Russian Man Changes Small Print in Credit Card Agreement, Then Sues
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I've seen some credit card and bank card forms that include language which make the agreement void if its terms are altered in any way, but if it doesn't have that, there's nothing really stopping you from doing the same.
That said, legal teams for credit card companies and banks are notorious for finding ways to beat you with technicalities and/or drag their feet through the court system so your own bills rack up. They can claim bad faith, and/or fraud (which is a hot button) and add to the mix a DA willing to create a name for him/herself by putting away a scumbag white-collar "criminal" (I.E. Joe, the Photoshop user) and you've got a lot of risk behind it.
Yep, which is why he won the first case. The terms are ridiculous though (fee of $200,000 if the bank cancels the card), which is why I would expect it to be deemed excessive and thrown out (same as EULAs that demand someones firstborn).
I'm curious as to whether he's done something similar previously.
Side note: There's a little-known legal provision that lets people sue a tele/direct-marketer if you ask them to take you off their list and they still keep contacting you. You have to take down the company name, get the name of the caller and ask them if they have "do not contact/call" and to put you on it. If they keep calling you after that (I think 3 times is the limit within 30 days or so), you can take them to small claims court.
Couldn't part of your alterations include the removal of that section? Just strike that out, in addition to the other changes you are making.
But that's an extremely long shot and it still needs to rely on the bank fudging the records first.
But in organizations where such things are routinely signed by a clerical worker and returned (things like alarm service come to mind) you can make these changes and sometimes get away with them. At least in one case where I asked the clerk at Safeway to sign off on an altered terms and conditions on their loyalty card the manager came over and said that nobody in the store was authorized to sign on Safeway's behalf.
Clearly that did not work for the Russian bank which has already had the agreement litigated.
We take credit card/bank card forms for granted in that nothing is returned to you except another copy of the same (hopefully) agreement, the card and monthly statement. Not the copy of the document you signed with their corresponding signature.
I wonder if this case will prompt some changes in the way they conduct their card affairs.
This could be a whole new era of spam prevention, by being personally as full of it as every EULA. Just send out contracts, "by contacting me in any way you agree to the following...". Companies would be terrified to send anything at all to anyone.
Really? I'm surprised by that. In recent years I've only signed new bank paperwork as a company director, but in all cases where that happened in real time in a branch, I've asked that they make a photocopy of exactly what I signed for me to keep for my company's records. They have always done so immediately, without objection, and without the signed version leaving my sight.
What? Why?
They didn't go for it :-)
Back when my kids were young and we had a neighborhood baby sitting co-op, all the Mom's met once a week. We set up a program where we got 15 different cards, every week we put all the cards in a basket at the beginning of the get together, then everyone took a card when they left (the basket was shaken up to randomize cards). That gave everyone a card to use but only aggregate statistics on the whole group rather than individual statistics.
The name was always Jane Smith.
These days Safeway has "fixed" that practice by tying gas rewards to a particular card number. That forces people to use the same card if they want to get gas rewards. I don't know but I suspect it was in response to activities like ours which mitigated their efforts to collect data.
In fact, you can often keep the activated card (at all kinds of stores) even if they do ask you to fill in some papers. Just ask to take the forms home to fill them in and return later and take the card, too.
I've long since avoided Safeway (going on two decades), but back when I both visited the store and had a card, but under a different name (usually some variant of "Fred Flintstone" or "Mickey Mouse"), I found that my actual name eventually ended up on the receipt if I every paid by check.
Lesson: don't pay by check.
Lesson: don't patronize stores with shopper surveillance cards.
Most recent notable experience: a few visits to Border's Books, in which the store's "loyalty card" was pushed ever more vigorously. I responded "no, the NSA's already listening to my phone calls and reading my emails, no need for them to get my reading list as well" (this was years before Snowden, though after the AT&T listening room was revealed). The cashier was impressed by my integrity, and commented as much, as I paid cash for my purchase.
The last time I was asked if I had their card was during the final week of the store's liquidation sale. And I was thinking 1) why even bother and 2) where will that data go after the company shuts down (it turns out it was bought by Barnes & Nobel, which may itself go the way of Borders before too long).
So. Yeah. I'll pass.
Now without the baby sitting co-op to randomize data I've offered my card to people ahead of me in line who don't have one, but again the gas rewards are changing that equation as well.
