ContractsProf Blog

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Valparaiso Univ. Law School

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Wednesday, August 13, 2014

Researcher Behind Facebook's Emotions Experiment to Help Design Ethical Guidelines

Today's New York Times features an article aptly titled (in the print version) "Under the Microscope."  The article describes researchers' attempts to grapple with the ethical issues relating to projects such as Facebook's experiment on its users, about which we have written previously  here and here.  According to the article, researchers both at universities and at in-house corporate research departments are collaborating on processes to formulate ethical guidelines that will inform future research that makes use of users' information.  

The article states that Facebook has apologized for its emotion experiment, in which it manipulated users' feeds to see if those users' own posts reflected the emotional tone of the posts they were seeing. It's not really clear that Facebook apologized for experimenting on its users.  As quoted on NPR, here is what Facebook's Sheryl Sandberg  said on behalf of the company:

This was part of ongoing research companies do to test different products, and that was what it was; it was poorly communicated . . . . And for that communication we apologize. We never meant to upset you.

As the Washington Post noted, Sandberg did not apologize for the experiement itself.  Seen in its full context, Sandberg's statement is more akin to OKCupid's in-your-face admission that it experiements on its users, about which Nancy Kim posted here.

But the Times article focuses on Cornell University's Jeffrey Hancock, who collaborated with Facebook on the experiment.  He seems to have no regrets.  For Hancock, researchers' ability to data mine is to his field what the microscope was to chemists.  Or, one might think, what the crowbar was to people doing research in the field of breaking and entering.  Hancock is now working with people at Microsoft Research and others to lead discussions to help develop ethical guidelines applicable to such research.

The Times quotes Edith Ramirez, Chair of the Federal Trade Commission on the subject.  She says:

Consumers should be in the driver’s seat when it comes to their data. . . . They don’t want to be left in the dark and they don’t want to be surprised at how it’s used.

By contrast, here is the Times's synopsis of Professor Hancock's views on how the ethical guidelines ought to be developed:

Companies will not willingly participate in anything that limits their ability to innovate quickly, he said, so any process has to be “effective, lightweight, quick and accountable.”

If the companies are subject to regulation before they can experiment on their users, it does not really matter whether or not they willngly participate.  And the applicable standards have already been established under Institutional Review Board (IRB) rules.  Significantly, as reported here in the Washington Post, although Professor Hancock works at Cornell, his participation in the Facebook study was not subject to Cornell's IRB review.  In our previous posts, we have expressed our doubt that the Facebook study could survive IRB review (or that it yielded the information that it was supposedly testing for).  

The Times article does not indicate that any of the people involved in devising rules for their own regulation have any expertise in the field of ethics.  Why is letting them come up with their own set of rules in which they will "willingly participate" any better than expecting the wielders of crowbars to design rules for their safe deployment?

August 13, 2014 in Commentary, In the News, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Wednesday, August 6, 2014

Online Contracts Here and Now

Here is my interview  with  Jeremy Hobson of NPR's Here and Now on the subject of online contracts. 

August 6, 2014 in Commentary, Current Affairs, In the News, Miscellaneous, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Wednesday, July 9, 2014

Aereo Loses in Supreme Court and so do Consumers – for Now

By Myanna Dellinger

Recently, I blogged here on Aereo’s attempt to provide inexpensive TV programming to consumers by capturing and rebroadcasting cable TV operators’ products without paying the large fees charged by those operators.  The technology is complex, but at bottom, Aereo argued that they were not breaking copyright laws because they merely enabled consumers to capture TV that was available over airwaves and via cloud technology anyway. 

In the recent narrow 6-3 Supreme Court ruling, the Courts said that Aereo was “substantially similar” to a cable TV company since it sold a service that enabled subscribers to watch copyrighted TV programs shortly after they were broadcast by the cable companies.  The Court found that “Aereo performs petitioners’ works publicly,” which violates the Copyright Act.  The fact that Aereo uses slightly different technology than the cable companies does not make a “critical difference,” said the Court.  Since the ruling, Aereo has suspended its operations and posted a message on its website that calls the Court’s outcome "a massive setback to consumers."

Whether or not the Supreme Court is legally right in this case is debatable, but it at least seems to be behind the technological curve.  Of course the cable TV companies resisted Aereo’s services just as IBM did not predict the need for very many personal computers, Kodak failed to adjust quickly enough to the digital camera craze, music companies initially resisted digital files and online streaming of songs.  But if companies want to survive in these technologically advanced times, it clearly does not make sense to resist technological changes.  They should embrace not only technology, but also, in a free market, competition so long as, of course, no laws are violated.  We also do not use typewriters anymore simply to protect the status quo of the companies that made them.

