Tuesday, September 23, 2014
On today's show, we read our homeowners insurance policy.
The details are amazing. Lava! Vermin! Falling objects! And, hiding in all the fine print, the story of how insurance works — and what makes it break.
The episode happens to have relevance to our ongoing symposium and even features a conversation with Daniel Schwarcz, one of the symposium contributors. If you listen, you'll hear Prof. Schwarcz admit that, to be sexy, insurance law might just need a little airbrushing.
Thursday, September 11, 2014
This is big - Governor Jerry Brown just signed a bill into law that would prohibit non-disparagement clauses in consumer contracts. The law states that contracts between a consumer and business for the "sale or lease of consumer goods or services" may not include a provision waiving a consumer's right to make statements about the business. The section is unwaivable. Furthermore, it is "unlawful" to threaten to enforce a non-disparagement clause. Civil penalties for violation of the law range from up to $2500 for a first violation to $5000 for each subsequent violations. (Violations seem to be based upon actions brought by a consumer or governmental authority, like a city attorney. They are not defined as each formation of a contract!) Furthermore, intentional or willful violations of the law subject the violator to a civil penalty of up to $10,000.
We've written about the dangers of non-disparagement clauses on this blog in the past. It's nice that one state (my home state, no less!) is taking some action. Will we see a California effect as other states follow the Golden State's lead? As I've said before, those non-disparagement clauses aren't such a good idea- now would be a good time for businesses to clean up their contracts.
Monday, August 25, 2014
As Jeremy Telman previously noted, the unhiring of Steven Salaita has caused quite a stir in academic circles. There was even an article in the Chronicle of Higher Education briefly discussing the contractual issues, which included the arguments made by Prof. Michael Dorf and Prof. David Hoffman. I think they both have good arguments but I tend to think this is a real contract and not an issue of promissory estoppel. The reason I believe this has to do with what constitutes a "reasonable interpretation" under these circumstances. I think both parties intended a contract and a "reasonable person" standing in the shoes of Salaita would have believed there was an offer. The offer was clearly accepted. What about the issue regarding final Board approval? Does that make his belief there was an offer - which he accepted - unreasonable? I don't think so given the norms surrounding this which essentially act as gap fillers and the way the parties acted both before and after the offer was accepted. I think the best interpretation - really, the only reasonable one given the hiring practices in academia - is that the Board approval was a rubber stamp but one that could be withheld if the hired party did something unexpected, like commit a crime. In other words, I think there was an offer that was accepted and that the discretionary authority of the board to approve his appointment was subject to the duty of good faith and fair dealing - i.e. the Board would only withhold approval for good cause. I don't think this was a conditional offer - the language would have to be much more explicit than it seemed to be and to interpret it that way would constitute a forfeiture (which courts don't like) - and yes, I considered whether it could be a condition to the effectiveness of a contract. That question caused me some angst but I still don't think it was given the hiring norms in general, and the way the parties acted.
There was, however, an implied term in the contract that Salaita would not do anything or that no information would come out that would change the nature of the bargain for the university. For example, if it turned out that he didn't really have a PhD or that he plagiarized some of his work, that would be grounds for the Board to refuse to approve his appointment. In that case, the Board could refuse to approve his hiring without breaching its good faith obligation.
The real dispute here is whether Salaita's tweets constituted a breach of that implied term (i.e. did it undermine the bargain that the university thought it was getting?) I think that's really what the disagreement in the academic community is about and why the real contractual issue has to do with interpretation - and the meaning of academic freedom.
Wednesday, August 6, 2014
Monday, July 7, 2014
H/T to Eric Goldman for sharing with the list a new case from Judge Lucy Koh of the federal district court of Northern California. Tompkins v. 23andMe provides a detailed analysis of 23andMe's wrap contracts. The case involves the same Terms of Service presented as a hyperlink at the bottom of the website's pages, and then later, post-purchase and at the time of account creation, as a hyperlink that requires a "click" in order to proceed (which I refer to as a "multi-wrap" as it's neither browsewrap nor clickwrap but a little of both). The court says the former presentation lacks notice, but the latter constitutes adequate formation. Eric Goldman provides a detailed analysis of the case here.
Not surprisingly, the Terms contained a unilateral modification clause which was briefly discussed in the context of substantive unconscionability. It was not, however, raised as a defense to formation, i.e. to argue that the promises made by 23andme were illusory.