Same goes for every one of the thousands of products we purchase, isn't it a waste of time, money, and national health to put the responsibility of researching products and services in the hands of individuals? Why are companies allowed to sell me snake-oil, cigarettes, and other harmful products?
Why isn't there a law that prevents marketing data from being tied to personal identifiable information?
and
http://www.forbes.com/sites/kashmirhill/2012/02/16/how-targe...
Show that individual data can be and is accessed.
As a non-USian who does not know this system, can somebody please explain what "gas rewards" are and why they would prevent the kind of card shuffling explained by ChuckMcM?
you could still pool all the cards and split the reward between you, couldn't you?
In the US, most large grocery store offer a card that you can use which gives you various rewards, and in turn allows them to perform analytics on their customer base.
Historically, these rewards were related to coupons for products in the store. However, this means that there is no benefit to using your particular card instead of someone else's.
More recently, the grocery stores have added other bonuses. The one that I'm most familiar with is for fuel / petrol. They team up with some fuel brand, say exxon, and when you've purchased enough on your loyalty card, you get something like $0.05 of your per gallon fuel costs.
The scheme with the poster above breaks down, because you need the physical loyalty card to use the fuel discount, and it's unlikely that everyone is refueling their car an equal amount each week, and that everyone is purchasing an equivalent amount of product at the store each week.
The size of the discount is tied to the amount of purchases made with that card present. So if you make a lot of purchases you get a bigger discount per gallon at the gas station.
If you share the card or exchange it with others, the first one to use the discount gets that savings, the next person does not. The discount resets on use, and it can be re-established by the next set of purchases on the card.
What that does is creates an economic incentive for someone to use the same card (maximize purchases to maximize discount) and not share it (discount is one time only, and to the current holder of the card.)
I have given a lot of thought to this problem. I even had a startup once devoted to solving it. My current thinking is that some form of digital signatures--perhaps PGP--is the best solution to all of this. As I discussed in a previous HN thread, we have a long way to go before the PGP user experience is acceptable for most computer-literate people. (When I say "user experience," I mean much more than the GUI. I mean the whole process of learning about PGP, creating keypairs, signing keys, etc..)
I was very surprised that the Russian court system found the contract valid. Surreptitious changing a contract prior to signing can make the contract invalid where I live. It might be a question of ill-intent, and that the court did not find it as such in this case.
Bank just offers you agreement to sign. Guy just offered the bank different agreement and the bank accepted it by signing.
Probably that's why in my country banks rather sends you already signed two copies of the agreement and you are supposed to sign both of them and send one back.
How's that supposed to work? Bank offers agreement. You offer totally different agreement although superficially similar. It's not altered. It's new. If bank agrees then I don't see how it could get away. After all they are big supporters of the rule that if you signed something you declared that you agree with it and if you actually don't it's your loss.
Regarding criminal fraud: That might be tough to prove. See, for example, this part of Virginia's fraud law:
http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+18.2-178
Note that merely obtaining a signature under false pretenses is a crime. Of course, the definition of "false pretenses" is the sticking point. Technically, the customer did not make any false representations. It seems he merely expected the bank not to notice his "proposed" contractual changes. That would not seem to satisfy the elements of the crime, though I wouldn't bet my own freedom on that.
Regarding bad faith: It would be interesting to see if the court would find a breach of the implied covenant of good faith and fair dealing. It's iffy. Generally, such a breach would arise from either party's conduct outside the signing of the contract itself. I.e. you do something underhanded to thwart the other party's enjoyment of his contractual rights, without breaching any specific term in the contract.
Could a breach of the implied covenant arise from the negotiation process itself? In my cursory search, I didn't come across any cases like that, but they could exist. In this case, there does seem to be some willful deception on the customer's part. One could argue, based on the circumstances, that he expected the bank not to notice his alterations. Perhaps this would be considered bad faith.
One could also argue that the contract is void as there was no meeting of the minds. This can be a difficult case to make when there is a written contract. Nonetheless, in unusual circumstances, which this appears to be, a written contract can be voided for this reason. Here, one could argue that the two parties thought they were signing contracts containing radically different text, and thus there was no meeting of the minds.