It is remarkable how much cable companies attempt to resist the fact that many, if not most, of us simply do not have time to watch hundreds of TV stations and thus should not have to buy huge, expensive package solutions.  Not one of the traditional cable TV companies seem to consider the business advantage of offering more individualized solutions, which is technologically possible today.  Instead, they are willing to waste money and time on resisting change all the way to the Supreme Court, not realizing that the change is coming whether or not they want it. 

Surely an innovative company will soon be able to work its way around traditional cable companies’ strong position on this market while at the same time observing the Supreme Court’s markedly narrow holding.  Some have already started doing so.  Aereo itself promises that it is only “paus[ing] our operations temporarily as we consult with the court and map out our next steps.”

 

 

July 9, 2014 in Commentary, Current Affairs, E-commerce, Famous Cases, Film, In the News, Music, Recent Cases, Television, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Monday, July 7, 2014

23andMe's Wrap Contracts

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.  

July 7, 2014 in Commentary, E-commerce, Famous Cases, Miscellaneous, Web/Tech, Weblogs | Permalink | Comments (0) | TrackBack (0)

Friday, July 4, 2014

Follow-up on Nancy Kim's Post about Facebook's Creepy Experiment

Michelle-meyerMichelle Meyer (pictured) has a very detailed post on this subject over at The Faculty Lounge.  Her approach is different from Nancy's, focusing narrowly (but thoroughly) on the question of whether an Institutional Review Board (IRB) could have approved the FB experiment. There Meyer arrives at a different conclusion than I think Nancy would arrive at.  Meyer thinks an IRB could have and should have approved the FB experiment based on informed consent (although she recognizes that one could dispute whether such consent was actually present), and Nancy, I think correctly, questions whether there are very strong arguments that FB users knowingly agreed to this kind of experiment when they agreed to FB's terms.  

July 4, 2014 in About this Blog, Web/Tech, Weblogs | Permalink | Comments (2) | TrackBack (0)

Thursday, July 3, 2014

About That Facebook User Manipulation Study

By now, most of you have probably heard about Facebook's study which tweaked users' news feeds to see whether doing so affected their moods.  The study was aparently conducted in response to reports that some FB users were getting bummed out by reading all the wonderful things happening to their shiny friends.  According to FB's study, this was not true.  They found that happy news led to happier posts and negative news resulted in more negative posts, leading the researchers to conclude that moods were contagious.  (My take on the results of that study below).  Facebook claimed that users consented to being part of this experiment when they agreed to the company's terms of service.  Public outrage ensued but even among the outraged, there was a consensus that Facebook "legally" had a right to do this because of the terms of use even if ethically, they should have refrained (or at least obtained active consent).

Such is the rhetorical power of a contract, even one that nobody reads.

I think it's at least questionable whether Facebook's terms of use gave it the right to conduct this user manipulation study and not just, as  Kashmir Hill of Forbes points out, because the word "research" didn't appear in their Data Use Policy until four months after the study took place.  As contracts profs know, the under-utilized and under-enforced implied covenant of good faith and fair dealing applies to contracts and is recognized under California law (which governs FB's Terms).  The broad language of the data usage policy makes it sound like Facebook will use data to improve its services, not to test whether their users get happy or sad if they manipulate news feeds.  Other provisions of FB's agreement with users make it reasonable to reach that conclusion (to keep its services "safe and secure"; to provide users with location features and services, "to make suggestions to you, for internal operations").  Even the language regarding research -- "for internal operations, including troubleshooting, data analysis, testing, research and service improvement" -- when read in context (which it should be), indicates that the purpose of using the data is to enhance the user experience, not to manipulate user behavior. 

They also say "your trust is important to us." 

Did Facebook act in bad faith by manipulating users' data feeds?  It's at least arguable that they did. 

Now, about the research results - as far as what the results showed, I'm not sure that the study did prove that positive posts enhanced users moods (and vice versa).  A user may have changed the nature of a post in order to conform to the prevailing mood, but that doesn't mean they actually felt happier.  Positive posts from others might have forced users to "fake it" by writing more positive posts and vice versa.  So I'm not convinced that the research refuted the claim that happy Facebook posts depressed some FB users...

 

 

July 3, 2014 in Current Affairs, True Contracts, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Tuesday, July 1, 2014

Symposium Issue on Contract Law in 2025

The Duquesne Law Review recently published a symposium issue on "Contract Law in 2025" -- I've pasted links to the contributions below:

 

Back Home

 

Drafting Our Future: Contract Law In 2025

SYMPOSIUM ARTICLES

The Judicial Vision of Contract: The Constructed Circle of Assent and Unconscionability
John E. Murray, Jr.

