How Zappos' User Agreement Failed In Court and Left Zappos Legally Naked
blog.ericgoldman.org
blog.ericgoldman.org
http://www.craigslist.org/about/terms.of.use
They even have the "we can change this at any time" part that is especially pathetic:
> CL may post changes to the TOU at any time, and any such changes will be applicable to all subsequent access to or use of craigslist.
2. Browsewraps are not necessarily unenforceable; courts tend to focus on whether the user had sufficient notice that continued use would constitute agreement to a contract [1].
[1] http://www.oncontracts.com/browse-wrap-agreement-enforceabil...
CL isn't carrying out a vendetta against PadMapper. It suffices for their purposes to shut them down going forward. Meanwhile, it helps PadMapper not at all if they gain lawful access to old CL listings. They need all of them, going forward. It is very hard to see the scenario where the law will promise them anything like that.
Such changes would not be enforceable retroactively, meaning they could not be used in the current lawsuit. CL would essentially need to file a brand new lawsuit, which is both costly and time-consuming.
Secondly, the "this or any later version" is again quite different. It allows you to distribute the given software under the current or any later version of the licence, but since you have the choice of which version to use, a new version cannot retroactively restrict your rights (e.g. if GPLv4 doesn't allow you something that GPLv3 does, you can simply keep distributing under GPLv3 if the original software said "GPLv3 or later"). As long as you comply with the version that you choose when distributing, you're fine. I don't think any court would find a problem with that, as you can't be surprised by someone else retroactively reducing your rights.
Not really. If you're not redistributing then you explicitly don't have to accept the GPL and may not be bound by it. If you are redistributing, then either you read and accepted the GPL or you're breaking the law. Redistributing copyrighted work is not "legal by default" the way clicking a link on a website is.
>This or any later version? Check.
The standard language is "or, at your option, any later version published by the Free Software Foundation". There is no claim there that the FSF can unilaterally change the terms.
The only concern I can see for free software is that "This software is distributed as-is without warranty" notices might not be valid if they're not prominent enough and the user isn't forced to click-through before starting the program.
The linked-to article says "Zappos governed by the default legal rules, which aren't nearly as favorable to it. Losing its contract provisions meant Zappos is legally naked."
Naked means unprotected, correct? But the default legal rules include protection, yes? So naked here can only be a euphemism, rather like in the first warm days of spring where I go outside without a coat and feel 'naked' because I'm missing clothing that I expected. Zappos has protections, just not the protection that it wants. This isn't "naked."
Yet I get the feeling that the author believes that the management provisions that Zappos had in its TOS ("its disclaimer of warranties, its waiver of consequential damages, its reduced statute of limitations, its clause restricting class actions in arbitration") are almost morally necessary. These of course are provisions that so-called "bricks and mortar" stores doesn't have.
1. Without a contractual disclaimer of 'consequential' damages [1], Zappos could find itself forced to defend against exorbitant claims for such damages --- and disputes about the underlying facts will usually mean that such claims would have to be resolved via an expensive and uncertain jury trial, as opposed to being disposed of on summary judgment [2] by the trial judge.
2. Different states have different degrees of legal protection for businesses. A brick-and-mortar store generally will be sued only in the jurisdiction where the store in question is located (or a chain might be sued at the location of its headquarters or other, limited venues) [3]. On the other hand, Zappos could be vulnerable to being sued just about anywhere a customer places an order --- the rules about 'personal jurisdiction' are a little fuzzy when it comes to Web sites [4].
So by not having contractual protections, Zappos arguably is exposing itself to the vagueries of whatever the default legal rules happen to be, in whatever state an unhappy consumer happens to live in.
3. The actual business risk to Zappos might not be terrifying here, because the potential harm to consumers from buying an ill-fitting pair of shoes seems manageable (although Zappos does carry more than just shoes). It might be a different story for other e-commerce Web sites. So the object lesson of the Zappos case is worth heeding.