Tuesday, July 1, 2014
The Duquesne Law Review recently published a symposium issue on "Contract Law in 2025" -- I've pasted links to the contributions below:
Drafting Our Future: Contract Law In 2025
The Future of Fault in Contract Law
Robert A. Hillman
Two Alternate Visions of Contract Law in 2025
Nancy S. Kim
The Future of Many Contracts
Victor P. Goldberg
A Eulogy for the EULA
Miriam A. Cherry
The Death of Contracts
Franklin G. Snyder & Ann M. Mirabito
Friday, June 27, 2014
Several months back, I blogged about KlearGear's efforts to enforce a $3500 nondisparagement clause in their Terms of Sale against the Palmers, a Utah couple that had written a negative review about the company. It was a case so bizarre that I had a hard time believing that it was true and not some internet rumor. Even though the terms of sale most likely didn't apply to the Palmers --or to anyone given the improper presentation on the website-- KlearGear reported the couple's failure to pay the ridiculous $3500 fee to a collections agency which, in turn, hurt the couple's credit score. The couple, represented by Public Citizen, sued KlearGear and a court recently issued a default judgment against the company and awarded the couple $306,750 in compensatory and punitive damages. Consumerist has the full story here.
Congratulations to the Palmers and Scott Michelman from Public Citizen who has been representing the couple. And let this be a warning to other companies who might try to sneak a similar type of clause in their consumer contracts....
Thursday, June 12, 2014
(The next John Grisham?)
Another way to provoke interest in the subject might be to write an imaginative futuristic tale of a world controlled by EULAs, like Miriam Cherry has done here. Her fast-paced story is a mashup of Girl with a Dragon Tattoo, Boilerplate and Ender's Game - beach reading for contracts profs!
Tuesday, June 10, 2014
I've been thinking a lot about contract design, disclosure and consent recently, and had a chance to read Tess Wilkinson-Ryan, A Psychological Account of Consent to Fine Print, 99 IOWA L. REV. 1745 (2014) which (from the abstract):
"aims to unpack the beliefs, preferences, assumptions and biases that constitute our assessments of assent to boilerplate. Research suggests that misgivings about procedural defects in consumer contracting weigh heavily on judgments of contract formation, but play almost no role in judgments of blame for transactional harms. Using experimental methods from the psychology of judgment and decision-making, I test the psychological explanations for this disjunction, including motivated reasoning and reliance on availability heuristics."
Wilkinson-Ryan concludes that, while disclosures may not have noticeable effects on the assent process (i.e. whether consumers read or understand terms), they have "enormous effects on how we understand transactional harms." In other words, we are more likely to understand that the consumer has consented and that the consumer is to blame for having consented if the particular disputed issue has been disclosed.
Wilkinson-Ryan covers the same territory that Eric Zacks covered in a couple of earlier articles having to do with contracting behavior by firms and the effect of contract design on how consumers perceive their moral obligations. In the first article, Contracting Blame, 15 Univ. of Penn. J. of Bus. L. 169 (2012) Zacks (I’m quoting from the abstract again):
“explores the impact of the cognitive biases of judges and juries in the context of contract preparation and execution....This Article makes a novel link between behavioral literature and contract preparation and suggests that contract preparers may be able to manipulate adjudicators’ cognitive biases systematically. Exclusive of the economic bargain, contract provisions can provide attributional 'clues' about the contracting context that inform and reassure judicial interpreters that a particular contracting party is more blameworthy than another....In light of the significant implications of the existence and prospective use of such attributional clues for contract law theory and judgment, this Article proposes a broader contextual and adjudicative focus when contemplating contract law reforms.”
In the second, Shame, Regret and Contract Design, 97 Marquette L. Rev. (forthcoming), Zacks argues (again from the abstract):
“(c)ontracts can encourage individuals to feel shame, to blame themselves, to believe that contracts are sacred promises that should be specifically performed, to utilize faulty judgment heuristics when determining contract costs, and to rely on misperceived social norms with respect to challenging or breaching contracts. This may influence them not to breach or challenge an otherwise uneconomical, unconscionable, or illegal contract.”
The takeaway from these three articles? Firms are manipulating consumers through disclosure and contract design into performing contracts without real consent. The question then is what to do about it.