Note that you can't just claim this any time you want to get out of a written contract. The default assumption is that your signature indicates you read and understood the contract. You have to show some unusual circumstance--such as one party's surreptitious alteration prior to signing--if you want to claim there was no meeting of the minds. And even then, a win is far from guaranteed.
Will it work? It's hard to say. Courts are generally skeptical of the excuse that "I didn't read the contract."
Perhaps it comes down to this: Does a party who makes proposed edits have any obligation to point out such edits? Or does the responsibility lie wholly with each party to read the contract in its final form?
I don't think a bank will want to go down the line of arguing the contract shouldn't be binding because they shouldn't have to read the small print - that sounds like an overall loss for the bank in general.
That's like I would initiate a contract with you and after we read it together and you agree it's what you want to sign I covertly slip a page into the pack that completely changes the terms and trick you into signing it without you actually knowing it's there. You can reasonably claim you intended to sign the original one, not the one I secretly modified - and I expect the court be more sympathetic to you than to my claims "you should have watched my hands all the time!" Of course, it'd require you proving that I did this, but if you can, your case sounds pretty strong to me.
Doesn't this case show that they cannot reasonably expect the contract to be identical to what they sent, in respect to all future contracts?
1 - The bank signed a copy then gave one to the customer to sign. If the customer changed the print at this point, it would no longer be valid.
2 - What this guy did, the bank gave him a copy, he modified it, then signed it, then sent it back, to which the bank approved. Which is still technically valid.
Your contact probably has aterm about them being allowed to change the contact and probably not even notifying you.
Customers are always cautioned to read the fine print. I would not know why this would not be valid advice for banks (or any other business) as well.
"Alexeev then sent his updated agreement to the bank, and shortly thereafter received the bank's signed and certified copy, as well as a credit card."
It's been a while since I signed up for a new credit card, but I don't recall getting back anything "signed and certified." Terms and what-not, sure, but that sounds like the bank sent back his (updated) contract.
Apparently, I've gotten more houses than credit cards, because that's exactly how you handle contract negotiations there.
Good lucky going to court sayingthat you only read the credit card brochure so you thought you didn't have to read the contact before signing... Whichis exactly what the bank did.
If the bank get out of this one, and Russian contract law is the same, it will be going over all the precedence to this date.
My bet is that neither side will have it all. Contact will be upheld, but values will be ruled out of some legal common sense.
The problem is that fraud charge may be hard to prove, but may be much easier to initiate. And criminal investigation, even not resulting yet in a charge, may be rather annoying matter. For example, they could get (given a friendly judge) an order to seize all your computer equipment to look for signs of fraudulent activity. And keep "looking" for years, while you can't use them. And so on. If they arrange a cooperation of a friendly prosecutor, they can cost you lots of money while never getting to the court. Since they are paid by the taxpayers and you're not, you lose.
I would wager he probably has 1 crappy old computer a printer and a smartphone (just my guess as an eastern European).
He could care less if all that crap gets locked off.
As far as I can tell even that fact that he kept his end of the contract to the best of his abilities for 2 years can be used as proof that he isn't fraudster.
A fraudster would have done that a lot sooner.
In other words, it's not just carelessness on the bank's part. That alone would not be a sufficient argument. Rather, it's carelessness coupled with the customer's willful exploitation of that carelessness. That may be enough to tip the scales in the bank's favor.
But in the end of the day, it's irrelevant, banks will use stronger language next time.
> banks will use stronger language next time
Except that such language could be deleted by the customer. In this case, a customer has demonstrated an ability to make arbitrary changes to the contract. Assuming he is legally savvy, he should be able to alter any terms that would damage his case. This, of course, assumes that the contract is held to be enforceable. I still have strong doubts about that.
I don't want to quote at length, and there's no particular passage that nails this case, but my overall sense from the article is that the contract could be voided for want of mutual assent. Or that perhaps even the contract could be judicially modified back to the bank's version.
Anyway, here's the most concise (heavily edited) quotation I could find from the article:
"There are many ways, short of fraud, by which one party can take advantage of another in driving a bargain. For example...his disinclination to read a printed form...At the least, if a person consciously takes advantage of such weaknesses, he acts in bad faith."
But, as of 1968, he said: "Case law under this section is scant." Has this changed? Quite probably. Do I have a Lexus or Westlaw account to find out? No.