[1] http://en.wikipedia.org/wiki/Consequential_damages
[2] http://en.wikipedia.org/wiki/Summary_judgment
[3] http://en.wikipedia.org/wiki/Personal_jurisdiction
[4] http://en.wikipedia.org/wiki/Personal_jurisdiction_in_Intern...
I recognize the legal principles which you listed, but is it realistic for this case? That is, of the over 100 years of mail-order catalogs in the US, how many such "expensive and uncertain" trials have occurred, how many were won or lost by the company, and what was the overall business cost?
I say this because I believe that the laws are already, and in general, in favor of the company over the consumer.
Let's take this specific lawsuit as the most relevant case. It wasn't, as you wrote, a case of ill-fitting shoes. It was a data security breech where personal information from some 24 million Zappos customers was copied. A customer claims that Zappos did not follow "federal consumer credit laws by failing to protect her personal information." If that was the case, should that customer not have the right to sue?
Note that as this is a federal law, it does not fall under your #2 point, that "Different states have different degrees of legal protection for businesses."
Should it be so easy for a company and customer to enter into a contract via a TOS which waives those federal protections? If so, should we extend that flexibility to other companies? I think the answers are "no" and "no."
This issue deals with risk management, I know. There are other solutions to risk management. For example, data breeches are a known risk, and can be planned for by designing the system to reduce the impact of the risk, by setting aside funds in order to handle litigation which might arise, and by purchasing insurance coverage should those funds prove insufficient. These make operations more expensive for the company, certainly, while a TOS which waives federal data protections is cheap. There should be no way that exorbitant claims - if unfounded! - based on data security issues should have a severe impact on Zappos.
I'm certain that some restaurants would like customers to waive food protection laws in the interests of cheaper food. Is that acceptable via a TOS-like contract agreement between the restaurant owner and the customer? Why should it be common for an online company, like Zappos, to have a TOS which waives certain customer rights?
1. At least on first reading, I don't disagree with anything in your analysis responding to my own; in particular, your mail-order catalog analogy seems quite apt.
2. You're correct that the risk-management precautions to which you refer have costs associated with them. Within limits worked out over decades in legislatures and courts, the law allows companies to use contracts to reduce such costs by shifting the associated risks to others.
When a company has sufficient bargaining power, its management typically attempts to do just that: Use standard-form contracts to shift risks to others, and thus reduce the company's costs.
(I spend some of my time helping to negotiate such contracts. As you might imagine, the standard-form contract of a powerful customer will usually be very different from that of a supplier.)
At the risk of belaboring the obvious, this is the same principle that's behind self-service gasoline pumps and self-service checkout lines in grocery stores: The more of a company's costs that the company can get its customers (or its suppliers) to take on, the higher the company's margins will be for the same amount of revenue. Not least, companies' managements are motivated to do this because eventually a company's aggregate costs will necessarily be reflected in the price, and thus the competitiveness, of the company's products and services.
(The costs of a company whose stock is publicly traded will also be reflected eventually in the price of the company's stock. That's generally high on the list of management concerns as well.)
3. The question you seem to pose is whether we should simply forbid contracting parties from contractually shifting risk as described in #2. Various state- and federal laws already do that to a certain extent; see, for example, consumer-protection laws, as well as article 2 of the Uniform Commercial Code (which in most states governs the sale of goods), not to mention employee-protection laws.
Whether a given jurisdiction should attempt go even further in that direction is a question that comes up every so often. One example is the recent controversy over the U.S. Supreme Court's 5-4 decision that companies can legally include mandatory arbitration provisions in their consumer contracts, thereby largely eliminating the possibility of class-action lawsuits and thus considerably reducing consumers' leverage [1].
Whenever the issue does come up, representatives of various affected interests converge from all directions --- including but not limited to so-called consumer lawyers eager to gain, or preserve, sources of contingent fees and/or statutory attorneys' fees awards.
Ultimately the issue boils down to a political question: What should or should not the law be? As with so many such questions these days, the deep ideological divisions among the American people often result in no change to the status quo.
[1] http://en.wikipedia.org/wiki/AT%26T_Mobility_v._Concepcion
It's only when the weather is bad where one needs clothing as protection.