Wilkinson-Ryan’s article raises interesting questions about whether disclosure requirements have unintended consequences. I think her article provides additional support for Omri Ben Shahar and Carl Schneider's book, More Than You Wanted to Know: The Failure of Mandated Disclosure (Princeton, 2014).* But rather than concluding that disclosure is a lousy way to address the problem of consent (which it often is), I came to a slightly different conclusion based upon one of her studies. That study found that "making the firm's behavior more salient changed how subjects ranked the blameworthiness of the parties." Wilkinson-Ryan notes that, "(u)nless participants are prompted to think about the firm's drafting process as a set of choices, the drafter's role is not a salient factor in judgments of blame." In my book, Wrap Contracts, and elsewhere, I argue that courts should stop focusing on consumer's "duty to read" and focus instead on the company's "duty to draft reasonably." In other words, courts should consider whether the drafting firm could have presented and drafted the contract terms in a better, more understandable fashion rather than on whether the adherent "should" have noticed the terms. This shifts the burden of form contracting - and Wilkinson-Ryan's studies suggest, the moral blame -- from the non-reading consumer to the bad-drafting, morally culpable, company. Of course, requiring companies to draft reasonably (as distinguished from providing “reasonable notice”) doesn’t get us all the way there – but it may help shift the focus away from blaming the adherent-victim to thinking about the immorality of the drafting firm.
*This blog plans to host a symposium on their book sometime in the fall so stay tuned.
**Boycott Amazon and buy this book from the publisher's website.
Tuesday, May 27, 2014
Law and Society Association's Annual Meeting is only a few days away. There will be an Author Meets Reader Salon on my book, WRAP CONTRACTS on Friday, 5/30, 8:15am-10:00am in the Duluth Room. Shubha Ghosh (Wisconsin), Danielle Kie Hart (Southwestern) and Juliet Moringiello (Widener) will be joining me in what promises to be a lively discussion about those pesky clickboxes and pop-ups on your screens. If you are attending the meeting, please stop by and join us!
Saturday, May 24, 2014
"You can stop using our Services at any time, although we’ll be sorry to see you go. Google may also stop providing Services to you, or add or create new limits to our Services at any time."
and this unilateral modification clause:
"We may modify these terms or any additional terms that apply to a Service to, for example, reflect changes to the law or changes to our Services. You should look at the terms regularly. We’ll post notice of modifications to these terms on this page. We’ll post notice of modified additional terms in the applicable Service. Changes will not apply retroactively and will become effective no sooner than fourteen days after they are posted. However, changes addressing new functions for a Service or changes made for legal reasons will be effective immediately. If you do not agree to the modified terms for a Service, you should discontinue your use of that Service."
Friday, March 21, 2014
Microsoft has been in the news recently for accessing a user's Hotmail account without a court order. Microsoft revealed this information as part of a lawsuit it filed against a former employee who it accussed of stealing trade secrets. The company received information that a French blogger had access to Windows operating system software code and wanted to find out who was the blogger's source. Conveniently for Microsoft, the blogger had a Microsoft-operated Hotmail account. The company's accessing of the emails and instant messages of the blogger was lawful because - you guessed it - it was permitted under the company's terms of service which state:
We also may share or disclose personal information, including the content of your communications:
- To comply with the law or respond to legal process or lawful requests, including from law enforcement and government agencies.
- To protect the rights or property of Microsoft or our customers, including enforcing the terms governing your use of the services.
- To act on a good faith belief that access or disclosure is necessary to protect the personal safety of Microsoft employees, customers or the public.
Lest you think you can escape the intrusions of corporate peeking into personal communications by moving to another email provider, a quick check of the terms of service of Yahoo and Google showed nearly identical language in their privacy policies.
Google’s terms of service state:
We will share personal information with companies, organizations or individuals outside of Google if we have a good-faith belief that access, use, preservation or disclosure of the information is reasonably necessary to:
- meet any applicable law, regulation, legal process or enforceable governmental request.
- enforce applicable Terms of Service, including investigation of potential violations.
- detect, prevent, or otherwise address fraud, security or technical issues.
- protect against harm to the rights, property or safety of Google, our users or the public as required or permitted by law.
You acknowledge, consent and agree that Yahoo may access, preserve and disclose your account information and Content if required to do so by law or in a good faith belief that such access preservation or disclosure is reasonably necessary to: (i) comply with legal process; (ii) enforce the TOS; (iii) respond to claims that any Content violates the rights of third parties; (iv) respond to your requests for customer service; or (v) protect the rights, property or personal safety of Yahoo, its users and the public.
Interestingly, Microsoft's terms of service give the company less discretion to snoop through our emails than Google or Yahoo -- it can only do so to protect the company and its users. Google or Yahoo can access communications to protect third party property interests. But they wouldn't really do that without a court order, would they? Oh, right.
Thursday, February 27, 2014
Readers of this blog will remember that last year we hosted a lively symposium on Margaret Jane Radin's book, Boilerplate: The Fine Print, Vanishing Rights, and the Rule of Law.
The debate about mass consumer form contracts is far from over....