 

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

 

July 1, 2014 in Miscellaneous, Recent Scholarship, Web/Tech | Permalink | TrackBack (0)

Friday, June 27, 2014

Maybe That Non-Disparagement Clause Wasn't Such a Good Idea....

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....

June 27, 2014 in Current Affairs, In the News, Miscellaneous, True Contracts, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Tuesday, June 10, 2014

Your Kids as a Free Facebook Marketing Tool Against Your Will

By Myanna Dellinger

What would you say if you found out that Facebook used your kids’ names and profile pictures to promote various third-party products and services to other kids?  Appalling and legally impossible as minors cannot contract?  That’s just what a group of plaintiffs (all minors) attempting to bring a class action lawsuit against Facebook argued recently, but to no avail. Here’s what happened:

Kids sign up on Facebook, “friend” their friends and add other information as well as their profile pictures.  Facebook takes that information and display it to your kids’ friends, but alongside advertisements.  The company  insists that they do “nothing more than take information its users have voluntarily shared with their Facebook friends, and republish it to those same friends, sometimes alongside a related advertisement.” How does this happen?  A program called “Social Ads” allows third parties to add their own content to the user material that is displayed when kids click on each other’s information. 

The court dismissed the complaint, finding no viable theory on which it could find the user agreements between the kids and Facebook viable.  In California, where the case was heard, Family Code § 6700 sets out the general rule for minors’ ability to contract: “… a minor may make a contract in the same manner as an adult, subject to the power of disaffirmance.”  The plaintiffs had argued that as a general rule, minors cannot contract.  That, said the court, is turning the rule on its head: minors can, as a starting point, contract, but they can affirmatively disaffirm the contracts if they wish to do so.  In this case, they had not sought to do so before bringing suit. 

Plaintiffs also argued that under § 6701, minors cannot delegate their power to, in effect, appoint Facebook as their agent who could then use their images and information.  Wrong, said the court.  Kids signing up on Facebook is “no different from the garden-variety rights a contracting party may obtain in a wide variety of contractual settings.  Facebook users have, in effect, simply granted Facebook the right to use their names in pictures in certain specified situations in exchange for whatever benefits they may realize from using the Facebook site.” 

In its never-ending quest to increase profits, Corporate America once again prevailed.  Even children are not free from being used for this purpose.  The only option they seemed to have had in this situation would have been to disaffirm the “contract;” in other words, to stop using Facebook.  To me, that does not seem like a difficult choice, but I imagine the vehement protests instantly launched against parents asking their kids to stop using the popular website.  Of course, kids are a highly attractive target audience.  Some already have quite a bit of disposable income.  They are all potential long-time customers for products/services not directed only at kids.  Corporate name recognition is important in connection with this relatively impressionable audience.  But is this acceptable?  After all, there is an obvious reason why minors can disaffirm contracts.  This option, however, would often require intense and perhaps undesirable parent supervision.  In 2014, it is probably unreasonable to ask one’s kids not to be on social media (although the actual benefits of it are also highly debatable). 

Although the legal outcome of this case is arguably correct, its impacts and the taste it leaves in one’s mouth are bad for unwary minors and their parents.

June 10, 2014 in Commentary, Current Affairs, E-commerce, Recent Cases, True Contracts, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Tuesday, May 27, 2014

Author Meets Reader Salon on Wrap Contracts

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!  

May 27, 2014 in Books, Conferences, Contract Profs, Miscellaneous, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Saturday, May 24, 2014

Mutuality and Wrap Contracts

As I've noted in a prior post, there is a lawsuit pending against Google for email scanning which was recently denied class status.  Something that's puzzled me about wrap contracts generally, including Google's, is that many of them don't seem to be contracts at all - and not simply because of the (lack of) consent issue.  They typically contain modification at will clauses and termination at will clauses.  In contracts class, I teach students that generally (with the exception of employment contracts) these clauses lack mutuality unless constrained in other ways, such as a notice period.  While there may be consideration (use of service in exchange for...data?  eyeballs?  not clear), there is no consideration if the promises are illusory and don't actually bind a party.   Google's terms of use, for example, state:

"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."

Google then isn't bound to actually provide anything according to its Terms of Use. 

In the email scanning case, Google is making the argument that consent to email scanning was obtained in the context of "consenting" to the Terms of Use.  But if these "contracts" are not really contracts because they lack mutuality, then can Google really claim that their users "consented" to the email scanning?  Is there blanket assent to terms outside of the context of a contract? 

