It's not just the length of the initial contract, it's the lack of a sane "diff" system.
Even if someone is willing and able to read a 44 page contract the first time, the next time version 1.0.1 of something comes out you are generally given a 44.5 page contract to re-agree to. "Somewhere" in there, they changed something; good luck figuring it out. So even if the version you read gave you permission to sue, the amendment that you clicked-through-in-agreement later may have given away that right (an amendment they probably made because somebody sued them).
We solved this type of thing years ago, the solution just hasn't made its way into legalese: use revision control. I wish that large documents were:
- Publicly revision-controlled with a system that has clients everyone can easily use (i.e. no arcane commands, and push-buttons for the most common things like "compare to last version").
- Public accountability for the entire revision history of every single line. If somebody wants to add [Horrible Clause A] two months after I first signed it, then I get to know exactly who made the change and if I want to I can take a look at other changes they've made to other documents.
I get to have this experience with one of my banks. And all I need to do to stay updated with the terms is click watch on the github repo. It's the way things should be.
It depends. I tried to switch to Simple, but at the time I was working as an independent contractor. The maximum size of a check you can deposit without mailing it to them is $3k. Having to mail in every check I received was a hassle that outweighed any benefits Simple provided over a regular bank account.
For what it's worth, last time I was doing independent contractor work, I used a billing firm, MBO Partners. They took 4% of my gross and treated me as a W2 employee. My taxes would come out of the gross, as would any benefits I elected. The rest would get direct deposited like a normal paycheck. I would have spent more than 4% of my time screwing around with paperwork, so I thought it a pretty good deal. I suspect there are other firms like this, but I liked 'em enough that I used them for 8 years or so without ever looking for alternatives.
What if arbitration clauses are not a problem at all? There is a great deal of contradictory evidence with respect to whether arbitration is more or less favorable to consumers and employees (though it is definitely very bad for class-action lawyers). But even if we assume for the purpose of argument that consumers always lose disputes which are arbitrated, they may be willing to make that trade in exchange for reduced prices on goods and services, as well as higher salaries.
There is a great deal of definitive evidence that arbitration clauses undermine the purposes of class proceedings, those purposes being:
1. increased access to justice (i.e. one may be automatically included in a successful claim, as opposed to seeking prospective reward through a potentially lengthy and expensive adjudication);
2. lowering of overall cost of adjudication (i.e. many issues may be resolved at once, at lower expense to the plaintiffs, defendant, and the courts); and
3. behavioural correction (i.e. raise the likelihood of bad behaviour by corporations resulting in monetary consequence).
Contracting-away class procedural rights can undermine point #1 and #3. Most people do not litigate even when they have an excellent chance of success, and behavioural correction requires a certain percentage of individuals to bring and succeed in their cases. The percentage who tend to litigate, and whom can be confidentially settled with out of court, are empirically a fraction the aggregate exposure from a class proceeding.
Which is all to say, arbitration clauses are not a problem if you do not feel like corporations should have monetary consequence for bad behaviour. This is certainly good for the people who own the corporations.
There is a problem, whether perceived or real, of "lottery ticket litigation" where plaintiff class action lawyers receive a large payout on success. Certainly one wants to incentivize capable lawyers to take on hard and speculative projects by dangling good returns, but in the case of class actions I have always thought of it more as a public interest litigation. There should be an incentive to succeed, but properly employed class proceedings can have a substantial public benefit. Lottery litigation can attract the wrong lawyers, though in my experience there is a fairly wide spectrum. On the other hand, public service class proceedings have their own set of distinct issues.
>> behavioural correction requires a certain percentage of individuals to bring and succeed in their cases
No it doesn't. Both the extensive use of the class form and punitive damages (or close substitutes) are virtually unique to the United States. Ad hoc regulation by an entrepreneurial plaintiff's bar acting without meaningful client input is not the not the only effective means to regulate businesses. On the contrary, plenty of countries arguably do a better job without the use of them at all.
The US is also uniquely suited to business innovation. I think that's no coincidence. Depending upon after-the-fact class action instead of up-front regulation means more focus on actual harm than fear of harm.
