EULA Wars: The Customer Is Always Right … to Lodge a Protest

Here’s another good post from our new guest blogger Ian Ayres; here are some previous Ayres items.

My friend and Peabody Award-winning journalist Jack Hitt is irked by EULAs (End User Licensing Agreements). They are the ubiquitous terms and conditions on the Web that no one ever reads. Jack can’t understand why, if he has to accept a seller’s EULA to get service, the seller doesn’t then have to accept Jack’s EULA in order to get his money. So he decided to run an experiment.

He recently signed up for a Web access deal at an airport. The deal included a EULA that was thousands of words long. To accept the deal, Jack had to supply an e-mail address. He offered up the following: TakemymoneyandnoEulasapply@aol.com.

This mischievous e-mail address represents a nascent movement to create a “battle of the forms” on the Internet. ReasonableAgreement has tried to get thousands of people to include the following boilerplate message in e-mails to EULA sellers:

READ CAREFULLY. By reading this email, you agree, on behalf of your employer, to release me from all obligations and waivers arising from any and all NON-NEGOTIATED agreements, licenses, terms-of-service, shrinkwrap, clickwrap, browsewrap, confidentiality, non-disclosure, non-compete and acceptable use policies (“BOGUS AGREEMENTS”) that I have entered into with your employer, its partners, licensors, agents and assigns, in perpetuity, without prejudice to my ongoing rights and privileges. You further represent that you have the authority to release me from any BOGUS AGREEMENTS on behalf of your employer.

You can even buy the following T-shirt with the disclaiming language:

I’m not sure if I helped inspire this, or whether great minds think alike. A few years ago, Barry Nalebuff and I created the “LiabiliT,” which attempts to do the same thing with regard to those annoying signs in parking lots disclaiming management responsibility. Here’s a picture:

The 64,000 byte question is whether Jack’s e-mail address, or the e-mail boilerplate, or even a T-shirt will have any legal effect. Is there a space in Cyberspace for counteroffers?

Sellers have been presenting take-it-or-leave it deals forever. But the Internet has created the perfect no-bargaining zone. At the check-out, there is no way to cross out or modify oppressive terms. Under traditional contract law, if buyers and sellers have conflicting forms (sellers disclaim warranties; buyers resurrect them) and still end up doing business, the conflicting terms in the forms cancel out and the law imposes the generally pro-consumer default rules of implied warranties. This is how law handles the classic “battle of the forms.” The problem is that on the Internet, consumers don’t have an easy way to present sellers with the counter forms.

In thinking about this issue, it’s useful to separate the question of whether the seller’s or the buyer’s terms are reasonable. There are certainly plenty examples of obnoxious EULAs that have prohibited users from criticizing the seller’s product. But anti-EULAs could also be oppressive — for example, voiding even the reasonable restrictions of the Free Software Foundation’s GNU General Public License.

The crucial “battle of the forms” question is whether it is reasonable for e-retailers to adopt a hear-no-counteroffers policy. Even though I created the LiabiliT, I think there is a strong case for asymmetric legal treatment of buyers and sellers. Sellers have to keep going back to the market in search of new buyers, and thus have to worry about their reputations. For buyers, not so much. It’s a pain for either side to read the other side’s offers. But a seller’s need to maintain a reputation means that an unread EULA is more likely to be reasonable than the buyer’s piggish reclaimers. And do we really want sellers to have to spend money paying attention to the e-mail names and boilerplate messages of other consumers?

Here’s a possible way forward. It would be reasonable for a payment system, such as PayPal or AmEx or Citibank Visa, to create an anti-EULA form on behalf of its clients. For example, Google Checkout could require that a condition of accepting payment through their system is that sellers agree to some reasonable pro-consumer terms. If Jack then paid with Google Checkout, he would be protected by Google’s form. The seller wouldn’t have to pay attention to millions of individual consumer offers. Rather, it would just have to pay attention to its deals with payment intermediaries (who have their own reputations to protect).


ajw

Note that if someone refuses to accept the terms of the GPL, there's no problem with that. They don't have to accept the GPL to use the product.

But, since nothing else gives them the right to modify or redistribute the product, then any redistribution is a good old-fashioned copyright infringement. And as far as I know, copyright law applies independently of any EULA.

Patrick

The problem here is one of plausible deniability. Anyone can deny they read the anti-EULA, but all EULAs require the user to check a box or something similar, then press "Submit" (an appropriate word in this context). There's an electronic fingerprint of the acceptance even if the user never really read or consciously accepted the terms.

