Hyperlinked Contract Terms Are Enforceable

from the even-if-not-visited? dept

Thu, Sep 3rd 2009 4:47am — Mike Masnick

There have been plenty of questions over the years about the enforceability of online contracts, especially of the "clickwrap" variety. However, a recent ruling apparently says that contract terms are acceptable even if hidden behind a hyperlink. Apparently, the court found that because the link to the terms is "highlighted" in a different color, it's consider conspicuous enough that a reader should have clicked on it and read it.

Now, that's interesting to me, because I'd just been reading law professor Peter Friedman's blog post for his first year Contracts law class, where he talks about how few people actually read online agreements, and how many people probably agree to things they didn't think they had agreed to:

65 out of my 66 students (law students in a contracts class!) admitted in our first class they rarely or never read the online agreements they "agree" to. The only empirical survey I am aware of regarding consumer behavior in connection with online agreements found the following 7 years ago:

50% of the respondents said that they sometimes read online agreements and 40% never read them;
Thus, only 10% of the respondents always read the online agreements that they encountered;
Well over half of the respondents (64%) always click the Accept button and most of the others (35%) some times Accept;
More than half of the respondents (55%) didn't believe that they were entering into a legally binding and enforceable contract even after clicking I Accept;
Most (79%) never ever kept a copy of any click-wrap agreement that they entered into;
The majority of respondents (90%) indicated that they never completely read shrink-wrap agreements;
38% of the total respondents came from the IT/Internet/E-commerce industries.
Andrew Gatt, "Electronic Commerce -- Click-Wrap Agreements: The Enforceability of Click-Wrap Agreements," doi:10.1016/S0267-3649(02)01105-6 (2002).

We've seen similar things in experiments that offered prizes within the clickwrap agreements, to see if anyone claimed them -- and it took four months and 3,000 downloads for anyone to claim the prize. In many ways, this actually reminds me of an old story about Van Halen's concert contracts with local promoters and venues, that was getting lots of attention last month, after it was featured on an episode of This American Life. Many people have heard the story of how the band had a rider in its contract demanding a bowl of M&M's backstage with all the brown ones removed. And most people who heard that story assumed it was a sign of rockstar divas with ridiculous demands. However, the true story is that it was actually in there to see if the people setting things up had actually read the details of the contract:

Van Halen was the first band to take huge productions into tertiary, third-level markets. We'd pull up with nine eighteen-wheeler trucks, full of gear, where the standard was three trucks, max. And there were many, many technical errors -- whether it was the girders couldn't support the weight, or the flooring would sink in, or the doors weren't big enough to move the gear through.

The contract rider read like a version of the Chinese Yellow Pages because there was so much equipment, and so many human beings to make it function. So just as a little test, in the technical aspect of the rider, it would say "Article 148: There will be fifteen amperage voltage sockets at twenty-foot spaces, evenly, providing nineteen amperes . . ." This kind of thing. And article number 126, in the middle of nowhere, was: "There will be no brown M&M's in the backstage area, upon pain of forfeiture of the show, with full compensation."

So, when I would walk backstage, if I saw a brown M&M in that bowl . . . well, line-check the entire production. Guaranteed you're going to arrive at a technical error. They didn't read the contract. Guaranteed you'd run into a problem. Sometimes it would threaten to just destroy the whole show. Something like, literally, life-threatening.

And, indeed, what the band found out is that the contract is just as enforceable whether or not you read the contract -- and that appears to be the result online too. While I have heard of a few cases of courts rejecting clickwrap agreements, it certainly sounds like more and more are considering them to be viable, legally-binding contracts.

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Filed Under: contract, eula, hyperlink

39 Comments

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..., 3 Sep 2009 @ 5:05am

What do they have to hide?
Seems to me that an attempt to hide the terms of a contract from potential customers is fraud.
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Richard, 3 Sep 2009 @ 5:18am

There just isn't time
...to read all that stuff - let alone to work out what it means. This kind of thing needs to be governed by standard terms and conditions. Non-negotiated non-standard contracts should be illegal.