I also broadly wouldn't trust the US to be particularly good at government regulation until our elections are publicly funded. There's a lot of evidence that our legislation is distorted towards the interests of the moneyed. I don't think that's a recipe for energetic, effective business regulation.
> >> behavioural correction requires a certain percentage of individuals to bring and succeed in their cases
> No it doesn't.
It is necessary for class proceedings to induce behavioural modification, which is what we are talking about here. There are other means to bring about behavioural correction, but that was beyond the scope of my comments.
> Both the extensive use of the class form and punitive damages (or close substitutes) are virtually unique to the United States.
At least a dozen states have class procedures, but you may be right on punitive damages. Canada is quite close, but punitive measures are handed out sparingly.
>> Ad hoc regulation by an entrepreneurial plaintiff's bar acting without meaningful client input is not the not the only effective means to regulate businesses.
I partially agree; class proceedings are a poor substitute for regulation. However, a few points. First, in tandem with victim compensation and reduced litigation costs, some argue the behavioural modification aspect from financial consequence can act as a check-and-balance that requires no arbitrary intervention by the government to correct and prevent wrongdoing.
Second, class action are procedural in nature and the substance of the case must be founded on existing laws – often common law torts, but sometimes regulatory or administrative. The cost of enforcement via a class proceeding is relieved from the public purse, and no additional rights are conferred on victims by way of a class proceeding – only the vehicle for exercising those rights is modified.
Third, regulators are often not as aligned with victims as plaintiff lawyers in class proceedings. It is not unheard of, and in some places quite common, for regulators to be hired by the very institutions they are charged with regulating.
Moreover, one can gauge the effectiveness of the class proceeding in behavioural modification by observing the broad resistance to it, namely the widespread introduction of arbitration clauses. Perhaps not the behaviour it was intended to modify, but that itself speaks to the point.
> On the contrary, plenty of countries arguably do a better job without the use of them at all.
I tend to agree, depending on the circumstances, but it is a hotly contested point.
From what I've seen, the US already has pretty aggressive public sector regulation in most areas, more than we seem to have over here in the UK these days. It's still not a complete solution because regulators don't have the resources to be everywhere at once.
They are a problem now. Absolute power corrupts absolutely. This is a one sided contract. Can you ever envision a contract solely drafted by one side to be beneficial to both sides?
The only contradictory 'evidence' is talk about why it's better; that is, companies claim it's an easier and cheaper process. They fail to mention that what they mean is, it's easier and cheaper to them.
As a consumer, I want the laws to be written by my elected politician, don't you? Sure, there's a lot of unfairness to it. But I can't imagine a selfish corporation, one that keeps claiming their only loyalty is the the share holder, will do much better.
Just one example. You know VWs recent emission scandal? In the USA those people signed not only an arbitration agreement, but one that disallows class actions. You won't hear the problems that arbitration is causing because those problems won't make it to a court of law to be a problem.
That's a good point. One could just argue that in time consumers will just favor contracts with companies that either don't have arbitration clauses or if they do the consumer doesn't care anyway about losing potential disputes. I think it's only really a problem when a company holds a (quasi) monopoly in a certain business. Like telcos do in the US in many states.
One could argue that. But markets are mainly good at solving problems that occur frequently and with short feedback loops. The sort of problems that lead to class action lawsuits are rarely either, let alone both.
You're assuming there will be a choice. A successful strategy tends to be copied. I doubt that any of the companies forcing you to agree to an arbitration clause have competitors that don't.
In New York (and, for all I know, everywhere else -- IANAL), city laws prevent you from signing away certain rights in a lease because shady landlords kept sneaking waivers in. For example, you can legally withhold rent if your landlord does not keep your property in a livable state. Many leases have provisions specifically waiving your right to withhold rent, but such provisions are legally enforceable.
There could be a similar law preventing anyone from signing away rights we deem too important to jeopardize.
They should just tell companies if they cannot describe the legal situation in under a page in a clear language for general consumer products then they cannot sell them.
