MediaTech Law

By M STREET LEGAL

We’ve Updated our Terms of Use!

Why are they sending me this information, and what am I supposed to do with it? You’ve just received an email like the one below from Uber, or from one of your various subscription services, credit card companies, banks, ISPs or any of a zillion different web applications:

SUBJECT: We’ve Updated our Terms of Use

Hi Andrew, we’ve been able to bring Uber to more than 400 cities in 72 countries. And that’s in just a little over 6 years. In light of that growth and some changes to our services, we’ve made some updates to our US Terms of Use

They have your attention. You sit up alert in your chair, you rub your eyes and read on. The company then sometimes offers a summary of the changes, often in as cheery and euphemistic a way as possible, with statements like “We revised our arbitration agreement which explains how legal disputes are handled”, or “We have updated our Terms of Use regarding the ways in which we may contact you.” All, no doubt, good things.

Turns out, noone actually reads these updates. That last sentence is not meant as sarcasm. The non-partisan Stanley Roper Polling Organization actually published a study that concluded “Noone actually reads these updates.” Editor’s Note: There is no such organization and there was no such study. Evidently. Although Andrea Peterson reports in The Washington Post about a 2008 study (about privacy policies) that concluded “it would take a staggering 244 hours a year for the average American to read the privacy policies of every site they visit over the course of a year.”

But everyone knows that noone reads these updates. Just like everyone knows that noone knows how to spell “yarmulke”. Or understands the icing rule in hockey.

There was a series of cases in the earlier part of this century where aggrieved individuals challenged websites’ right to unilaterally change Terms of Use, including cases where no change had actually been made but the Terms of Use gave the website the unilateral right to do so anyway.

Eric Goldman wrote about this subject back in 2009, discussing a case involving the now-defunct Blockbuster video rental business. Blockbuster’s terms gave Blockbuster the right to “modify these Terms and Conditions of Use, including without limitation the Privacy Policy, with or without notice. Such modifications will be effective immediately upon posting.” And:

You agree to review these Terms and Conditions of Use periodically and your continued use of this Site following such modifications will indicate your acceptance of these modified Terms and Conditions of Use. If you do not agree to any modification of these Terms and Conditions of Use, you must immediately stop using this Site.

A federal court in Texas found a problem with this clause, because not only could Blockbuster change the contract at any time unilaterally but could do so without notice. Actually, it was the “without notice” part that was the only real problem. You might think – and Professor Goldman hints – that a contract that can be unilaterally changed by a party isn’t really a “contract” in the sense of an agreement evidencing mutual assent. Or in other words, if you’re agreeing to a contract that the other side can change at any time and in any way they see fit, you’re really not agreeing to anything at all. So you wouldn’t have a binding contract.

But contracts include unilateral permissions all the time, of all kinds, all authorized (and enforceable) by the initial mutual agreement of the parties to enter into the agreement in the first place. Under that theory, a mutual agreement that one party can unilaterally change the contract might itself be enforceable – the academic nerdiness of this argument leads to migraines – although with Blockbuster the breadth of the unilateral grant was too much for the judge.

The Blockbuster case involved simply a dispute over enforceability of Blockbuster’s mandatory arbitration clause, which the judge called “illusory” and thus not enforceable. Not because of anything inherently wrong with mandatory arbitration clauses, but because of Blockbuster’s ability to unilaterally change the terms without notice.

Logan Koepke writes in Medium about “browsewrap agreements” where, as Koepke puts it, “continued use = assent/agreement to the new terms”, after the user agreed to the original terms during site registration. Koepke refers to the Rodman v. Safeway case, a 2014 decision of the federal court for the Northern District of California. As with Blockbuster, Safeway sought to enforce revised terms based on rights to make unilateral changes “with or without notice”. Safeway in fact did so in this case without notice, which led the court to refuse enforcement. Koepke writes, “The Court, thankfully, doesn’t look too kindly upon this new contractual arrangement, arguing that it creates the expectation for ‘consumers to spend time inspecting a contract they have no reason to believe has been changed’ and that ‘the imposition of such an onerous requirement on consumers would be particularly lopsided.’”

Once again, though, the problem was lack of notice, not necessarily the substance of the changes themselves. So one might think that the fix for companies is to simply require (and provide) notice of changes to Terms of Use. And that is probably right, except for the major point that substantive contract law still applies. Juliet Moringiello and John Ottaviani write in the American Bar Association’s Business Law Today about applications of enforcement concepts from traditional offline consumer contracts to evaluating modifications to online contracts, a topic we will address soon in a separate post.

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