Mike

I am someone that reads those EULAs. I'm also the person that frequently writes those EULAs.

Here's the deal (pun intended). Assuming all other contract principles are met (notice, offer and consideration) and the agreement isn't unconscionable (a tough standard) inserting that e-mail address will not change acceptance. By "accepting" the service, he/she has basically accepted the agreement. By accepting the benefit of the service, but denying the offer would be a windfall for the putative-rejecter. No court would uphold that arrangement.

In non-EULA contexts, we might consider that theft. For example, in a retail context there is an implied contract: you pay me in exchange for the product you're buying. If you accept the benefit of the product you're buying but reject the offer by not paying, you're stealing.

There's an efficiency issue in contracting in the ordinary retail context. No one wants to sign an agreement every time they buy something (though, read your receipt sometime if you buy something with a credit card (it usually has something like "I will pay the amount I'm charging"). It's the reason that bricks & mortar stores that don't have contracts for walk-in patrons but do impose EULAs for their online purchasers.

Also, while most people hate seeing them, not every clause is as anti-consumer as exclusive venue and mandatory, loser-pays arbitration clauses. Moreover, things like limitations on liability, etc. in some sense reduce the cost to the consumer as a whole (at the expense of the unfortunately harmed consumer).

It's also wrong to think that EULAs aren't negotiable. That's just not true. The problem is that it's not usually worth either party's time/expense to do a proper negotiation. Lowest common denominator form agreements are efficient for both parties.

Finally, to the extent some contracts are editable and you can give them back to an agent of the company, you would have a much better chance of negotiating the terms. I do this a lot when I'm given a contract by a sales associate with form terms on the back. The same thing that forms the contract in my point above (performance) works the other way. Imagine that you make changes to the form contract handed to you, you hand it back to the sales associate (agent of the company with apparent authority to enter into the contract), you pay, the sales associate accepts your payment, and both parties begin performance. Presto, contract!

Read more...

Mike

I'll point out that the LiabiliT probably suffers a number of contract formation problems.

As to the Google checkout scenario: there's a couple things going on. First, Google already has a terms of use with its partner retailers: https://checkout.google.com/termsOfService?type=Seller. I don't know (and have never researched) what terms Google imposes on its partners. Nevertheless, I doubt, very highly, that Google could/would construct a license agreement on behalf of its consumers that could/would meet the needs of every type of transaction (buying a snowblower over the internet is different than downloading cheap software).

Second, Google's checkout feature is governed by its own EULA for payment purposes: https://checkout.google.com/termsOfService?type=Buyer. While Google has an incentive to make the terms moderately favorable to consumers, I can't imagine that it would be a pro-consumer as most would like. Very likely, such a pro-consumer agreement would have a very high risk threshold.

Read more...

Chris V

My issue with EULAs is that in the case of store-bought software, they come up AFTER you put the money down for the product. So, you buy the software, and then the software presents you an offer that was never presented when you purchased that software - an agreement that you MUST accept to actually use the software you already own.

Oh, and good luck declining the EULA and attempting to return opened software to the store for a refund. Stores don't accept opened software. And, if you do get a refund, more than likely it will be for in-store credit.

Kenneth

Note that there is an alternative ending to a "battle of the forms": no contract is formed. You present your rejection of the EULA? Fine, I don't sell the service or gewgaw to you. No one says we have to take the negotiations to the next step when it is in the power of either party to shut it down before it ever begins.

Doug

This is awesome!!

(awesome but still.. I gotta burst your bubble. This is a counter-offer. Until it's legally accepted the original offer stands. So clicking 'accept', even after doing this, is still an acceptance of the original offer)

Doug (again)

Oh I see, you noticed the counteroffer thing..

Be nice to have an NGO that explains the problems in the contract and negotiates for the consumer

gord m

the simple solution is to force the manufacturers to place their eula's on the outside of the box or as a separate accompanying document. market forces [angry retailers] and bad optics [angry customers] should sort it out from there.

gord m

Paula

Have you ever actually read the multiple EULAs PayPal forces on its users (many of which are accessible only AFTER signing up for their services)? To task them create an anti-EULA form on behalf of their clients is like asking a dog to guard your steak! The more reasonable solution is already out there but insufficiently utilized: have rating systems available for various consumer websites. It's like the old sales adage: “A happy customer tells one person; an unhappy one tells ten.”