I believe that the EFF has some webpages that deal with the t's and c's of a number of well know web based services and in particular draw attention to significant changes.

Having read some of that stuff I decided that I would never have anything to do with certain services.

Some of them, if thought through are sort of self contradictory - almost to the point of comedy.

I particularly liked the provisions about names in WoW - which amount to : You shall not choose a name that is either meaningful or meaningless....
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Chronno S. Trigger (profile), 3 Sep 2009 @ 5:28am

Re: There just isn't time
"I particularly liked the provisions about names in WoW - which amount to : You shall not choose a name that is either meaningful or meaningless...."

Have you ever used that? They have two terms and conditions before you even start playing. Then there's another one after every single update and patch. I swear I've clicked I agree 12 times and have no idea what it says. I tried reading it once but it seemed to be in another language, and it would have taken me longer to read it than to play the game.
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Anonymous Coward, 3 Sep 2009 @ 5:29am

So according to them I should have read the 5 links on the main text (plus clicked a lot elsewhere in your page) because all those links are conspicuous and tell me to click them? Those contracts are generally so full of legalese that they are almost unreadable anyway... and also for us non-US residents, those contracts are generally not localized to our laws, and not even on our mother tongue. So yes, you may see a point where a contract may be kind of needed, but saying that clicking on "Accept" means anything is stretching it a little too much.
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F'ing reporters, 3 Sep 2009 @ 5:37am

How many times have we heard about brown M&Ms?
This is the first time in twenty years that I've heard the real story and it's way more interesting than what has been reported before.
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Hardik Upadhyay (profile), 3 Sep 2009 @ 5:59am

Hyperlinks and Online Contract are meaningless
If you check out the theme of the online contract concept, its totally useless. How many of you are actually reading EULA??? How many of you actually know your rights which are associated with the product. If you think honestly, it will actually boil down to zero. So I guess the W3 consortium should come into picture to change the whole scenario. To get more information, you can read my blog at http://hardikupadhyay.blogspot.com or you can follow me on twitter at http://twitter.com/hardikupadhyay
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Lachlan Hunt (profile), 3 Sep 2009 @ 6:17am

That's ridiculous. Most people who aren't lawyers wouldn't have the ability to comprehend the legalese included in such agreements even if they did read them. I've tried to read a couple, but most are so long and incomprehensible that there is little point in trying. The fact that these are considered legally enforceable, regardless of their content, is ridiculous.

There needs to be some kind of limits on what can be included in an agreement like that, or at least limits on the possible concequences of breaching it.
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Shane, 3 Sep 2009 @ 6:30am

What about the Color Blind?
So most hyperlinks are blue, and nearly 5% of all men not able to see colors like red and blue, are they exempt? I know that studies of folks with cell phone contracts show that they don't read them. And often lawyers have pushed back on a simple list of "did you know"s due to the implied idea that you don't have to read the fine print...where are we left?
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anon, 3 Sep 2009 @ 6:30am

er...
So what about browsers that don't render links in different colors? Or highlight them? Your HTML design is just a suggestion, users are free to use their own preferences and settings in their browser.
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ender, 3 Sep 2009 @ 6:36am

So the contract is enforceable because the link is coloured differently. How can they be sure that it was coloured differently on user's computer - after all, I browse 75% of my time with a custom stylesheet enabled on Opera, which replaces all website colours with colours I find easier on my eyes (yes, I'm composing this message with my stylesheet enabled, too).
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Richard, 3 Sep 2009 @ 6:36am

Cory Doctorow's take
Look at http://www.informationweek.com/news/global-cio/showArticle.jhtml?articleID=197003052
for a good discussion of this - and put his rider at the bottom of all your emails

READ CAREFULLY. By reading this comment, you agree, on behalf of your employer, to release me from all obligations and waivers arising from any and all NON-NEGOTIATED agreements, licenses, terms-of-service, shrinkwrap, clickwrap, browsewrap, confidentiality, non-disclosure, non-compete and acceptable use policies ("BOGUS AGREEMENTS") that I have entered into with your employer, its partners, licensors, agents and assigns, in perpetuity, without prejudice to my ongoing rights and privileges. You further represent that you have the authority to release me from any BOGUS AGREEMENTS on behalf of your employer.

