the customer agrees to the offered terms. The term that allows the vendor to alter the terms after the fact makes the supposed contract even less valid.
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VRP, 9 May 2009 @ 10:29am

Re: Re: Lori Drew case??
If you're referring to ex post facto laws AC, the SCUS has [wrongly] long held this constitutional principle applied only to criminal cases / laws. In any event, I'm unaware of any other country even having a prohibition against ex post facto laws, let alone an enforceable one.

VRP
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VRP, 9 May 2009 @ 10:40am

Re: re:
"The fact that the terms you agree to are not necessarily the ones that end up later, is indeed something that will eventually reach supreme court."

But only on a Petition for Writ of Certiorari and not beyond. Response will always be "Petition Denied". Remember who owns and operates the Supreme Ct, and remember how that court is politically, not judicially, driven. Justice isn't ever even considered by members of the court. There's no place for such a concept in a court of law.

VRP
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Pat, 9 May 2009 @ 2:37pm

Terms Change at Any Time - On Line or Off
Contracts that can change at any time, whether online or offline, are not contracts at all but illusory offerings that have no specificity worthy of meeting the good faith terms to be contracts.

If contract has no meaning and doesn't fulfill legal qualifications to be a contract, it creates the appearance of a contract but denies its own purpose for existence - to be bound.
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Steve R. (profile), 10 May 2009 @ 7:14pm

Its a Start
Now if we can fix the fiction of "one click agreements", contracts by adhesion, and that products are only leased/licensed (not sold) we will be on the road back to rationality.
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Steve R. (profile), 10 May 2009 @ 7:33pm

Re: Re: I wonder...
As a quick take, it might not apply to credit cards since they let you "terminate" your card if you don't agree to the change in terms.

As for cell phone contracts, I would not consider them valid. One aspect of a contract is the concept of damages. If you terminate early, I don't see what the real damage is to the phone company, so I don't see how they could collect an early termination fee.

I suspect that they would claim that the "damage" is that they gave you a phone at a significant discount and that they needed to recoup that "damage" if you quit their service. But if they did that, the early termination fee would then be on a sliding scale. Do the cell phone companies do that? (Sprint many years ago had an early termination fee even if you kept your old phone. Clearly no damage in that situation.) I would take the position that the phone was simply an enrollment gift, a loss-leader in a sense. So if the phone company made a bad business decision by giving you a gift, then they are NOT entitled to any early termination fee.
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jilocasin (profile), 11 May 2009 @ 8:34am

Too much power to corps, too little to consumers
This just goes to show that the corps have way too much power.

Any contract that's subject to change without notice isn't a contract. Anytime you see those terms, especially in a privacy notice, I read them as no contract exists.

Other courts need to follow this. Just because many companies like to do this doesn't make it right.

The other thing that needs to happen is that consumers should not be able to waive any of their rights, no matter what the contract says. Companies can waive whatever rights they want. Consumers aren't in a position to negotiate especially when companies present 'contracts' in a take it or leave it manner.

Between these two changes (no waiving of consumer rights, no unilateral contract changes) a majority of illicit business practices would be curtailed.

Of course should that happen, expect companies to crawl out of the wood work complaining about how this would be unfair and infringe upon their rights to squeeze money out of the unsuspecting public, er. make a profit.
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Scott, 11 May 2009 @ 7:52pm

Meeting of the Mindless
How can you have a contract agreement without a meeting of the minds? Certainly not when one of the parties is free to change their mind at any time.
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