 

 

 

May 24, 2014 in Commentary, E-commerce, Miscellaneous, Web/Tech | Permalink | Comments (2) | TrackBack (0)

Sunday, May 18, 2014

More on the Structure of Cable Contracts

By Myanna Dellinger

Recently, Jeremy Telman blogged here about the insanity of having to pay for hundreds of TV stations when one really only wants to, or has time to, watch a few. 

Luckily, change may finally be on its way.  The company Aereo is offering about 30 channels of network programming on, so far, computers or mobile devices using cloud technology.  The price?  About $10 a month, surely a dream for “cable cutters” in the areas which Aereo currently serves. 

How does this work?  Each customer gets their own tiny Aereo antenna instead of having to either have a large, unsightly antenna on their roofs or buying expensive cable services just to get broadcast stations.  In other words, Aereo enables its subscribers to watch broadcast TV on modern, mobile devices at low cost and with relative technological ease.  In other words, Aereo records show for its subscribers so that they don’t have to. 

That sounds great, right?  Not if you are the big broadcast companies in fear of losing millions or billions of dollars (from the revenue they get via cable companies that carry their shows).  They claim that this is a loophole in the law that allows private users to record shows for their own private use, but not for companies to do so for commercial gain and copyright infringement.

Of course, the great American tradition of filing suit was followed.  Most judges have sided with Aero so far, the networks have filed petition for review with the United States Supreme Court, which granted the petition in January.

Stay tuned for the outcome in this case…

May 18, 2014 in About this Blog, Commentary, Current Affairs, E-commerce, Famous Cases, In the News, Recent Cases, Television, True Contracts, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Monday, May 12, 2014

Dropbox Updates Its Terms of Service

A few months ago, I received an e-mail from Dropbox, on which I rely to back up all of my work.  The e-mail notified me that Dropbox was updating its privacy policy and Terms of Service.  "Uh oh," I thought.  Since I rely on Dropbox, I figured this was something I ought to look at carefully, but since the e-mail came during a hectic time in the semester, I just saved it to look at later. 

Today is later, and cleaning out my inbox is one way I take a break from term-end grading.  Here is part of the e-mail:

  • We’re adding an arbitration section to our updated Terms of Service. Arbitration is a quick and efficient way to resolve disputes, and it provides an alternative to things like state or federal courts where the process could take months or even years. If you don’t want to agree to arbitration, you can easily opt out via an online form, within 30-days of these Terms becoming effective. This form, and other details, are available on our blog.

D'oh.  If I had read this when I got it, I could have opted out of the arbitration policy!  Today, when I tried to click on the opt-out link, I got a screen that said, in effect, "Sorry sucker, you missed the boat!"  I had already accepted the new terms of service, including the arbitration clause, by using Dropbox for 30 days without reading the e-mail.  If anybody has attempted to opt out, please share your experience.  I really wonder how easy it is to opt out or if Dropbox is just counting on people not to bother.

Fortunately, most of Dropbox's terms are pretty reasonable as such things go.  Dropbox will pay all fees on claims under $75,000 and will pay a $1000 bonus to anybody who wins an arbitral award in excess of Dropbox's settlement offer.  Dropbox promises not to seek its own fees and costs unless the arbitrator determines that the claim is frivolous.   There are also exceptions to the arbitration provision for small claims and for injunctive relief, but the latter would have to be brought in San Francisco.  There is also the now-unavoidable ban on class actions, as well as consolidated or representative actions.  

Boo!

May 12, 2014 in Commentary, True Contracts, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Monday, March 3, 2014

Blockchain Contracting


WireMy student, Sam Henderson (who blogs here), directed my attention to this report on the Legal Informatics Blog about blockchain contracting and conveyancing systems.  Blockchain technology is apparently one of the many things that makes Bitcoin transactions foolproof, genius-proof, and completely impervious to rampant speculation, financial catastrophe and the bankruptcy of major dealers in the virtual currency.  So, like Bitcoin itself, applying blockchain technology could only democratize and decentralize commercial law, or so maintains this blog post on Thought Infection.

What a strange idea.  

Contracts are private legislation.  They are already about as democratic and decentralized as they could possibly be.  Sure, they are governed by the relevant laws of the relevant jurisdictions, but blockchain technology would not change that.  In any case, the law of contracts already permits the parties to choose the law that will govern them (within reason), so that's pretty decentralized and democratic.  

What is not democratic and decentralized about commercial law is the fact that contracts tend to be drafted by the powerful and imposed upon people as take-it-or-leave it deals through form contracting.  Given the complexity of the technologies associated with Bitcoin, it seems unlikely that adding layers of technology to commercial law would render it more democratic and less centralized.  