Diffs won't help - the aim from version 1.0 is to obfuscate.
1 page is plenty long to bury unconscionable landmines in, especially for the party controlling UX. Until courts are ready to legislate UX, the better approach is to legislatively augment the court's "soft" power to void contracts that a reasonable person would "sign" without reading. Vague as hell, yes, but it fixes the incentive landscape without leaving obvious loopholes: longer and harder to read = more enforcement risk.
Also, this principle already exists and has a decent track record. Which is why my lease is 3 pages long, simple, and relatively landmine-free (I had to initial key clauses) while my iTunes contract is 50 page long, impenetrable, and landmine rich. The principle just needs to be strengthened & applied in the tech world.
Eh, the "vague as hell" is a huge problem. If I'm reading a contract trying to figure out my recourse and it has a bunch of unconscionable terms, then I've got to confidently know enough general legal information and applicable case law to realize what's on the paper in front of me is utter bullshit. Most likely I am going to be dissuaded from escalating (lawyer or small claims) thinking I simply have no case. Perhaps if there were punitive damages for unconscionable terms (which seems appropriate as they're essentially maliciously wrong legal advice).
I'd agree, but I'm also pretty sure that it'll be a long and trying uphill battle requiring decades of waiting and several large scandals just to get the judiciary to the point of throwing them out. But I guess we can hope :)
It's a bit more that the "the state is the enemy" line rapidly devolves to standard Libertarian bullshit.
Power begets power. Good power structures redirect that concentration and redistribute power, wealth, and means of production. The question of how to go about doing this is older than civilisation, most recent example I've come up with is from a history of Caesar Augustus, addressing the optimates and populares.
Former are oligarches, latter proles.
Guess which side's plank was "strict property rights and no debt forgivenss", and which was "structured bankruptcies, land redistribution, and affordable grain"?
It's the same strict propertarian vs. living-wage argument we're having today.
We didn't solve this type of thing for the adversarial case. If contracts became easily electronically diffable, then companies who didn't want their diffs comprehensible would randomly move sentences around and substitute words in every version of their contracts.
Perhaps one could legislate that legally immaterial changes have to be kept in separate commits than legally material changes, and that those have to be as atomic as is reasonable.
I feel like the more difficult problem is getting every company to use some kind of electronic system to store versions of legal documents. Actually diffing two documents in any format is much simpler, even against an adversarial company.
I have to imagine that the companies would at least be paying more for lawyers to shuffle contracts around like that than to amend them slightly.
It's an interesting idea, but I don't think it would accomplish anything. A major point of the article is that consumers and employees generally have no power to negotiate; even if you can read the contract easily, there's little you can do about it.
The only way to bring about that kind of change is from the regulatory level, the companies benefit from obfuscating the changes they're making you agree to.
Making it easier to see that they just added a single provision allowing them to sell your data is not something companies will want to implement themselves.
I am a deals attorney and a programmer. I'd caution against conflating comparison tools like "diff" with Git and revision control more generally.
Lawyers call change sets "redlines" rather than "diffs". Their use in the profession long predates modern computing. Word has a serviceable built-in diff tool called "Compare Documents", and many law firms license superior document comparison software. Prose diff is hard, and specialized law tools far surpass diff, wdiff, GitHub prose diff, &c. in areas like move detection and treatment of punctuation.
Source code revision control systems are built for, and conducive to, modes of collaboration that only occasionally resemble legal practice. In the main, lawyers trade "patches" with commentary via e-mail, which is still the practice of some important open-source projects, like Git itself. (For a nice comparison of this workflow to "GitHub flow": http://zachholman.com/posts/git-commit-history/ . See also git-send-email and git-format-patch.) A developer might be tempted to squash commits to make a "pretty" patch. In an adversarial negotiation, hiding incremental revision history is essential for maintaining confidentiality and information advantage. If you're going to squash, anonymize, remove timestamps, &c. every time, Git is overhead and potentially dangerous. Git's architecture does not allow parallel, private histories for shared commits; you can't have your secrets and share them, too.