If a massive credit card agreement had a cancellation fee of $10, I'd expect to have to pay it. If the fee was $200,000 then I'd expect a court to say "Don't take the piss".
Just like we keep arguing that ridiculous terms in EULAs shouldn't be enforceable even if someone clicked ok, the bank shouldn't be held to this.
The contract was deemed valid though, which I think is awesome.
*Penalty clauses are ones that specify excessive damages, to punish someone who breaches a contract -- as opposed to "liquidated damages" clauses, that specify damages which pre-estimate the loss that you'll suffer if I breach the contract, which are allowed.
So OK penalty clauses are really abusives but what about simply granting oneself favorable terms (like guaranteed interest rates, free services, etc.) ?
I disagree. This is one of those instances where I believe it's more important to preserve an equitable standard rather than penalize someone simply for being bigger.
Let's say hypothetically that the courts agree with you, and that in Russia the legal system is strongly based on precedent as it is in the US (I don't know anything about the Russian legal system).
Would any company be exposed to this manner of small-print tweaking? Would this include LLCs as well as corporations?
What if an office supplier injects ridiculous terms into an agreement it signs with a corner grocery store, imposing 6 figure termination fees, and prices that increase exponentially every week? How about a web hosting agreement between a hosting provider and a startup, granting the hosting provider full IP rights to anything hosted on their servers?
These may not appear to be comparable to the David & Goliath-esque situation of a credit company and an individual, but I'm pretty sure this is not really a can of worms anyone wants to open.
It's not. Russian legal system is based on codes. http://en.wikipedia.org/wiki/Law_of_Russia
I know this is Russia, not the US, and law does not apply to the same extent, but I still hope the man wins.
cf. also the following:
* http://www.cato.org/events/rule-law-russia * http://www.reuters.com/article/2011/05/20/russia-medvedev-id... * http://www.freedomhouse.org/article/state-human-rights-and-r... * http://online.wsj.com/article/SB1000142405274870377570457616... (Google URL and use Referer: information to view)
I'm sure others could come up with more sources too.
In the UK, if bank fees are excessive we can take it to the Financial Ombudsman service. There is supposed to be a level of fairness.
> but I still hope the man wins.
I don't. If he did, then it would make it ok for the bank to do exactly the same thing.
IANAL, but I believe the general legal (as opposed to moral) arguments for ridiculous clauses being unenforceable is that contracts of adhesion face a strict inspection for unconscionability along with the suspicion that there might not be a true meeting of the minds if circumstances made it unlikely for one party to even be aware of what they were agreeing to.
I don't think you can argue that the bank was aware of what they were agreeing to.
The unprecedented level of corruption in Russia is in a large extent due to this cultural beliefs. Being a successful bureaucrat or corrupted official is a dream of millions, be it a student of Academy of Government Service, or just a novice applied for a job of a traffic cop.
Most of so-called businesses are based on a fraud, designed and set up with the fraud in mind, as an exit strategy, based on exploitation of minorities, cheating of naive and uneducated and banal brute force.
Of course, such thing happen all over the US or other countries, the difference is the percentage. In Russia cheating and fraud are dominant strategies due to lack of any real economy or production.
The dream of easy money makes us the world largest porn producer, malware manufacturer (nothing very clever, just primitive deception) and a world's leader in drugs usage. We are deliberately copying, adapting and sometimes creatively enhancing all the possible ponzi schemes, corporate frauds found in US, without trying to mimic anything decent.
So, nothing to see here, yet another punk inspired by the cult books about Ostap Bender.
btw, these cards of Tinkoff Credit Systems was a nice cheating in itself - in a small print there was whopping 35% interest rate, huge fees for cancellation and inability to pay back ahead of schedule.)) So, they worth each other.
That's a last century's character - too modern to be folklore. Now let me get my 'balalaika' and go dance with some bears - this would fit very nicely in the image you are trying to enforce.
This appears many in unequal or unjust countries in the world (for example North Africa), and it is easy to understand: When the powers that be are not seen as just, it's easy to motivate cheating against their rules.
The HR representative signed both copies, gave me one and filed the other. The funniest part is that when I left a few years later, they couldn't find the one I'd signed and asked me to sign another during the exit interview ... I declined ;)
It seems strange that an otherwise legal contract signed by both parties would be void based on the agreed content when signed.