Anna Turtle

This blog post misuses the term "battle of the forms," which usually concerns when two businesses (not business and consumer) have pre-printed forms, usually stating terms that benefit themselves, and exchange those forms in making a contract. It is then that conflicting provisions will be dropped out and default rules of contract law will go into effect. If I go to Amazon.com, it is not a "battle of the forms" because I, the consumer, don't have a form. It would only become a battle of the forms if I presented Amazon with my own contract, conflicting with Amazon's EULA terms, and each of us accepted the other's.

Sending a company an email and saying "if you read this, you accept my modification of our contract" makes about as much sense as if you had a valid contract to sell a product to someone at a certain price, and they sent you an email saying, "If you read this, you agree to cancel our contract."

I'm sure that would go over well, especially since the person reading is not being given a choice (or any consideration) to modify the contract, since he doesn't know what the email says until he reads it.

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martin g

I'm no expert, but it always struck me that all of the disclaimers and waivers that companies put on their software and IT products essentially state that the products don't actually have any use or purpose.

On the other hand, if you violate their EULA, all of a sudden the product has some very specific uses and purposes. You have created a liability for yourself by using the product in a fashion that is contrary to what the company now claims (contradicting their disclaimers/waivers)it was originally intended. Heads they win, tails you lose.

Bryan M Griffith

*** Not a legal opinion, merely an academic analysis of a hypothetical situation ***

The UCC and the cases that have interpreted it seem to suggest that the only impact of such additional terms, unless accepted by the offeror, is to cancel the contradicting terms and limit the contract to the agreed upon terms and the UCC "gap fillers." If the gap fillers are preferred to the offer's term it may be worth including some additional and different terms. The additional or different terms do not create a counteroffer that must be accepted, the response to an offer will still operate as an acceptance even if the terms do not mirror the offer. The short answer is that the question is complicated and the marginal value of the additional or different terms probably won't get you anything unless you are hyper-litigious.

Is it goods? For sales of goods, tangible items, the Uniform Commercial Code, as adopted by the state, will apply to any dispute. Software may or may not be considered goods. Boxed software on store shelves is likely goods, but web 2.0 applications and other digital delivery items may be able to escape the UCC if they sell a license instead of a physical product. For our purposes, we will assume the purchase of a good.

The key UCC section is UCC 2-207. You can read UCC 2-207 Revised Version, not the version adopted by the states, though similar at:
http://www.law.cornell.edu/ucc/2/article2.htm#s2-207

How can a buyer deliver additional terms to a non-negotiable (online) contract? UCC 2-207(1) allows a written confirmation to be delivered within a reasonable time. This may permit an e-mail after acceptance of the contract that contains additional terms. However, if it is not enough that you simply deliver your additional terms to a random or specific e-mail box. To make the acceptance conditional upon acceptance of the additional or different terms, the acceptance must make that condition explicit. If nobody reads the e-mail it may not be obvious that your acceptance was conditional.

Are the buyer's terms additional or different from the seller's terms? UCC 2-207(1) allows an acceptance of the contract (or written confirmation) to contain additional or different terms, unless the acceptance is made conditional on the additional or different terms. For example, "I accept this contract, but only if you agree to accept returned opened software within one year." The term expanding the return policy is probably additional or different from the seller's agreement.

So what happens to the additional and different terms? Under UCC 2-207(2) the additional terms become proposals for addition to the contract. Except in Louisiana and Montana, different terms are not proposals. Any additional terms must be expressly accepted otherwise they are not included in the contract, unless the contract is between merchants. Between merchants the terms may become part of the contract automatically, but most of these will be consumer transactions, not between merchants.

Which proposed terms are a part of the agreement? Under UCC 2-207(3) a contract may be found through conduct even if the writings do not establish a contract through offer and acceptance. If the acceptance is made conditional on acceptance of the additional or different terms, the writings do not establish a contract. If the acceptance contains different terms that are not expressly assented to by the seller, the writings may not establish a contract. In this case, the contract consists of the terms which the writings agree upon, together with other terms provided by the UCC.

