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Is your terms of service illusory and unenforceable?

By: Scott Bradner

You may have noticed that the terms of service agreement for many web sites are a bit one sided. The user gets to use the service but only at the deference of the web site operator. In addition the web site operator reserves the right to change the terms of service whenever they want to and the user agrees to abide by future versions even if they do not know there has been any change. A month ago a Texas court rules that such terms of service were "illusory" and unenforceable. The court's decision may be overruled on appeal but, at least for now, there may be a bit more balance between users and service providers.

The Texas case is Harris vs. Blockbuster, Inc. (No. 3:09-cv-217-M (N.D. Tex. April 15, 2009). The overall case concerns Blockbuster publishing what videos people rented through a Facebook "feature." Since the federal Video Privacy Protection Act of 1988 prohibits such a disclosure without the renter's OK it did not take long for someone to sue Blockbuster. Blockbuster pointed to their Terms and Conditions of Use and claimed that the only recourse anyone had was arbitration rather than the courts.

Another thing in Blockbuster's Terms and Conditions of Use is the following language: "Blockbuster may at any time, and it its sole discretion, modify these Terms and Conditions of Use, including without limitation the Privacy Policy, with or without notice." The text goes on to say that it is the user's responsibility to check to see if the conditions have changed and to stop using the service if they do not agree to the new conditions.

The court found that the arbitration clause in the Blockbuster Terms and Conditions of Use was "illusory" because Blockbuster could change it at any time, and thus was unenforceable. This is even though Blockbuster had not tried to change it - the fact that they could do so without an active agreement from the user meant that the user could not place any trust in what the Terms and Conditions of Use said at any time. The implication of the court's decision is that the whole Terms and Conditions of Use is also illusory and unenforceable because of the one-sided ability to change the terms.

Blockbuster's problems could have been avoided if they had just included giving their customers notice of changes as part of their process. If you or your company has such a one-sided use agreement it would be a good idea to change it now. This decision may yet be overturned on appeal, but maybe it will not.

Meanwhile, the European Commission (EC) has floated a proposal to extend the current physical product consumer protection regulations to the world of software -- much to the consternation of software vendors and the open source community. Life for European web site operators would be quite different if the EC applied the same logic to web sites (e.g., inability to wave implied security requirements) and added in the Texas decision (no unaccepted changes). Life would be different for web site users as well -- I expect much to the better.

disclaimer: A better life is what many people expect from a Harvard education -- for some it's a better life for themselves, for others it is a better life for society -- in any case, I do not know of a university opinion on malleable use terms so the above report is from me.