As I said before, I wasn't interested in taking their IP but rather eliminated the parts that are onerous to the employee and that might put my side projects at risk. I should also point out that I'm still on good terms with this company and have helped with various IP issues that weren't finished when I left.
When they inevitably didn't pay me on time the CEO called me up to ask why they hadn't received the finished product from me. When I pointed out I'd modified the contract - which he had returned, signed - he said in a rather hurt voice "...but I never read it - I just assumed it hadn't been changed!". There is a lesson there!
The next version of the agreement (we sign it once/year) actually included language very similar to my changes. Admittedly, I don't know if I impacted that or if it was independent, but it did make me feel good.
Lets say that you were given some terms and conditions to read, the and the bank swapped them out for others just before you signed. The new terms contain a condition that you must pay them several hundred thousand dollars instead of 10.
Which way would you expect the court to rule? Which way do you think it should?
How much more liable will be decided by the judges.
Usually, having a written contract that both parties sign means that condition's easily met. But pretty clearly, swapping some small print out just before you sign might undermine that, depending on the situation. See e.g. Hartog v Colin & Shields [1939] 3 All ER 56.
(Obviously, this is irrelevant to the person in the article, as Russia is not a common-law country. And I don't know if it's relevant to American HN readers either: my possibly flawed understanding (as a Brit) is that most consumer contracts in the US are not governed by common law, but by the UCC, of which I know nothing).
The point is: you interpret words as they'd be understood by a reasonable person in the position of whoever the words were spoken to, not as they were understood by the person who spoke them.
E.g. consider the Hartog case. Key sentence: "...the plaintiff could not reasonably have supposed that that offer contained the offerers' real intention." ("Could not reasonably have supposed" is legal shorthand for "A reasonable person in their position would not have supposed"). If they had genuinely thought that the offeror meant it, it wouldn't have mattered.
No test by fire needed.
(NB this is English common law. I've been told in the past (https://news.ycombinator.com/item?id=5402595) that the UCC in the US is a whole lot more subjective than English law, so this is likely wrong in the US).
The rule you described is really nice but is it used in practice to fight such scammy business practices?
I would imagine the rule is not used extensively in practice because it exists as a preventive measure should such a thing ever come up.
But: It's not clear to me that the rule is at all relevant to that scam. As you describe it, it's not that the victims reasonably appeared to be agreeing to do one thing when what they signed said something different. They were persuaded to buy a blanket for x thousand dollars, and did.
The most obvious tool contract law has to undermine that is misrepresentation. If the scammer told a lie to get the victim to sign, then the contract's voidable by the victim. (This is true even if the misrep is innocent. If it's fraudulent, then you get a better measure of damages - and, of course, the scammers might've committed the criminal offence of fraud).
There's also a doctrine of 'undue influence', which if proved can also make the contract voidable.
Finally, even if the contract is valid, since R v Hinks [2000] UKHL 53, it's not impossible that the scammers could be convicted of theft of the money. So, validly transferred per civil law, theft per criminal law! Which is... surprising. (IMHO it's bloody stupid, but that's another debate).
The test is objective manifestation of intent to be bound.
The UCC, which in the relevent part only covers the sale of goods, abrogates this rule and allows and contract to be formed so long as the material terms are identical. The provisions of the resulting contract are governed by UCC 2-207 and the process of determine them is given the colorful name the "battle of the forms".
What I would expect would happen and what I believe to be the correct ruling and how the world should work in ideal circumstances are all different things, sadly.
So just because I think the bank will prevail doesn't mean I think it's the correct ruling or morally right or the kind of world I want to live in. It just means that I don't think a judge would slow banking to a crawl for the sake of rendering the correct judgement on this case.
So making them read what they force everybody to read would be cruel?
Besides. It has easy fix. Bank should sign the agreement first before sending it to the customer.
But just because I want them to get slammed, or because they deserve to get slammed, or even that it is legally correct that they get slammed, none of those things means that they actually WILL get slammed.
Trust me I want them to get hurt on this one and for it to reform the fine print bullshit and all of that. It would be so awesome if it did happen. But I'm definitely not optimistic that it will happen.