There that's fixed it - at least for every company that has an employee who reads this site.
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Michial Thompson, 3 Sep 2009 @ 6:42am

Just because people are too stupid to read
Just because people are too stupid to read the terms that they are agreeing to does not invalidate them. It only goes to prove that people are too stupid to be allowed behind a keyboard.

I really don't see the point of pouting and whining over this issue.
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matt, 3 Sep 2009 @ 6:47am

ground rules
We need ground rules. For example these agreements need to be limited to a certain # of words and the language must be simple enough for the "Average American" to understand them.... which would put them on about an 8th grade reading level.

If I read every 25,000 word legalese agreement presented to me I would need a day to be 48 hours long instead of 24.

It is simply absurd to have to read and agree to a 25,000 word legal contract every time I do even the simplest task.

F-ing lawyers

And what if you disagree or need clarification on the interpretation of the language? Nobody can help you. The response from the company will be "these are our terms accept or decline them."

Imagine if before you got a Big Mac you had to sign and initial a 25,000 word legal contract. It is farking ridiculous and needs to stop.
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Free Capitalist (profile), 3 Sep 2009 @ 6:50am

Re: Just because people are too stupid to read
I would say I mostly agree with you.

In the cases cited by Mike's link, the terms in question were regarding the fair conduct of a transaction, including remedies and arbitration clauses. This I would consider fair (as in.. they should have read the contract), since the clauses don't seem to infringe on anyone's rights or try to make a grossly unfair

However, I would take issue with a court decision supporting a contract where specious or potentially infringing terms were embedded, such as the release of private information without a clearly visible opt-out clause.
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David (profile), 3 Sep 2009 @ 7:04am

Another problem
This assumes that the web page displays the same in everyone's browser. If you have a Greasemonkey script or CSS changes or are using some "non-standard" browser that doesn't display links as originally intended, then you may not see the link as conspicuous. Would that be a legal excuse?
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Richard, 3 Sep 2009 @ 7:17am

Re: Re: Just because people are too stupid to read
OK if the conditions were reasonable - but many conditions aren't. If you read the Cory Doctorow article that I linked to above you will see that the trend is to include unreasonable t's and c's pretty much by default.

eg the original myspace contract gave them the rights to every original song uploaded on the site, the VISTA EULA gives Microsoft the right to delete any file it doesn't like from your hard drive. Most commercial webservices will attempt to get some kind of copyright control over user created content - not always as extreme as the myspace example but still beyond what you would normally expect.

Personally I think it should work the other way around. The user should create (perhaps with some legal help - or there could be standard ones) his/hers own terms and conditions for signing up to these services. They could then be matched against the company's requirements and any mismatch highlighted. The user would then get the option to waive the condition in question or punt it back to the company who would then be required to give it consideration (by a human).

That way maybe we could create a two way "market" in t's & c's rather than the land grab we have at present.
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anon, 3 Sep 2009 @ 7:17am

Even if you read the linked part before clicking 'Accept'...
...how do you know that what you've agreed to is what they bring up in court later when they decide you've infringed on something? The people who create online EULAs can change anything they want at any time and, unless you can prove otherwise, you'll be agreeing to anything they feel like putting your way.

I'll use an extreme example rather than play with subtleties.

You read the online EULA and clicked 'accept' as you agreed to allow the company to update their software on your machine as and when it was required by their software updating service.

Some months later, you get dragged into court for somehow breaking the EULA.

"The online EULA says you agreed we could kill your pets, have sex with your partner, install any malware we feel like uploading to your computer and extract funds from your bank account daily for rental of the software. You clicked 'accept' so you must have been happy with all of that. Although we did run over your cat, your partner is not at our offices every Thursday and we're still waiting for the agreed to additional payments."

