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Wednesday, March 28, 2012

WSJ Online's agreement and illusory contracts

A federal district court in New York recently ruled in Lebowitz v. Dow Jones & Co. that the Wall Street Journal Online's subscriber agreement was not illusory merely because it had a provision that allowed it to change fees at any time. (H/T Eric Goldman's Technology & Marketing Law Blog which has been on a roll with 'wrap contract issues). Pursuant to their agreement, subscribers to the Wall Street Journal Online obtained access to the Wall Street Journal Online and Barron's Online. Dow Jones (parent of both companies) decided to spin off the Barron's service. Existing subscribers were then told they could continue to access one service, but could only access the other for an additional fee. Plaintiffs sued, claiming breach of contract. At issue, was the following clause of the subscription agreement:

"We may change the fees and charges then in effect, or add new fees or charges, by giving you notice in advance....This Agreements contains the final and entire agreement between us regarding your use of the Services and supersedes all previous and contemporaneous oral and written agreements regarding your use of the Services. We may discontinue or change the Services, or their availability to you, at any time."*

The court found that Dow Jones was expressly permitted to change its services and/or fees (it gets a little fuzzy which in the opinion) pursuant to this clause. Plaintiffs argued that interpreting the above clause to mean that Dow Jones can change the fees at any time (even during the term which has already been paid for), would render the argument illusory and so such an interpretation should be avoided. The question then was whether that clause rendered the agreement illusory. The court held that it did not because "Dow Jones acted reasonably, and therefore this provision of the Subscriber Agreement is not illusory." [This seems a bit backward. It should have said that courts will interpret a requirement of reasonableness into seemingly illusory contracts if it's clear the parties intended to enter into the contract - since the court concluded that Dow Jones didn't act unreasonably, there was no breach]. I'm not sure I agree with the court's decision and wish I had a copy of the entire agreement. It seems a better interpretation of the clause would be that Dow Jones could change the fees but that subscribers would be able to discontinue the subscription and get their prepaid amounts back if they did not like the increase. I don't think that was an option. The court seemed to think that there was no real harm done by changing the terms of the agreement (even before the subscription period had expired) because the majority of WSJ Online subscribers didn't access Barron's Online. (It may also have made a difference that plaintiffs were seeking class certification)

*This provision was accidentally dropped when I copied the text in the original version of this post.

** I plan to blog a little bit more about the notice aspects of this case after I've had a chance to review the pleadings in the case.

[Nancy Kim]

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