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February 10, 2016

Infrequently Asked Questions: What am I signing away in a terms of use agreement?

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Hardly a day goes by that we're not signing terms of use forms for a service or an app -- those long-as-a-phone-book texts we reflexively click through but seldom (if ever) take the time to read.

Curious about what details might be cause for alarm, Drexel University Kline School of Law Associate Professor Richard Frankel discusses a seldom-talked-about clause that companies like Netflix, Sony, PNC and, yes, Comcast, are tucking into their contracts.

What’s the basic right we’re signing away with some terms of use?

The main thing I’ve studied in a lot of these agreements -- not all -- is where you sign away your right to go to court. Everyone has a constitutional right to a trial by jury in a legal dispute, that’s the Seventh Amendment, but many of these click-through terms of use say that you give up that right to go to court and agree to resolve any disputes you have in what’s called mandatory binding arbitration, which is a private form of dispute resolution. A private arbitrator is going to decide your dispute instead of a court.

And they can do that?

They can do that ... if you can be presumed to have read your contract, you click to agree to the terms, that’s enough to waive that right.

What are some other things you've seen snuck into agreements?

Sometimes, in terms of the dispute resolution, you’ll occasionally see some pretty crazy things. I don’t know if this always occurred in a click agreement as opposed to a print agreement, but "You agree to not only arbitrate your claims, but you agree the arbitration will take place in California," even if you live in Philadelphia. So if you wanted to bring a case in court you can bring it to where you live, but if you were going to resolve by arbitration you’d have to travel all the way to California to do that, even if the travel costs were more expensive than the amount at stake in your dispute ...

The other thing is that sometimes [agreements] change -- you notice they change all the time. And a lot of them will say "We reserve the right to change this all the time," and it’s not like they call you up to negotiate with you to say, "Hey you agreed to this terms of service, we want to change it. Do you agree?" They just impose it on you, and your only recourse is to stop using the service if you disagree.

Are there any regulations or restrictions to what you can pack into these agreements?

With respect to giving up your right to go to court, most attempts like that have been held to violate an old federal law called the Federal Arbitration Act, a law passed in the 1920s [that] obviously wasn’t thinking of click-through agreements back then, and it was never intended to be applied to that kind of thing. But the Supreme Court has interpreted that law very broadly to prohibit state legislatures or judges from trying to regulate the fairness of arbitration clauses in such agreements. I don’t know as much about efforts to regulate the terms in other ways, but I do imagine there’s a lot of lobbying power behind the groups that want to use terms of use, these long terms of use, and they don’t want people to read them or see what they’re giving up.

Is it just more recently these have been included in clauses or is it the case that the right person finally read it, paid attention and took notice?

It’s been gradually growing since the 1980s. There was a series of court decisions that authorized use of arbitration clauses in a wide variety of circumstances, and so companies following that sort of authority they’ve been given by the Supreme Court -- they began expanding the use of arbitration and there were a couple recent decisions in the last 5 years that really allowed companies to restrict the scope, or the ways of which you’re able to enforce the right to arbitration. And I think a lot of companies have followed that by putting these in. But it’s been going on for the past 10 years or so, at least.

What’s the most surprising thing you’ve learned in your research?

I think one thing is -- and I’m just as guilty as everybody else of this -- but how we all have sort of passively accepted this. "I’m going to click on this terms of use and agree without reading it." We know no one’s going to be there to read it and everybody does it anyway and come what may. The whole idea that it represents some kind of legally binding contract, where you expect everybody to have read it and negotiated it. It’s surprising that we even think of that as a contract anymore.

And then the other surprising thing is even when people do read it, and they read sections where they’re giving up their rights, there are studies that show there’s little understanding of what they’re actually giving up. And people may read a section saying "You’re giving up your right to go to court," but they don’t think it’s true or something that can really happen to them. That they can still go to court and enforce their rights.

Where do you think this issue's headed?

I think on the one hand there’s this sense of acceptance -- that this is the cost of doing business. So I think it’s probably headed to a place where it will become that much more prevalent. There have been efforts to try and regulate, at least with respect to arbitration and maybe a few other aspects of contracts, but especially when it comes to arbitration there’s a huge amount of lobbying power on behalf of groups that want a rigorous enforcement of arbitration clauses and waivers of rights to go to court. And I think that really makes it difficult to enact change, even when we all realize it’s pretty ridiculous -- that no one is reading anything they’re signing and they’re written in a way to minimize the chance anyone is reading it.

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