Personally, I'll stick with whatever is on the disc at the time as they can't tamper with what sits in the box on pressed media. Tin-foil hat or not, I deeply distrust any kind of fixed agreement that is so easily editable as even a modest alteration can have far-reaching consequences; the larger the EULA and the more complex the legalese contained in it, the easier to hide something unpleasant and the worse it could become.
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Dallas IT Guy, 3 Sep 2009 @ 7:29am

Re: Just because people are too stupid to read
And what about those of us with advanced degrees, a high level of reading comprehension in English, and who are quite technically literate, who *still* don't understand the language of the agreement?

I would argue that these agreements are written in such a way that it *requires* a lawyer to correctly interpret them.

This is a fundamental problem. How can we honestly expect someone to agree to a legally binding contract that they don't, and can't reasonably be expected to, understand?
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Craig Foster, 3 Sep 2009 @ 7:34am

Re: Even if you read the linked part before clicking 'Accept'...
I agree.

I PDF (signed with an email cert) online Ts&Cs, as you never know when it'll come in handy.

My previous ISP had a section requiring any change to be agreed by both the ISP *and the client*. When they altered the terms to require a additional penalty fee for leaving early, I whipped out the PDF and said 'do you really want this to go any more pear-shaped than it is?' to which they replied 'here's your refund'.

Give someone a way to weasel their way into a better position, and you can be guaranteed they'll use it.
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ChurchHatesTucker (profile), 3 Sep 2009 @ 8:06am

Re: Re: Even if you read the linked part before clicking 'Accept'...
"I PDF (signed with an email cert) online Ts&Cs, as you never know when it'll come in handy. "

And it usually has some clause like, "we can change these terms with no notice." Part of the reason I don't pay any attention to them in the first place.
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kilroy, 3 Sep 2009 @ 8:10am

Re: Just because people are too stupid to read
You cannot be serious!!! Are you implying that we should all get a law degree before we are permitted to do anything else? I have tried to read that crap, and believe me I am intelligent.

However, I know that lawyers intentionally create documents that only other lawyers could fully understand. The idea being that if you need a lawyer to comprehend it you will pay some lawyer for that service.
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TheStupidOne, 3 Sep 2009 @ 9:06am

Purchased Software
a lot of purchased software does the same thing, but those terms and conditions aren't just hidden behind a hyperlink, but inside the install file of the software that you have to buy, open (making return impossible), and run on your computer before even seeing.

I've often wanted to write software and include a clause granting me the sole ownership of all of their property. Then show up with a truck and start taking things and watch the mayhem that results
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DragonRider, 3 Sep 2009 @ 9:07am

Too Stupid to READ....
I find I take exception to a lot of the comments here. EULA's and other agreements are ridiculously large, tedious and confusing documents, to the point of even some companies don't know all the ins and outs of what they are asking you to sign. The complexity of these documents and what they hide is why so many of us ended up with the Sony rootkit on our hard drives. Part of this is our own fault (McDonalds coffee, Hardees obesity suit, burglars suing homeowners for injuries sustained during burglary, and others). Because our system is set up so that anyone can sue for nearly any frivilous reason and stand a high chance of winning, companies go to extaordinary lengths to protect themselves.... We, the average consumer get to pay the price. The fact that there are some out there that would use this to their advantage is a side symptom of the "sue and get rich" mentality... In the real world(ie anywhere out side of a courtroom) Technical documents for the average person MUST be written at an 8th grade level (try writing a maintenance guide for an air brake system for a commuter rail at an 8th grade level... ) that is the standard, and given that the majority of US Citizens barely test out at a 10th grade level, any attempt of the average citizen to read and understand these "contracts" is ludicrous at best... at clown show at worst... The US Tax Code is something of far more immediate importance to americans, and yet... it is nearly as bad, if not worse than most of these contracts...

