Contracts In The Digital Age

A Contract is a Contract is a Contract

This article is in part a response to the following article written by

Tree of Woe

:

Techno-Feudalism and Digital Serfdom

With the advent of the digital age, contract law began to play an increasingly present part in the average person’s life. Terms of Service and User License Agreements became mainstays of internet activity as corporations sought ways to manage their digital services. Like with so many other facets of life touched by the internet, many people (almost invariably lay persons, mind you) thought this would lead to some great upheaval in contract law (though few could articulate what that may actually look like).

And yet, time and time again, Courts of repeated the mantra that digital contracts are no different to regular contracts.

While new commerce on the Internet has exposed courts to many new situations, it has not fundamentally changed the principles of contract. It is standard contract doctrine that when a benefit is offered subject to stated conditions, and the offeree makes a decision to take the benefit with knowledge of the terms of the offer, the taking constitutes an acceptance of the terms, which accordingly become binding on the offeree.¹

Regardless, many lay persons still to this day lament what they view as draconian terms to use sites like Twitter, Instagram, Facebook, etc. The simple reality is that none of this is new, the average person just has far more exposure to it today than ever before.

The actual problem is that people, consciously or not, want to be insulated from poor contractual decisions (read: coddled because they are babies).

One who refrains from reading a contract and in conscious ignorance of its terms voluntarily assents thereto will not be relieved from his bad bargain.²

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TOS is NOT “Digital Serfdom”

A contract's terms are a contract's terms; if you agree to the terms you are bound by them. As long as the contract isn't illegal, unconscionable, or enforcement of the contract would violate some public policy interest (all of which are extremely rare cases) then you are bound by the terms on acceptance.

Courts have always upheld that, aside from the above exceptions, you are bound by the contract even if it was a very one-sided contract that was clearly not in your favor. Contracts are, by definition, voluntary arrangements (if you are coerced into a contract then no contract was actually formed, as a matter of law) and so it is up to you entirely to decide if you agree to the terms or not. In fact, it isn’t even uncommon for Courts to note how immoral the contractor is, and still uphold the contract:

We cannot condemn too strongly appellee's [contractor’s] conduct. It raises serious questions of sharp practice and irresponsible business dealings. A review of the legislation in the District of Columbia affecting retail sales and the pertinent decisions of the highest court in this jurisdiction disclose, however, no ground upon which this court can declare the contracts in question contrary to public policy.³

The examples given in “Techno-Feudalism and Digital Serfdom” are not accurate either, and the presumptions underlying them are flawed from a legal perspective. For example, you cannot have a contract unless there is consideration, which means both parties have to give something to the other (forbearance of rights or a transfer of value). So unless a social media platform is getting paid by you or something like that, there was never a contract to begin with. In such cases, TOS is basically just a disclosure of what behavior they will/won’t accept on their platform, not terms of an actual contract. From a legal perspective, being able to use social media without giving up anything in return is “a mere gratuity” or gift, rather than an actual contract.

But even in cases where you do pay money to be able to use a platform, terms are still in effect because you agreed to them. These kinds of terms are also not at all unusual even in “brick and mortar” contracts. Many, many, many contracts have terms that seem draconian and overzealous. This is not something that is unique to digital contracts.

That’s your fault btw.

For example, take the case of UMNV 205–207 Newburry, LLC v. Caffé Nero Americas Inc. where the defendant operated a café in a booth which was rented from the plaintiff.⁴ During COVID-19, the Governor of Massachusetts issued an order which “barred on-premises consumption of food or beverages, indoors or outside.” Essentially, restaurants could only do carry-out orders for the duration of the order (which was extended several times).

Normally, this would not be an issue as Café Nero could simply swap to carry-out only as did many other businesses during COVID. However, their lease agreement stipulated that Café Nero “could only offer take-out sales “‘from its regular sit-down restaurant menu.’” which barred carry-out orders entirely.

In this case, Café Nero stopped businesses entirely as their only choice was to either A) Violate the Governor’s order, or B) Breach contract. As a result, they stopped paying rent to the plaintiff, who then filed suit to claim the unpaid rent. The Court ultimately concluded that the defendant didn’t owe the plaintiff unpaid rent, as COVID-19 (specifically the Governor’s order) served to “frustrate the purpose” of the contract, and this was entirely out of their control.

You are probably asking yourself “what does this have to do with overly draconian and ostensibly unfair contractual terms?” and rightly so, as the ruling in this case was ultimately fair. But the ruling is not what matters here, what matters is what the Court notes in the legal background of the contractual defense “frustration of purpose”. The Court, citing a different case, noted:

“when an event neither anticipated nor caused by either party, the risk of which was not allocated by the contract, destroys the object or purpose of the contract, thus destroying the value of performance.”⁵

In other words: had the plaintiff included a term in the contract which stipulated that the defendant/Café Nero was required to pay rent even in the event that they were unable to provide dine-in services, then Café Nero would be contractually bound to not only shut down their business (due to the “no dine-in” order from the Governor, and the “no carry-out” term if their contract) but to pay rent for the entire duration. Essentially, they would be forced to pay rent for a building that the same contract said they were unable to use, and the Courts would have upheld this, requiring the café to pay rent even though they could not conduct business.

The only way around this, in such a case, would be to request a modification to the contract’s terms to either allow carry-out orders or forgo rent payments. Or, of course, not entering into the contract to begin with.

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You Agreed To The Terms

To summarize, it is not the fault of corporations like Twitter/Facebook/Google/etc. for instituting what could be considered unfair or even predatory TOS/User Agreements. It is the fault of lazy users who do not read the terms.

It doesn’t matter if you actually read the terms or not, as mentioned above. You agreed to them and so you are bound by them.

You could even run the TOS through ChatGPT and ask for a summary or something, but few people do that.

This is, however, not really the main thrust of the original article. The original article states that this is 1) In total opposition to regular contract law, and 2) A manifestation of institutional powers seeking to ensnare people under the yoke of servitude.

I’ve already demonstrated why the first part is entirely untrue. As for the second part, this is only true insofar as the average person throws themselves, often eagerly, under the yoke of servitude.

The only solution to these problems is legislation which limits the scope of TOS or something like that. I.e.: character limits on TOS agreements, limits on what can be included in TOS, etc. In general, however, contract law is largely left up to the individual parties to regulate.

Contract Law is, for this reason, essentially a microcosm of capitalism. A contract which has predatory terms is unlikely to be entered into unless the potential benefits outweigh the cost. Naïve contractees are also, rightly, punished for entering into bad contracts. Just like Capitalism itself, Contract Law is a reflection of economic Darwinism. If you fail to do your due diligence, that’s on you.

1. Register.com, Inc. v. Verio, Inc., 356 F.3d 393 (2d Cir. 2004).

2. Bob Wilson, Inc. v. Swann, 168 A.2d 198 (D.C. 1961).

3. Williams v. Walker-Thomas Furniture Company, 198 A.2d 914 (D.C. 1964).

4. Umnv 205-207 Newbury, LLC v. Caffé Nero Americas Inc., Dates: 2084CV01493-BLS2 (Mass. Super. Feb. 8, 2021).

5. Chase Precast v. John J. Paonessa Co., Commonwealth, 409 Mass. 371, 566 N.E.2d 603 (Mass. 1991).