Terms Of Service: Breaking Contract Law?

Terms of Service (ToS) are legal agreements between service providers and consumers. They outline the rights and responsibilities of both parties and are legally binding. However, the language used in these agreements is often vague and lengthy, causing concerns about customer privacy. When a company or consumer breaks the terms of service, it can result in a breach of contract. A breach of contract occurs when one party fails to fulfil its obligations as outlined in the contract. This can be an action or a failure to act, depending on the terms. While breaking the terms of service is not a criminal offence, it can result in legal consequences, with the victim generally being entitled to what they were initially promised.

Legally binding terms of service

Terms of Service (ToS) are legal agreements between service providers and consumers. They are a type of contract and are legally binding if certain conditions are met.

Firstly, the ToS must be presented properly. This means that the user must be put on notice, which requires a conspicuous presentation of the ToS. For example, a bold and distinct hyperlink that contrasts against its background, with clear language indicating the existence of the agreement. The user must have the opportunity to review the agreement and must affirmatively accept it.

Secondly, the company must be able to prove that a particular user accepted a particular version of the agreement at a specific time. This can be done through screenshots or back-end records that connect users to specific agreements.

If these conditions are met, the ToS is a legally binding contract, and the company can enforce it by refusing service. If a user breaks the contract, the company may be able to sue for breach of contract, although this is rare.

However, it is important to note that contractual provisions may be unenforceable even when a contract is otherwise binding. For example, if a contract includes a clause allowing unilateral amendment, where one party can change the agreement without the other party's consent, it may be deemed unenforceable.

Additionally, if a user did not fully understand the terms of the contract, it may be voidable. In this case, a judge may need to decide the validity of the contract.

Consumer protection laws

As economies developed and consumers increasingly interacted with large corporations, laws evolved to protect consumers from unfair practices. Consumer protection laws are made up of a patchwork of federal and state laws that govern a wide range of products and services. For example, the City of New York's Consumer Protection Law prohibits unfair trade practices such as false advertising, phony sales, and special offers with hidden conditions. It also outlines proper behaviour in the collection of consumer debts.

At the federal level in the US, the Federal Trade Commission Act empowers the Federal Trade Commission to prevent unfair methods of competition and regulate consumer protection. The Commission inspects complaints of scams and fraud against businesses. In recent cases, the FTC has taken action against companies like Facebook, H&R Block, and Handy Technologies for violating consumer privacy, deceptive advertising, and deceptive earnings claims, respectively.

While consumer protection laws have steadily increased since the 1970s, consumers still face high costs and time barriers to taking action against businesses, resulting in low usage of these protections.

Signing away rights

When signing a contract, it is important to remember that while the power to contract is broad, it is not limitless. There are certain rights that cannot be signed away.

Firstly, it is not possible to contract to perform illegal activities. This means that a contract cannot be used to facilitate or enable illegal activities. Secondly, constitutional rights cannot be contracted away. For example, a contract cannot restrict a person's fundamental rights, such as the right to liberty.

In addition, contracts that are unconscionable will not be enforceable. Courts give significant weight to public policy when making enforceability determinations. For instance, an author's moral rights cannot be assigned to another person, and they have the right to prohibit others from distorting or modifying their work. However, an author can waive their moral rights if other IP rights in the work have been transferred, such as in the case of research.

Another example of a public policy consideration is each person's right to compete in the marketplace. While courts aim to balance restraints on trade with legitimate efforts to protect a business's confidential information, they have been reluctant to enforce contractual provisions that place unnecessary restraints on trade. For instance, a non-competition clause must include limitations of time, geography, and scope of activities to be enforceable.

It is also important to note that contracts signed under duress or threat of physical or other harm are not legally binding.

Changing terms of service

Firstly, it is important to understand the distinction between "clickwrap" and "browsewrap" agreements. A clickwrap agreement requires users to actively confirm their agreement by checking a box or clicking "I agree", whereas a browsewrap agreement simply presents the terms somewhere on the website, often in the footer section. Clickwrap agreements are generally considered more enforceable in a court of law, as users must explicitly agree to the terms.

When updating terms of service, companies should provide clear and timely notice to their users. This can be done through email notifications, website banners, or mobile app pop-up windows. The notice should include information such as the reason for the update, a summary of the changes, and the effective date of the new terms. It is also good practice to provide a link to a comparison between the new and old agreements. This gives users the opportunity to review and understand the changes before they come into effect.

Failing to provide proper notice of changes to terms of service can have legal consequences. In the case of Rodman v. Safeway, Inc., the court ruled against Safeway for unilaterally amending its terms without notifying its users. The court argued that users cannot be expected to assent to terms that do not yet exist, and that companies should not create an expectation for consumers to constantly inspect contracts for changes.

To avoid potential legal issues, companies should make it a standard practice to provide clear and timely notice of any changes to their terms of service. This not only helps to protect the company legally but also fosters a more transparent and respectful relationship with its users.

Breach of contract

A breach of contract occurs when one party fails to fulfil its obligations as outlined in a binding contract. This could be a late payment, or a more serious violation such as the failure to deliver a promised asset. A contract is a binding agreement between two or more parties, where each party agrees to do, not do, or pay something according to the terms of the agreement.

For a contract to be legally binding and enforceable, there are several requirements:

• A mutual agreement: Both sides must agree to be bound by the contract and agree on the essential terms.
• An offer and an acceptance: One side makes an offer and agrees to be bound by the contract, the other side accepts.
• Consideration: Each party must give something of value. This could be money, an item, or a service.
• Capacity: Each party must be competent to agree to the terms of the contract. For example, a minor or a person without the mental capacity to understand the contract cannot enter into a binding agreement.
• Legal purpose: The contract must be for a lawful outcome.

A breach of contract can occur in both written and oral contracts. If a party does not fulfil their side of the agreement, the other party can sue. For example, if you lend a friend money and they agree to pay you back within six months, but then refuse to pay you, you can sue for breach of contract.

There are different types of contract breaches, including minor and material breaches, and actual or anticipatory breaches. A minor breach is when you don't receive an item or service by the due date. A material breach is when you receive something different from what was agreed. An actual breach is when a party refuses to perform the terms of the contract, and an anticipatory breach is when a party states in advance that they will not deliver on the terms.

If you are suing for breach of contract, there are a few things to keep in mind. Firstly, you must sue before a deadline, which is generally within four years for a written contract, and two years for a verbal contract. Secondly, check your contract for any language about what happens in the event of a breach. For example, the contract may state that you must go to arbitration or mediation before suing. Finally, make sure to collect any evidence that proves your position, such as the contract itself, receipts, emails, or witness statements.

If you are being sued for breach of contract, there are several defences you can argue. These include:

• You did fulfil your obligations under the contract.
• The other party broke the agreement first, or it is their fault that you couldn't fulfil your obligations.
• The contract was supposed to be in writing.
• The contract is indefinite, with essential terms not being agreed upon.
• The contract was signed under duress, with the other party using threats or physical force.

To avoid a breach of contract lawsuit, you should ensure that any contract you sign is clear, precise, and legally compliant. You should also carefully select the people or companies you work with, checking their professional reputations and legal history.

Frequently asked questions