Unfortunately, Thought Infection's post is misinformed about contracts.  He writes

Whereas today contracts are restricted to deals with enough value to justify a lawyers time (mortgages, business deals, land transfer etc…), in the future there is no limit to what could be codified into simple contracts. You could imagine forming a self-enforcing contract around something as simple as sharing a lawnmower with your neighbor, hiring a babysitter, or forming a gourmet coffee club at work. Where this could really revolutionize things is in developing nations, where the ability to exchange small-scale microloans with self-enforcing contractual agreements that come at little or no cost would be a quantum leap forward.

Here are the problems with this as I see it:

  • Contracts are not restricted; they are ubiquitous;
  • Contracts do not require lawyers; they are formed all the time through informal dealings that are nonetheless legally binding so long as the requisite elements of contract formation are present;
  • To some extent, Thought Infection's imagined contracts already are contracts, and to the extent that they are not contracts it is because people often choose to form relationships that are not governed by law (e.g., do you really want to think about the legal implications of hiring a baby sitter -- taxes, child-labor laws, workman's comp . . . yuck!); and 
  • Microloans are already in existence, and the transactions costs associated with contracts do not seem to be a major impediment.

Look, I'm not a Luddite (I blog too), but I also don't think that technology improves our lives with each touch.  Technology usually makes our lives more efficient, but it can also make our lives suckier in a more efficient way.  Technology does not only promote democracy and decentralization; it also promotes invasions of privacy by the panopticon state and panopticon corporations or other private actors, reification of human interactions, commidication and alienation.  It has not helped address income disparity on the national or the global scale, ushered in an era of egalitarian harmony overseen by benevolent governments or pastoral anarchy.  

As to contracts specifically, however, there are lots of ways to use technology that are available now and are generally useful.  Last week, we discussed Kingsley Martin's presentation at KCON 9. Kingsley has lots of ideas about how to deploy technology to improve sophisticated contracting processes.  But for  the more mundane agreements, there is a nifty little app that a couple of people mentioned at KCON 9 called Shake.  For those of you looking for a neat way to introduce simple contracts to your students, or for those of you who want to make the sorts of deals that  Thought Infection thinks we need blockchain to achieve, Shake is highly interactive, fun and practical.

March 3, 2014 in Commentary, E-commerce, Web/Tech | Permalink | Comments (2) | TrackBack (0)

Friday, February 21, 2014

KCON 9 Lunch Speaker: Kingsley Martin

Kingsley Martin of KM Standards gave a luncheon address on "The Emergence of Contracts Standards and Its Future Impact on Legal Education."  He introduced us to some very impressive technology that can greatly increase the efficiency with which practicing attorneys review standard agreements.  Here's what it looked like:

Kingsley Martin

This technology enables an attorney to review a new document, say a merger agreement, by comparing it to a database of say 15 similar documents.  It immediately identifies the provisions that are similar to those found in the database, those found in the new document and not in the database, and those not found in the new document but common in other, similar agreements.  An attorney can then quickly pinpoint what is missing from the document and might need to be added and what unusual provisions might regard careful scrutiny.  

More particularly, the technology can also use the database to identify the most common language used in standard provisions and also variations in standard provisions so that one can see the range of how parties work out standard terms and pick out the language that is best suited for a particular deal. 

The steps are to identify the unitary elements of standard form agreements, identify the clauses components and then draft clauses in clear, standard English.  Ultimately, Martin thinks that such the technology can help attorneys negotiate optimal terms.  For example, if you are trying to find optimal compensation in an employment agreement at a public company, you could go on to EDGAR and get all the filings that disclose compensation terms.  The parties then should be able to discern from the data an appropriate compensation package.

How might this affect teaching?  He thinks his basic contracts clauses could be reduced to playing cards.  One might then run various simulations with students (or one could just choose to characterize the exercise as a "game" that they students "play").  The students can then choose and negotiate using the various cards and see if they can work out a satisfactory deal.  Or they may not be able to achieve a satisfactory deal through the use of common terms, and then the challenge is to see if they can draft unique language suitable to their ends.

Anyone interested in seeing what the cards might look like can check them out here.

February 21, 2014 in Conferences, Teaching, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Tuesday, January 21, 2014

Tips on the Rise... but Who Benefits?

After a night on the town, you decide to hire not a traditional taxi company, but rather a new and similar service provider that uses third-party private drivers operating their individually owned, unmarked cars and smart application payment technology.  The app says, “Gratuity is included.”  Would you expect the tips you give to go in full to the drivers or for the tips to be shared with the taxi-like company?  Probably the former, although tipping tactics and expectations seem to be changing.