Sunday, February 9, 2014
This article in the WSJ coincides perfectly with my syllabus as we are now finishing up our segment on offer and acceptance. Apparently, in the early to mid-nineties, the band Rocket from the Crypt agreed to let in free to their concerts anyone with a tattoo of the band’s logo.
As with many messy offer and acceptance scenarios, it started informally. The band members got tattoos of the logo – of a rocket blasting out of grave – and a few of their friends decided to do the same. Eventually, the band decided to let anyone with the tattoo get in free to see them play. They were a small band then and so whoever had the tattoo was probably a friend (or a friend of a friend) of a band member. But the band grew in popularity – and so did the number of tattooed fans. At their 2005 farewell concert, 500 rocket-tattooed fans got in free.
Now the band is preparing for their reunion tour. Tickets are selling out. There’s just one small problem. Many of the venues where they are scheduled to play don’t want to honor the free-admission-with-tattoo policy.
In my humble opinion, it doesn’t sound like the band actually made an offer to anyone, much less the public at large. The terms weren't definite - how big did the tattoo have to be? Could it be anywhere? For how long would fans get in free? Were there any limits?
But the band did honor the “tattoo-as-ticket” in the past. Does that then give rise to an implied contract? Or is there an equitable estoppel argument that could be raised given the fans’ reliance?
As interesting as this may be to ponder for contracts profs, in the end, I think there should be no enforceable contract and no estoppel claim for the simple reason that the band never intended to make an offer to the public at large. Furthermore, it doesn’t seem reasonable for someone to get a tattoo based upon what they understand to be the band’s informal policy of letting tattooed fans in free. The practice was a custom that grew organically, rather than a promise that must be kept as long as the band plays or the tattoo lasts. Not everything is a contract. If there was some sort of actual promise made, the band's promise was likely one to make a gift (free admission) to show their appreciation to anyone who had a tattoo. In other words, the band members weren't bargaining for fans to get a tattoo, and they weren't bargaining for them to show up to the venue with a tattoo - rather, motivated by affective reasons, they made a donative promise to let in their most loyal fans, the ones with tattoos, for free.
Friday, January 31, 2014
I like to remind my 1Ls Contracts students that a contract is private law between two parties, but it doesn't override public law. This story is last week's news, but I thought I'd blog about it anyway because it provides a pretty good example of this point. In 2009, William Marotta responded to a Craigslist ad posted by two women for a sperm donor. All three parties agreed - and signed an agreement to the effect - that Marotta waived his parental rights and responsibilities. The Kansas Department for Children and Families sought to have Marotta declared the father and responsible for payments of $6,000 that the state had already paid and for future child support.
Unfortunately for Marotta, a Kansas state statute requires a physician to perform the artificial insemination procedure. The Shawnee County District Court Judge Mary Mattivi ruled that because the parties "failed to conform to the statutory requirements of the Kansas Parentage Act in not enlisting a licensed physician...the parties' self-designation of (Marotta) as a sperm donor is insufficient to relieve (Marotta) of parental rights and responsibilities."
Note that the couple was not seeking to invalidate the contract - it was the Kansas state agency.
It's unclear whether the parties will appeal.
Wednesday, January 22, 2014
Warren Buffett and Quicken Loans have teamed up to help make teaching about unilateral contracts and interpretation so much more interesting. The offer? One billion dollars to anyone who fills out a perfect 2014 NCAA tournament bracket.
Say what? Is this serious? Or is it like that Pepsi commercial - you know the one.
Although at first, this might sound like a joke, once you learn the odds are, by one estimate, one in 9.2 quintillion, you --a reasonable person -- would realize this offer was serious.
All you have to do is fill out a perfect bracket. (Now might be the time for me to mention that I once won my law firm's pool one year. Strange but true).
But wait - there's more. The Business Insider reports that Quicken, which is actually running the contest, will award $100,000 to 20 of the most accurate but not perfect brackets "submitted by qualified entrants in the contest to use toward buying, refinancing or remodeling a home." The company will also donate $1million to Detroit and Cleveland non-profit organizations.
Get ready for March Madness....
Wednesday, January 8, 2014
Monday, December 9, 2013
By James Sinclair in McSweeneys, titled "Alright, Fine, I'll Add a Disclaimer to My Emails." Here's a taste:
The purpose of this disclaimer, in theory, is to protect the sender from whatever liability may result from the sender’s own failure to communicate clearly or properly send an email, even though the sender, having obtained a formal legal education, is well aware that a generic email disclaimer, even one written with that ominous language of which lawyers are so fond, is unlikely to be enforced against a party lacking a sophisticated understanding of the legal principles surrounding said disclaimer, and that in the case of a party who does understand the legal principles surrounding said disclaimer, the disclaimer merely restates what said party already knows. This disclaimer is a catch-22.