The whole system needs to be scrapped and revamped... and patently ridiculous lawsuits should be pre-emptorily dismissed (McDonalds??? Seriously... )
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Jesse, 3 Sep 2009 @ 9:46am

If the contracts were (administered to americans) were in French, would they be viable? If they were in Shakespearean? What about dense legalese? If the average citizen can't understand it, I don't see why that would be any different than writing it in a foreign language to conceal its contents.
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Jason (profile), 3 Sep 2009 @ 10:43am

Not the same thing...
"And, indeed, what the band found out is that the contract is just as enforceable whether or not you read the contract -- and that appears to be the result online too."

The difference here is that this isn't a question of whether the contract was read or not, but whether the party even knew that the contract existed. THAT is absolutely critical to a website TOS.

Sometimes those links are at the bottom of lengthy pages where a user would never even scroll down to see them, much less know they were haphazardly jumping into an unread agreement.

There's a reason most people don't read them. Half the time, they are completely unaware of them.
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Anonymous Coward, 3 Sep 2009 @ 10:56am

where in the transaction is the ToS
the problem is how the ToS reaches the person agreeing. here, it was a business to business transaction over $75,000 and the ToS were presented multiple times on the transaction web pages. also, the term that they were fighting over is a very common and reasonable term in business-business deals of high priced goods.

this is not some bullshit ToS at the bottom of a webpage, where they want every single person who visits the site to agree to some ridiculous terms. when you compare the previous case to the dell case, it's pretty obvious that the ToS bullshit you see on most sites is unaffected by this ruling.
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Matt (profile), 3 Sep 2009 @ 11:03am

I do not have a problem with legalese. Contracts should be in legalese - because lawyers draft them and will be called upon to interpret them.

The problem is that these are classic adhesion contracts (that is, "take it or leave it" contracts). At common law, adhesion contracts were disfavored, and often unenforceable. This is because contracts classically require an offer, an acceptance (ie - a negotiation), and a mutual intention to be bound. They are supposed to be a "bargained-for exchange". Adhesion contracts lack negotiation and bargaining.

Worse, they are unavoidable. The argument has been that they are not bad because if you do not like Amazon's terms, you can always shop at Walmart. The trouble is, Walmart has the same terms.

Imagine if your grocery store handed you "Terms and Conditions" every time you went to buy milk. You would find it ridiculous, particularly if they were 25 pages long. You might stomp out (sans milk) and go across the street to the competitor. Imagine finding that they had them, too.

Now imagine that they _don't_ have them - instead, they have a sign behind the register that says, "By shopping here you agree to certain terms and conditions. Please ask a manager if you would like to read the terms and conditions." On page 17 of the terms and conditions that the manager keeps in his office is an arbitration clause that provides that any dispute concerning your purchase (however small) must be resolved by binding arbitration before a three-arbitrator panel in the grocery chain's home state (which is not your state). When you get overcharged 37c for your milk, should you be forced to go to arbitration? 700 miles away?

How is enforcing that agreement good for society? Remember, law exists for society, not just for grocery stores or websites.
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Matt (profile), 3 Sep 2009 @ 11:15am

Re: where in the transaction is the ToS
With due respect - the contract was for the sale of $6,000 of agar plates, hardly the level of stuff that gets sent to the legal department for review. PDC sued for $75k because that was its _injury_, not the purchase price of the goods. Indeed, the second half of the decision is all about this distinction, denying summary judgment on the question of whether damages should be limited under the contract to the $6k purchase price (rather than the $75k of damages).

The limitation of damages clause is standard in consumer contracts, but atypical in large commercial transactions. Indeed, the opposite (an indemnification provision) is often included in large commercial transactions (where the buyer has more power).
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Danny (profile), 3 Sep 2009 @ 11:19am

Re:
This (the legalese issue) is why I don't bother reading EULAs.

I have come to realize that I am not going to understand the contract anyway.