Under this analogy, are business conditions in the US so bad that online stores need "clothing", in the form of special TOS which waive certain consumer protections otherwise available to customers of physical or mail-order stores?
If so, why haven't these considerations become these become part of the law? Otherwise it represents a barrier to entry, since every new online business must remember to set up those TOS correctly. The linked-to article shows that doing so is hard enough that a large, highly successful company makes mistakes. Why not just incorporate the needed changes as part of the UCC and not worry about it?
We (web developers, entrepreneurs) can't expect to just slap a "Terms of Service" link in tiny grey font at the bottom of every page and expect that to be legally binding. We can't expect agreement without asking for it. It's especially problematic for sites which don't require registration (and I'd like to see those ToS disappear). One site I saw today had a ToS link but no about page. Which is really more important?
Not to mention the fact that what happened in this court on this issue would not necessarily happen in every court viewing the same facts. Or whether in some cases a company makes a conscious decision to do what they know might fail in order not to add friction to the process. Clean up the mess afterwords, get the extra business now. "Polute the river and if we get get caught and fined, pay the fine!"
Separately, what I would like that I haven't seen in this thread are some thoughts on how a company like Zappos could have made this type of a mistake if it is so obvious.
It'd be great if there was a standard, simple, AUP / TOS. Perhaps even a TOS-Builder app - you select what your users will be doing and it interactively creates a TOS for you using simple English and short sentences.
[1] http://www.law.cornell.edu/wex/adhesion_contract_contract_of...
Summary of major provisions:
> s.8(1) - An unfair term in a contract concluded with a consumer by a seller or supplier shall not be binding on the consumer.
> s.5(1) - A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer.
> s.7(1) and s.7(2) - A written term must be in plain intelligible language. Any doubt is resolved in the customer's favour.
[1] http://www.legislation.gov.uk/uksi/1999/2083/contents/made
Humorous comments may get upvoted, particularly when they extend the content cleverly and are well written. However, you are correct in so far as the threshold tends to be higher than is common.
In my experience, it is best to view downvotes as editorial suggestions rather than personalizing them as "hate." A downvote may mean a lot of things, but in general it is often best to consider them as an indication of how well one's point has been communicated. I recommend using them as feedback regarding the quality of one's writing.
Likewise on the subject of communication, one might read your post as a bit uncivil in regard to the way it addresses the author of the parent comment. Curtailing incivility is a current point of emphasis within the HN community.
My question is, how could your point have been better communicated in a way which promotes meaningful dialog, and how could the "edit" feature be used to implement an improved version?
If the TOS has changed, you could accept-reject the login (lock the credentials in the fields) and say "to continue, please read the TOS change and press 'accept' to continue". Or just have this as a separate screen after the login.
Using Clickthrough Agreements. Zappos had an easy way to
form a clickthrough agreement. As shoppers are checking
out of the store with their shopping cart, Zappos could
say "By clicking the 'purchase' button, you agree to the
Zappos terms of use" with a link to the document. It's as
easy as that. No custom coding, no interstitial web
pages, no real risk of abandoned shopping carts.
An interesting read though -- thanks.
Its the same reason webmd does not have a big disclaimer at the top of the page saying they are not acting as your doctor.
Isn't toxic to strong a word here? That particular clause it unenforceable, but the rest of the contract is unaffected, because of (I presume) a severability clause? The article seems to indicate that this clause taints other aspects of the contract.
The use of a unilateral change-of-terms clause, without notification or assent, in their contract with the users of their website invokes an illusionary promise of a contract which vitiates the entirety of the contract at its very roots, including the severability clause.
http://blogs.law.stanford.edu/stanfordebp/files/2010/07/2010...
That's sarcasm, but I feel like that's what would be legally argued in court, and it shows how much power websites have compared to their users.
Put that somewhere that, say, Internet Archive would get ahold of it. Among the Archive's revenue-generating services is providing notarized copies of data that it's archived, essentially substantiating someone's claims that material was available online at a given point in time.