For a little Monday humour, check out the full disclaimer here.
[Meredith R. Miller]
Monday, December 2, 2013
Over at the Huffington Post, Sam Fiorella takes note of the egregious terms in Facebook Messenger's Mobile App Terms of Service. These terms include allowing the app to record audio, take pictures and video and make phone calls without your confirmation or intervention. It also allows the app to read your phone call log and your personal profile information. Of course, an app that can do all that is also vulnerable to malicious viruses which can share that information without your knowledge. But, of course, this is allowed only with your "consent."
Sunday, November 24, 2013
I want to thank all the experts who participated in last week's symposium on WRAP CONTRACTS: FOUNDATIONS AND RAMIFICATIONS . They raised a variety of issues and their insights were thoughtful, varied and very much appreciated. I also want to thank Jeremy Telman for organizing the symposium and inviting the participants.
Today, I’d like to respond to the posts by Michael Rustad, Eric Zacks and Theresa Amato. Eric Zacks emphasizes the effect that form has on users, namely that the form discourages users from reviewing terms. Zack notes that contract form may be used to appeal to the adjudicator rather than simply to elicit desired conduct from the user and that forms that elicit express assent - such as “click” agreements - help the drafter by aiding “counterfactual analysis surrounding the ‘explicit assent’” issue. In other words, drafters may use contract forms to manipulate adjudicator’s decisionmaking and not necessarily to get users to act a certain way. (This is a topic with which Zachs is familiar, having just written a terrific article on the different ways that drafters use form and wording to manipulate adjudicators’ cognitive biases).
Both Michael Rustad and Theresa Amato focus, not on form, but on the substance of wrap contracts – the rights deleting terms that contract form hides so well. Amato comes up with an alternative term to wrap contracts – online asbestos – to highlight the not-immediately-visible damage caused by these terms. As a consumer advocate and an expert on how to get messages to the general public, Amato understands the need to overcome the inertia of the masses by communicating the harms in a way that can drown out the siren call of the corporate marketing masters. So yes, a stronger term may be required to jolt consumers out of their complacency although the real challenge will be getting heard and beating the marketing masters at their own game.
Michael Rustad notes that my doctrinal solutions fall short of resolving the problem of predispute mandatory arbitration and anti-class action waivers. He’s right, of course, although I think reconceptualizing unconscionability in the way I propose (by presuming unconscionability with certain terms unless alternative terms exist or the legislature expressly permits the term) would reduce the prevalence of undesirable terms including mandatory arbitration and class-action waivers. Rustad, who has considerable expertise on this subject, mentions that many European countries are further along than we are in dealing with unfair terms. Many of those jurisdictions, however, also have legislation which limits class actions, tort suits or damages awards. In addition, they don’t have the same culture of litigation that we do in this country. Wrap contracts have their legitimate uses, such as deterring opportunistic consumer behavior and enabling companies to assess and limit business risks. In order to succeed, any proposal barring contract terms or the enforceability of wrap contracts must also consider those legitimate uses.
I believe there is a place for wrap contracts and boilerplate generally but their legitimate uses are currently outweighed by illegitimate abuses of powers. Wrap contract doctrine has moved too far away from the primary objective of contract law – to enforce the reasonable expectations of the parties-- and my solutions were an attempt to move the train back on track. My focus was on doctrinal solutions but the problems raised by wrap contracts are complex and my solutions do not foreclose or reject legislative ones. I’m a contracts prof, so my focus naturally will be on contract law solutions (if you have a hammer, everything looks like a nail, I guess). Doctrinal responses have the advantage of flexibility and may be better adapted to dynamic environments than legislation which can be quickly outdated when it comes to technology or business practices borne in a global marketplace.
Admittedly, when it comes to wrap contracts, doctrinal flexibility hasn’t really worked in favor of consumers, but that only makes it more important to keep trying to sway judicial opinion. I know there are those who question whether judges read legal scholarship, but I know that there are many judges (and clerks) who do. The case law in this area has spiraled out of control so that it makes no sense to the average “reasonable person” and has opened the door to the use of wrap contracts that exploit consumer vulnerabilities.
My book was not intended as a clarion call to rid the world of all wrap contracts; rather, it was intended to point out how much damage wrap contracts have done, how much more they can do, and to provide suggestions on how to rein them in and use them in a socially beneficial manner.
I’m grateful to have had the opportunity to hear the insightful comments of last week’s highly respected line-up of experts and to share my thoughts with blog readers.