Fortunately, there are two common situations where Git makes sense for legal docs: standard forms and public terms. GitHub is in active use in both those areas.
A few pioneers, among them Jason Boehmig, whose Ironclad is a recent YC alum, and Casey Kuhlman, now of Eris Industries, have done work on "open" form contracts in plaintext markup tracked with Git. Jason lead the effort to make the Series Seed financing documents available on GitHub: https://github.com/seriesseed/equity I've followed in Jason's footsteps with an in-development community revision of Series Seed at https://github.com/seriesnext/seriesnext and an experimental company-to-company NDA at https://github.com/obviousnda/obviousnda (More announcements in this vein to come.) Casey's "Legal Markdown" and later writing for Eris were big inspiration for my current open-source work.
Public terms, like terms of use, fall somewhere in between working on a standard form for the common good and negotiating a contentious agreement. On the one hand, what's good for the service provider may come at user expense, as with arbitration clauses or limits on liability. On the other hand, courts require that users at least have notice and a way to review changes made, and transparency goes a long way to earning user trust and avoiding PR blow-up.
When the users on the other side are devs, Git makes a lot of sense. A number of developer-tools companies use version control to track their privacy policies, and sometimes other company policies. npm, Inc.'s policies, to give one example, are here: https://github.com/npm/policies Many of these use GitHub's "prose diff" support for Markdown.
Why doesn't somebody just create a git repository with contracts from major companies and push changes whenever they appear? Link to a subreddit that discusses said changes and voilà you get a little more transparency. Or am I missing something?
Yeah, the "diff" is a big one. There should be 5-10 major types of contracts that companies can work from, and consumers should be told "This is contract 5. The diff is as follows:" and limit the diff in length
Some states have this. In Texas for example there is a statewide standard residential lease contract. When you rent property in Texas you know what you're getting into.
Ive been trying to think of an effective way of regulating these sorts of contacts through legislation, and what you're describing seems like the simplest route. Simply have the public draft the standard contractual templates on behalf of consumers/employees/tenants that companies/employers/landlords are constrained to use.
Unless there's any reason to think the corps would have any less influence on that than they have on the laws that allow them to get people to waive their rights to sue - and why would they? - that sounds like a great way to prevent customers from escaping abusive conditions.
As a good example, the aforementioned Texas agreement seems to have a clause that states that the landlord can enter the property at any time without previous notice. Preventing the landlord from giving up that right is not a good thing.
Good point. I'm not even really one to turn to legislative remedies. It's difficult to imagine many practical ways to match the vast legal resources of these established interests against individuals.
And then abusive companies can just make a near unreadable diff. Rearrange all the sections in the document so that the diff is massive and unreadable.
I'm disappointed that consumer research organizations, such as Consumer Reports, don't include these issues in their reports. For example, their review of many products could include:
* Legal control: Is it free/open? Is the user just a licensee?
* User privacy: Is user data collected? How much? Can the user access it? Does the user control it?
* Legal recourse: Is arbitration required? Are class actions banned?
These issues have a large impact on consumers; I don't understand why they are overlooked. It also would raise awareness, a necessary step in addressing with them.
Governor Brown vetoed AB 465 which could have helped put a stop to this with regards to employees having to arbitrate instead of having their day in court. His reason for vetoing AB 465 was that Federal law pre-empts state law.
The federal government is too tightly controlled by large corporate interests, and I don't see reform of the Federal Arbitration Act happening any time soon. There are just to many powerful interests with a lot at stake, who would lose if arbitration were reformed at the Federal level. Maybe we should put this on the ballot as an initiative instead. At least it would send a message.
The problems with arbitration is that it does not affect court precedents, the records are private, and there's no jury involved. This all weighs heavily in favor of the employer over the employee.
I suspect the fine print will eventually be outlawed for use on the average consumer (unless we radically increase the education of the average consumer). It is well established by now that today's average consumer lacks the reading comprehension level required to fully understand these fine print agreements.
I don't know that it's about reading comprehension. I think most consumers could understand them if they put the effort in.