The question of whether the drivers in the above situation have a viable claim to the full amount of the tips will soon be resolved in California in O’Connor v. Uber Techs, 2013 BL  338258 (N.D. Cal. Dec. 5, 2013).  After determining that no implied-in-fact contract can be said to exist between the drivers and the taxi-like company “Uber,” the court so far determined that Uber and its passengers may have entered into an implied agreement regarding the tips from which the drivers were ultimately intended to benefit as third parties to the contract between Uber and passengers.

In the USA, tipping is widely considered a fair way for service personnel to earn a more decent living than if they had to rely on base salaries.  This intersects with the current debate about whether the federal minimum wage should be increased.  According to recent CNN TV news, if salaries reflected the productivity levels of United States workers, the minimum salary should be $28/hr.  It is currently $7.25

But what about consumers?  Tipping seems to rising more rapidly than both salaries and inflation rates in general.  Not long ago (ten years or so), tipping 10% in restaurants was considered the norm, at least in California and parts of the Western USA.  Now, food servers, the drivers in the above case and undoubtedly others expect 20%; a 100% increase in ten years or so.  Many Los Angeles restaurants have begun to automatically add this 20% gratuity to their guest checks (some still leaving an additional line open for tips…).  In comparison, the average inflation rage was 2.5% per year over the past ten years.  During the 12-month period ending November 2013, inflation was 1.2%.  Of course, salaries may be a more accurate yardstick.  According to the Social Security Administration’s Average Wage Index, salaries increased by approximately 33% over the past ten years (approx. 3% from 2011 to 2012).

To be sure, service personnel and other workers deserve a decent income for their efforts in a wealthy, industrialized nation such as the USA.  The question is whether the burden of this should be placed on consumers in the form of more or less “hidden” costs such as tax and tips in somewhat uncertain amounts or whether the employers should be expected to more openly list the true bottom-line costs of their services as is the case in other nations.  A better route may be to increase the federal minimum salary to the much-discussed (e.g., here) “living wage.”  At a minimum, it would seem that all tips given should go to the workers and not be a mere way for companies to award themselves more money.

Myanna Dellinger

Assistant Professor of Law

Western State College of Law

January 21, 2014 in Food and Drink, Legislation, Web/Tech | Permalink | TrackBack (0)

Thursday, January 9, 2014

New in Print, Including Books

Only one article this week:

Robert W. Emerson and Uri Benoliel, Can Franchisee Associations Serve as a Substitute for Franchisee Protection Laws? 118 Penn St. L. Rev. 99 (2013)

But also a new book:

Mitchill Book

Contract Law and Contract Practice: Bridging the Gap Between Legal Reasoning and Commercial Expectation

By Catherine Mitchell

An oft-repeated assertion within contract law scholarship and cases is that a good contract law (or a good commercial contract law) will meet the needs and expectations of commercial contractors. Despite the prevalence of this statement, relatively little attention has been paid to why this should be the aim of contract law, how these 'commercial expectations' are identified and given substance, and what precise legal techniques might be adopted by courts to support the practices and expectations of business people. This book explores these neglected issues within contract law. It examines the idea of commercial expectation, identifying what expectations commercial contractors may have about the law and their business relationships (using empirical studies of contracting behaviour), and assesses the extent to which current contract law reflects these expectations. It considers whether supporting commercial expectations is a justifiable aim of the law according to three well-established theoretical approaches to contractual obligations: rights-based explanations, efficiency-based (or economic) explanations and the relational contract critique of the classical law. It explores the specific challenges presented to contract law by modern commercial relationships and the ways in which the general rules of contract law could be designed and applied in order to meet these challenges. Ultimately the book seeks to move contract law beyond a simple dichotomy between contextualist and formalist legal reasoning, to a more nuanced and responsive legal approach to the regulation of commercial agreements.

Catherine Mitchell is a Reader in Law at the University of Hull.

Please click here to view the table of contents for this book

 December 2013   308pp   Hbk   9781849461214  RSP: £50 / €65

Discount Price: £40 / €52

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[JT]

January 9, 2014 in Books, Recent Scholarship, Web/Tech | Permalink | TrackBack (0)

Monday, December 2, 2013

Privacy Invasion? Facebook Has an App for That

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."

 

[Nancy Kim]

December 2, 2013 in Current Affairs, E-commerce, Miscellaneous, True Contracts, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Sunday, November 24, 2013

Wrap Contracts Symposium: Response to Rustad, Zacks and Amato and Closing Thoughts

Wrap contracts

 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. 