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David Watts

In the U.S. and many other countries, payment services like PayPal and Google Checkout and standard credit card processing already bring with them a form of anti-EULA. They provide chargeback rights, which include both legal protections under consumer law and protections imposed on the merchant by the credit card associations or the payment service provider. So no matter how many "As Is", "No Returns," etc. disclaimers a seller puts in their listing, if the seller's goods do not match what the buyer is expecting, the buyer can get their money back (and in most cases, the payment service will decide close calls in favor of the buyer). No need to go to court or arbitration

Jeddy Khan

Any software which has EULA cannot be gifted to someone as a present, it belongs only to the person who has purchased, which is ridiculous. If EULA applied on everything then no one would be able to give a present to anyone, fortunately that is not the case, otherwise to would impossible to buy or sell anything. Considering a computer with EULA software installed in it and sells that computer someone else for any number of reasons - the buyer has a second hand computer and has been given the CDs and DVDs of EULA software as a bargain. Would that be illegal on part of the person to sell his computer in that condition? Under no circumstances is he obliged to completely erase his hard drive or remove anything including his private documents. His EULA software would already be in the computer. That person who has sold his computer lives starts living somewhere else - new address, new phone number etc. is he Software Police going look for him and imprison him for violating EULA. It is time people stand up against this EULA crap. Once and item is sold it does not belong to the person who has sold it that has always been the rule.

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ajw

Note that if someone refuses to accept the terms of the GPL, there's no problem with that. They don't have to accept the GPL to use the product.

But, since nothing else gives them the right to modify or redistribute the product, then any redistribution is a good old-fashioned copyright infringement. And as far as I know, copyright law applies independently of any EULA.

Patrick

The problem here is one of plausible deniability. Anyone can deny they read the anti-EULA, but all EULAs require the user to check a box or something similar, then press "Submit" (an appropriate word in this context). There's an electronic fingerprint of the acceptance even if the user never really read or consciously accepted the terms.

Mike

I am someone that reads those EULAs. I'm also the person that frequently writes those EULAs.

Here's the deal (pun intended). Assuming all other contract principles are met (notice, offer and consideration) and the agreement isn't unconscionable (a tough standard) inserting that e-mail address will not change acceptance. By "accepting" the service, he/she has basically accepted the agreement. By accepting the benefit of the service, but denying the offer would be a windfall for the putative-rejecter. No court would uphold that arrangement.

In non-EULA contexts, we might consider that theft. For example, in a retail context there is an implied contract: you pay me in exchange for the product you're buying. If you accept the benefit of the product you're buying but reject the offer by not paying, you're stealing.

There's an efficiency issue in contracting in the ordinary retail context. No one wants to sign an agreement every time they buy something (though, read your receipt sometime if you buy something with a credit card (it usually has something like "I will pay the amount I'm charging"). It's the reason that bricks & mortar stores that don't have contracts for walk-in patrons but do impose EULAs for their online purchasers.

Also, while most people hate seeing them, not every clause is as anti-consumer as exclusive venue and mandatory, loser-pays arbitration clauses. Moreover, things like limitations on liability, etc. in some sense reduce the cost to the consumer as a whole (at the expense of the unfortunately harmed consumer).

It's also wrong to think that EULAs aren't negotiable. That's just not true. The problem is that it's not usually worth either party's time/expense to do a proper negotiation. Lowest common denominator form agreements are efficient for both parties.

Finally, to the extent some contracts are editable and you can give them back to an agent of the company, you would have a much better chance of negotiating the terms. I do this a lot when I'm given a contract by a sales associate with form terms on the back. The same thing that forms the contract in my point above (performance) works the other way. Imagine that you make changes to the form contract handed to you, you hand it back to the sales associate (agent of the company with apparent authority to enter into the contract), you pay, the sales associate accepts your payment, and both parties begin performance. Presto, contract!

Read more...

Mike

I'll point out that the LiabiliT probably suffers a number of contract formation problems.

As to the Google checkout scenario: there's a couple things going on. First, Google already has a terms of use with its partner retailers: https://checkout.google.com/termsOfService?type=Seller. I don't know (and have never researched) what terms Google imposes on its partners. Nevertheless, I doubt, very highly, that Google could/would construct a license agreement on behalf of its consumers that could/would meet the needs of every type of transaction (buying a snowblower over the internet is different than downloading cheap software).

Second, Google's checkout feature is governed by its own EULA for payment purposes: https://checkout.google.com/termsOfService?type=Buyer. While Google has an incentive to make the terms moderately favorable to consumers, I can't imagine that it would be a pro-consumer as most would like. Very likely, such a pro-consumer agreement would have a very high risk threshold.

Read more...

Chris V

My issue with EULAs is that in the case of store-bought software, they come up AFTER you put the money down for the product. So, you buy the software, and then the software presents you an offer that was never presented when you purchased that software - an agreement that you MUST accept to actually use the software you already own.

Oh, and good luck declining the EULA and attempting to return opened software to the store for a refund. Stores don't accept opened software. And, if you do get a refund, more than likely it will be for in-store credit.