Another mandatory arbitration clause ruled unconscionable
The Consumerist reports on a judgment from the US Court of Appeals for the 9th Circuit in Shroyer v New Cingular Wireless Services Inc, which held that a class action waiver and mandatory arbitration clause in a mobile phone contract was unenforceable because it was unconscionable under California law.
This is the latest in a line of cases in which courts have rejected "get out of court free" contract provisions by holding that they were unconscionable. Another such recent case was Gatton v T-Mobile USA Inc.
Linden Labs, operators of the "Second Life" virtual world, suffered a high profile defeat earlier this year in a very similar case - Bragg v Linden Research Inc.
The case that seems to have started this ball rolling was Comb v Paypal Inc, a 2002 decision. Courts seem to be increasingly aware that corporations are abusing their ability to dictate terms in this fashion, in an attempt to "insulate [themselves] contractually from any meaningful challenge to [their] alleged practices" [from Comb v Paypal]
Another recent 9th Circuit decision in Douglas v Talk America Inc held that a company could not unilaterally alter a contract merely by putting an updated version of the contract on its website, despite a provision of the contract that purported to allow them to do so.
Hopefully, these cases will put companies on notice that the days of "we own your soul" contracts are at an end. But I doubt it. It remains to be seen whether statutory schemes against unfair terms in consumer contracts will have that effect.
Readers interested in the topic of unfair terms in electronic contracts may be interested in reading an article I co-authored on that topic: Dale Clapperton and Stephen Corones, 'Unfair Terms in Clickwrap and Other Electronic Contracts' (2007) 35 Australian Business Law Review 152.
This is the latest in a line of cases in which courts have rejected "get out of court free" contract provisions by holding that they were unconscionable. Another such recent case was Gatton v T-Mobile USA Inc.
Linden Labs, operators of the "Second Life" virtual world, suffered a high profile defeat earlier this year in a very similar case - Bragg v Linden Research Inc.
The case that seems to have started this ball rolling was Comb v Paypal Inc, a 2002 decision. Courts seem to be increasingly aware that corporations are abusing their ability to dictate terms in this fashion, in an attempt to "insulate [themselves] contractually from any meaningful challenge to [their] alleged practices" [from Comb v Paypal]
Another recent 9th Circuit decision in Douglas v Talk America Inc held that a company could not unilaterally alter a contract merely by putting an updated version of the contract on its website, despite a provision of the contract that purported to allow them to do so.
Hopefully, these cases will put companies on notice that the days of "we own your soul" contracts are at an end. But I doubt it. It remains to be seen whether statutory schemes against unfair terms in consumer contracts will have that effect.
Readers interested in the topic of unfair terms in electronic contracts may be interested in reading an article I co-authored on that topic: Dale Clapperton and Stephen Corones, 'Unfair Terms in Clickwrap and Other Electronic Contracts' (2007) 35 Australian Business Law Review 152.
Leave a comment