Wrap ContractsI 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. 

[Nancy Kim]

November 24, 2013 in Commentary, Contract Profs, E-commerce, Miscellaneous, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Friday, November 22, 2013

Wrap Contracts Symposium, Part VII: Theresa Amato

This is the seventh in a series of posts on Nancy Kim's Wrap Contracts: Foundations and Ramifications (Oxford UP 2013). 

Amato

Our seventh guest blogger, Theresa Amato, is the executive director Citizen Works which she started with Ralph Nader in 2001. After earning her degrees from Harvard University and the New York University School of Law, where she was a Root-Tilden Scholar, Amato clerked in the Southern District of New York for the Honorable Robert W. Sweet. She was a consultant to the Lawyers Committee for Human Rights (Human Rights First) and wrote an influential human rights report on child canecutters in Haiti and the Dominican Republic. She then became the youngest litigator at Public Citizen Litigation Group, where she was the Director of the Freedom of Information Clearinghouse in Washington D.C.  In 1993, Amato founded the nationally-recognized, Illinois-based Citizen Advocacy Center and served as its executive director for eight years. She currently serves as its Board President.  Most recently, she has launched Fair Contracts.org to reform the fine print in standard form contracts.  In 2009, The New Press (New York) published her book, Grand Illusion: The Myth of Voter Choice in a Two-Party Tyranny.  She also appears prominently in the Sundance-selected and Academy Awards short-listed documentary “An Unreasonable Man.”  

Nancy Kim

“Yes,” writes Professor Nancy S. Kim. “As strange as it may seem, under contract law you can legally bind yourself without knowing it.”

Contract law experts nod in accord, some in resignation or with ennui.  Non-lawyers are instead completely shocked when I describe this reality.   They have no idea that by visiting a website, sending an email, tweeting or posting, or any of these now common, everyday acts that they are giving consent to use those services and are therefore binding themselves to the various “terms of use” – even if they may have only “constructive” and not actual notice of them. 

In her valuable book, Wrap Contracts, Foundations and Ramifications, Professor Kim does a service to all by explaining how courts enforce these online contracts “where consumers have no intent of entering into a contract.”  She points out that “[t]he requirement of manifestation of consent seems to be subsumed in wrap contract cases with the issue of notice.”  As a result, “the nondrafting party does not actually need to either receive notice or understand or intend the meaning attributed by the courts to a particular action.”

Court decisions to date have favored corporate vendors over consumers whose actual online navigating experience using these products and services covered by “wrap contracts” is given insufficient acknowledgement.  No consumer wants to fill out an online form only to be then told to click somewhere else to find buried terms of use, thereby putting at risk the time they have spent entering data to confirm the transaction.    Nonetheless, as Kim concludes:

courts have constructed consent in an entirely unreasonable fashion by twisting doctrinal rules, conjuring up notice, inferring action from inaction, and blithely ignoring the central role of intent in contracts.  They engage in this hocus pocus in order to enforce transactions that they believe provide a net benefit to society.

These “wrap contracts” consumers often unknowingly “agree” to may be buried in the hyperlinks and are not merely proprietary instructions for how to use the product or service.  As Professor Kim explains,   consumers are not only under affirmative obligations in these “wrap contracts,” they may be subject to a smorgasbord of rights-reducing language.   Exclusive jurisdiction, forced arbitration, waived class actions, and the vendor’s one-way reserved rights to change the terms whenever it wants to are aggressive consumer rights reducers, often eviscerating decades of public policy and legal decisions that have afforded consumers their rights.  In some cases, consumers are agreeing to muzzle themselves from complaining about the product or service.  Fine print contracts may not only strip mine the legal rights of consumers, but they can also take or “steal” their property and privacy. 

Wrap ContractsThank you, Professor Kim for spelling it out for all to read.  Not only do consumers not need a pen to sign on a dotted line, or in some cases even a button to click that one “agrees” to terms certainly not read, but “wrap contracts” take it even further.  Consumers don’t even need to know they are agreeing, much less to what set of terms.  Nonetheless, “wrap contracts,” now often “multi-wrap contracts,” as Professor Kim notes, “by their form, permit companies to impose more objectionable terms than paper contracts of adhesion.”

When people begin to understand how their rights are treated in the “wrap contract” rabbit hole, this offends sensibilities.  For those not attuned to the “degradation of consent,” so aptly explained in Professor Margaret Jane Radin’s book Boilerplate, The Fine Print, Vanishing Rights, and The Rule of Law, this sort of contract peonage is not only unwelcome, it runs counter to everything the non-drafting parties think of as fair play. 

