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Thursday, November 21, 2013

Wrap Contracts Symposium: Response to Moringiello and Hartzog

 

Wrap Contracts

        It’s my pleasure to respond to Tuesday’s posts from Juliet Moringiello and Woodrow Hartzog.   Juliet Moringiello asks whether wrap contracts are different enough to warrant different terminology.  Moringiello’s knowledge in this area of law is both wide and deep  and her article (Signals, Assent and Internet Contracting, 57 Rutgers L. Rev. 1307) greatly informed my thinking on the signaling effects of wrap contracts.  The early electronic contracting cases involved old- school clickwraps where the terms were presented alongside the check box and their signaling effects were much stronger than browsewraps.  Nowadays, the more common form of ‘wrap is the “multi-wrap,” such as that employed by Facebook and Google with a check or click required to manifest consent but the terms visible only by clicking on a hyperlink.  Because they are everywhere, and have become seamlessly integrated onto websites, consumers don’t even see them.  Moringiello writes that today’s 25-year old is more accustomed to clicking agree than signing a contract.  I think that’s true and it’s that ubiquity which diminishes their signaling effects.  Because we are all clicking constantly, we fail to realize the significance of doing so.  It’s not the act alone that should matter, but the awareness of what the act means.   I’m willing to bet that even among the savvy readers of this blog, none has read or even noticed every wrap agreement  agreed to in the past week alone.  I wouldn’t have made such a bold statement eight years ago.    

             Woodrow Hartzog provides a different angle on the wrap contract mess by looking at how they control and regulate online speech.  With a few exceptions, most online speech happens on private websites that are governed by “codes of conduct.”  In my book, I note that the power that drafting companies have over the way they present their contracts should create a responsibility to exercise that power reasonably.  Hartzog expands upon this idea and provides terrific examples of how companies might indicate “specific assent” which underscore just how much more companies could be doing to heighten user awareness.  For example, he explains how a website’s privacy settings (e.g. “only friends” or authorized “followers”) could be used to enable a user to specifically assent to certain uses.  (His example is a much more creative way to elicit specific assent than the example of multiple clicking which I use in my book which is not surprising given his previous work in this area).

                Hartzog also explains how wrap contracts that incorporate community guidelines may also benefit users by encouraging civil behavior and providing the company with a way to regulate conduct and curb hate speech and revenge porn.  I made a similar point in this article.  I am, however, skeptical that community guidelines will be used in this way without some legal carrot or stick, such as tort or contract liability.  (Generally, these types of policies are viewed in a one-sided manner, enforceable as contracts against the user but not binding against the company).   On the contrary, the law – in the form of the Communications Decency Act, section 230- provides website with immunity from liability for content posted by third parties.  Some companies, such as Facebook, Twitter or Google, have a public image to maintain and will use their discretionary power under these policies to protect that image.  But the sites where bad stuff really happens– the revenge porn and trash talking sites – have no reason to curb bad behavior since their livelihood depends upon it.  And in some cases, the company uses the discretionary power that a wrap contract allocates to it to stifle speech or conduct that the website doesn’t like.  A recent example involves Yelp, the online consumer review company that is suing a user for posting positive reviews about itself.  Yelp claims that the positive reviews are fake and is suing the user because posting fake reviews violates its wrap contract.  What’s troubling about the lawsuit, however, is that  (i) Yelp almost never sues its users, even those who post fake bad reviews, and (ii)  the user it is suing is a law firm that earlier, had sued Yelp in small claims court for coercing it into buying advertising.  To make matters worse, the law firm’s initial victory against Yelp (where the court compared Yelp’s sales tactics to extortion by the Mafia) for $2,700 was overturned on appeal. The reason?  Under the terms of Yelp’s wrap contract, the law firm was required to arbitrate all claims.  The law firm claims that arbitration would cost it from $4,000-$5,000.

                I agree with Hartzog that wrap contracts have the potential to shape behavior in ways that benefit users, but most companies will need some sort of legal incentive or prod to actually employ them in that way. 

 

 [Nancy Kim]

http://lawprofessors.typepad.com/contractsprof_blog/2013/11/wrap-contracts-symposium-response-to-moringiello-and-hartzog.html

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