If this works, people all over Russia will likely try stuff like this. Banks will have to check every contract with every customer ridiculously carefully until they can roll out a global solution. While fine print is sub-optimal and irritating, forced mass reform has serious short-term repercussions.
But that's not what seems to happen at Russia. And having different rules for each party is hipocrisy.
Finally, a big institution is screwed when they don't read the little guy's fine print before they sign!
This means that ignorance isn't bliss, so much as a natural state in order to function. To me, that implies something is wrong.
[1] http://www.legalmatch.com/law-library/article/contract-integ...
"This Contract contains the entire agreement of the parties with respect to the subject matter of the Contract. The contract supersedes any prior agreements, understandings, or negotiations, whether written or oral. This Contract can only be amended through a written document formally executed by all parties."
While that clause could apply once the agreement is signed to any future changes, before that, isn't it just negotiation between the parties? (Whether it can be considered "good faith" or not is another matter, of course.)
> This Contract can only be amended through a written document formally executed by all parties.
To me, that suggests the contract can only be amended if all parties provided a written document approving the amendments.
In this case, only one party provided the required documentation.
[1] Clause: http://www.oncontracts.com/general-provisions/#sec-35. Explanation: http://www.oncontracts.com/surreptitious-contract-changes/ and http://www.oncontracts.com/surreptitious-contract-changes-ii...
This reminds me of the story here awhile back regarding someone signing credit card receipts with increasingly absurd signatures, including a drawn picture in lieu of his legal signature.
http://consumerist.com/2009/02/03/dont-draw-genitalia-as-you...
I asked for an automatic debit for a student loan, and got a form to fill out. Among other terms it specified that the lender could change the amount taken from my account, unilaterally!!!
So I crossed out this part, specified literally the current amount in dollars and cents, and said that any change would require separate written consent from me.
And sent it back with a signature. As others pointed out above, if they failed to notice the change, it is their own fault and their own problem, just as they would argue that it was my fault and my problem if I signed without reading all their self-serving, tiny-font, lawyer-crafted language.
And they started debiting the account - which has no legal justification other than that piece of paper, therefore they have agreed to the terms. It has not come to a court case, but if they ever withdraw more than the specified amount I'll sue.
Would I win? Maybe not, but if not it wouldn't be because of any flaw in my approach. Rather it would be because of the defacto two-tier legal system, where corporations have rights in proportion to their wealth and individuals can't afford to enforce any theoretical rights they supposedly have. I wish I could find the well-written rant on this topic (historical separate court systems for aristocrats and peasants) - Falkvinge maybe.
e.g. I sent 3 documents out today requesting signatures from directors - signatures which by local laws bind the company they represent +- irrevocably. If you allow the scenario presented then clause #138 could easily have read "pay Mr Havoc a million a day".
So what does it say about the rule of law in Russia?
Edit: Here = America
Contract is an agreement between two or more parties. You agree to the terms presented in the contract with your signature. Any law written in a way which protects companies is wrong. There should be no difference between a contract written by John Doe and a contract written by any company.
They would then find it worthwhile to spend $7 million in legal fees to avoid the $700K cost, just to have precedent for the next person that tried it.
The nature of corruption in Russia is not about that rich easily buy justice to win over poor, or that big companies are preferred over individuals, though that issues exist too, it's about those closer to Putin living by different law than regular people, but I don't see anyone like that involved.
Just today I was thinking about Google and other big companies founded by Russians and then I see this little man hacking himself into success. I feel deep respect for persons who start from nothing, but with big success! Despite the prejudices people may have with Russian, some of them are really damn smart and this man proves it..
Thats quite an achievement, hats off to you sir.
Legally, the signed contract is simply the physical manifestation of something deeper: the consensus ad idem or both sides agreeing to the same thing. Tricking a busy clerk into signing an altered document does not constitute acceptance of the contract.
The court generally chooses not to reward such dishonesty, and therefore allows the honest party to choose which version of the contract should hold.
If you're really lucky you'll be able to add a fraud claim as they forge your signature on a unmodified copy of the agreement.
Whenever you deal with credit card companies, banks, etc, you should always make them reproduce the document.
Eh?
I think it's a shame that regardless of if he wins or loses, many people believe that "fine print" is a tool that only big institutions like banks or insurance companies are allowed to use in their favor.