Professor Kim’s use of the term “crook provisions” should not be understated and aligns with popular sentiment when consumers are fully informed of this state of affairs.  Companies now grant themselves the right to “appropriate” -- once known otherwise as “stealing” or, charitably, “taking”-- from consumers for no payment.  They then turn around and make a profit on what heretofore we would have considered the possessions of the consumer, e.g. their content, images, personal information and shopping habits. 

As Professor Kim explains:  “a crook provision anticipates no such offensive action by the consumer and has no direct relationship with the product or services offered by the company.  It is simply an attempt to sneak an entitlement from the user without payment, either in terms of money or goodwill.”     Indeed.

So where is the counteraction to this outright mugging of consumer rights and property?  The ubiquity of these contracts has masked the reality of their potential to do serious harm to consumers such that consumers are not even aware of the magnitude of the problem.   

Kim notes that “What we call something matters.” I agree, and after reading her parade of horrible online scenarios in Chapter 10, “Contracts in Wonderland,” and just how far afield these “wrap contracts” are from the fundamental principles of contract law, I started thinking of new labels for these “wrap contracts” and their innocuous, almost blasé sounding, “terms of use.”  

For lack of a better term at the moment, I think we should nonetheless stop calling them “contracts” and start treating them as the equivalent of “online asbestos.”  Like asbestos in its heyday, manufacturers and service providers use “wrap contracts” everywhere.  They have properties that facilitate commerce but that does not mean that they are not toxic and dangerous for those exposed to them. 

Moreover, like asbestos, some of the dangers will not necessarily emerge for decades when content thieves and data aggregators use consumer information to the detriment of the consumers.  Perhaps due attention will be paid when the content providers, i.e. the consumers/users, begin to realize they cannot expunge those posts from their teens or more uncensored moments that now prevent them from getting hired or getting credit.   Or perhaps regulators will begin to pay sufficient attention to the one-sided misappropriations when serious amounts of data are compromised by those with criminal intent (already it is happening) and with frequency for millions of users.

The question is, how long will it take for U.S.  regulation and the courts to catch up to the need to ban or strictly limit the use of these offensive sword and crook provisions? For asbestos it took at least half a century, while manufacturers whined the whole way about regulation even as they knew for decades of its dangers much as “wrap contract” apologists do now.  No, these “contracts” may not kill you, but they can make your life miserable and we would all breathe better if consumers were treated more fairly. 

Though “online asbestos” may sound hyperbolic in academic circles, there needs to be a massive push back on behalf of consumers – for the nomenclature does matter.  “Terms of use” and “wrap contracts” sound far too innocuous when we know that people do not realize they are being exposed to, and through buried notices alone “agreeing” to, the dangerous loss of their rights and the theft of their property.   To get organized, as we at Fair Contracts educate about and encourage, the tide will not turn until people are fully aware of what happens when they alight on a website.  Ubiquity, harmonization of users, inertia, facility, consumer biases, are all operating to the detriment of consumers and to the advantage of corporate profit seekers.

Professor Kim’s doctrinal adjustments (“a duty to draft reasonably; replacing blanket assents with specific assent; considering contract function when apply existing doctrinal rules, and reinvigorating unconscionability”) are a very solid start, though they are only a beginning.  In some cases, such as replacing blanket assent with specific assents, the proposed remedy may only devolve into the Pavlovian clicking response now exercised by consumers with routine oblivion to the consequences, believing they have little choice if they want the product or service behind the click.  

Courts should be helping consumers enforce their intent, not creating doctrinal chaos as Kim writes by reciting, “law that originates from the paper-based contracting world to this brave new digitally based world when they might be better off acknowledging the difference that contract form and function make to the reasonable expectations of the parties.”  The courts have instead largely given corporations a judicial pass thus far and Professor Kim’s rebalancing of burdens (from the nondrafting party to the drafting party) is the least that they could begin to impose to adjust the invocation of the judicial force of the state.

I think we should be asking for much more on behalf of consumers and could take cues from other countries with more advanced notions of consumer protection and data privacy.  Not only should legislators, regulators and courts protect consumers from exposure to online asbestos by outright banning, or at minimum reforming, many of these harmful provisions, but corporations who have taken rights from consumers should also be required to begin remediation efforts – immediately.  These corporations can start by returning the misappropriated property and other stolen goods to their rightful owners.      

[Posted, on Theresa Amato's behalf, by JT]

 

November 22, 2013 in Books, Commentary, Recent Scholarship, Web/Tech | Permalink | Comments (0) | TrackBack (0)