And what I mean by that isn't that I am not going to understand English. Rather, I am not going to be able to parse the word choices the lawyer made, and relate those word choices back to the civil law to know the implications of the word choices.

So, there is no way for me to make an informed decision anyway. Why bother reading?
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DS, 3 Sep 2009 @ 1:33pm

Re: Too Stupid to READ....
Unless you actually know the story of the McDonalds lawsuit, and not what you heard in the playground. Just stop. Really.
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Chargone (profile), 3 Sep 2009 @ 1:38pm

Re: Re: Re: Even if you read the linked part before clicking 'Accept'...
hold on...

didn't some US court previously rule that any T&C or EULA including a 'we reserve the right to change this at will' clause was invalid in it's entirety? i remember something like that showing up on techdirt.

so really, you only have to check for that clause. if it's there, no worries.

assuming that ruling held up, anyway.
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Chargone (profile), 3 Sep 2009 @ 1:43pm

Re: Purchased Software
see, I've never quite got my head around how that sort is NOT signed under duress. your money's already gone, you can't get it back, the court costs are significantly more and you're unlikely to win...

and if it's signed under duress, how is it enforceable or binding?

i mean, you Could just not use it, but... if you disagree with the EULA doesn't it kinda conflict with the ... implied? contract involved when you bought the thing?
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..., 3 Sep 2009 @ 6:29pm

Re: Just because people are too stupid to read
You're an ass - huh
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Frosty840, 4 Sep 2009 @ 1:57am

Re: There just isn't time
I like that idea. Have a standard boilerplate contract that the website has to agree to provide as its Terms and Conditions, before it offers you services which require you to adhere to those Terms and Conditions.

Personally, I intend to rely on the "prove it was me that ticked your stupid agreement box" defense if I'm ever called on one of these contracts.
It's a *moronic* defense, I know, but it's a damned sight more convenient than actually reading the agreements in the first place.
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matt, 4 Sep 2009 @ 8:01am

Re: Too Stupid to READ....
The McDonalds hot coffee suit was extensively litigated and McDonalds attorneys probably ended up with more money than this lady did when it was all over... I think she got something like $8,000 after the appeals.
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Cody Jackson (profile), 6 Sep 2009 @ 11:24pm

Re: How many times have we heard about brown M&Ms?
Yes, the real story is very interesting. Especially when read in context of a concert. If someone hasn't taken the time to actually read the contract, as evidenced by the M&Ms, then they obviously can't be trusted to have paid attention to details.

This is an extremely clever idea to ease the burden of double-checking people. If they took care of the M&Ms, then you can have a reasonable expectation that they took care of other details. If not, then you better start looking over their shoulder, quick.
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Barb, 17 Sep 2009 @ 6:11am

hidden link same color as text
checkout this site! the terms that are click-able are not visible http://homelistingbiz.com/ this is so wrong on so many levels!
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contract fun and games, 18 Oct 2009 @ 4:20pm

contract blues
I think if people read the contracts and all the small print there would be much fewer people unhappy
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Anonymous Coward, 8 Jan 2010 @ 7:23am

I only vaguely see the similarity between the brown M&M's and clicking that horrible 'Agree' button without reading all the gibberish.

If I'm a company, like all those places paying for a big name band to come make me money by playing in my venue, then I better be reading the contract - or have a lawyer that can do so for me and give me the nitty gritty details, thereby catching the brown M&M point.

I'm not a company and I shouldn't need a lawyer every time I go to buy a piece of software. Any tech junkie would send a small, or even large, fortune on lawyers doing that.

I'm not an idiot, and my reading level is well past the norm - hell, I can even make out what some of those paragraphs mean in that contract - that doesn't mean I can read the whole thing. After half a page the eyes cross and the brain starts melting out the ears. If I wanted to read that kind of junk I'd be in law class right now.

I think these online contracts, of whatever sort, need some form of standardization, if for no other reason than to protect joe-schmoe from the sharks that are out there.

And lets not even comment about the barely computer functional and the blue link idea...
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