The problem is simply that people don't read this stuff in the first place. They simply sign without reading, assuming/hoping/praying that the terms are reasonable.
And really, can you blame them? Contracts are so vastly overused and they're made with the assumption that the consumer isn't going to read them. Most companies won't give you a two-page contract if a twenty-page contract will do. Many contracts are excessively long and are part of a sales process built on speed that assumes nobody will take the time to read before signing.
I would like to see a change in how contracts are handled, such that if one side knows the other side didn't read before signing, the contract is void. That wouldn't take care of everything (American Express's contract is probably handled by mail, so they can reasonably expect you to read the contract at leisure in your home before you sign) but it would put a stop to abusive situations in retail, where they had you a bunch of paperwork to sign. If they had to actually watch you and make sure you read it all before signing, the contracts would probably become a lot shorter. If people got used to reading the things, then it might even change their habits for other scenarios like doing stuff through the mail.
However, I also think it is completely insane that contracts are allowed to put any restrictions on either party's access to courts. The whole point of courts is to be the arbiter when something goes wrong. A clause saying that you must use some third-party arbitration service instead of the courts, or a clause saying that you agree not to participate in class-action lawsuits, should be completely unenforceable, just like a clause that says you agree to become the other party's slave.
I don't, as a consumer, sign these things because I think they're reasonable. I sign them because I don't have the negotiating power to get a better contract, and the market isn't frictionless enough to offer my preferred terms at any reasonable price.
I think that simply requiring the contracts to be read in order to have force could take care of unreasonable terms in this case. Here's how I imagine it playing out:
1. Because long contracts would immediately cause hugely increased costs for these companies if they had to wait for every customer to read them, they would greatly reduce the length and complexity of their contracts.
2. The most unconscionable clauses are also often the least necessary, so they would likely be the first to go. Of those that remain, the consumer is now much more likely to both read and understand them.
3. Because everybody is reading the contracts, they'll become aware of unconscionable clauses immediately, rather than only when they get bitten, or when they see some news story like this one.
4. Because everybody knows they're in there, competitive pressure or widespread outcry should force the removal of any remaining unconscionable clauses. (In theory this should happen now, but in practice people mostly don't know the clauses are there in the first place.)
Reading the whole contract as an individual wouldn't change much (although I think it's a good idea anyway), but I think that forcing everyone to read them would change a lot.
Whether you've read the contract is entirely meaningless when there are only three competitors in your market who all offer the exact same contract and have the freedom to tell you to fuck off if you don't want to sign it.
That's where my step 4 comes in. They won't all offer the exact same contract they do now, because it will be too expensive for them, and since people are actually reading the contract then competing on clauses will actually be a way to get customers to switch over.
> Whether you've read the contract is entirely meaningless
No, and that's the whole point. If courts nullified contracts that even a reasonable person would "sign" without reading, phonebook contracts would carry enforcement risk, discouraging the practice.
Reading the contract isn't sufficient. You also need to be able to understand the legal language and its implications, and most people can't do that. If I read that arbitration clause, it wouldn't occur to me at all that it's a way for the other party to circumvent the court system.
The real problem here is that companies tend to have their own legal counsel writing these documents, but customers don't have their own legal counsel reading them and advising them about potential pitfalls.
You can't force people to read them. You can only force them to agree that they've read them. Which is by and large what contracts say already. ("I have read the terms and conditions...")
And even if you could force people to read them, you can't force them to understand them, which is really what's necessary for your plan to work. Those contracts are generally written by lawyers for other lawyers. To understand them you need the IQ of a lawyer and a fair bit of their education. Not being able to get an oil change until you've done a semester of contract law is something that nobody's going to be happy about.
> The problem is simply that people don't read this stuff in the first place. They simply sign without reading, assuming/hoping/praying that the terms are reasonable.
that's not the problem. I see these arbitration clauses all the time, yet I sign anyway. Because I can't function without a credit card, without a cellphone, without internet hookups to my house, etc. It's not reasonable to say that I have to forego these services, or that I need to carefully shop for those vanishingly few providers that currently don't have such a clause, only for them to add one in when the contract renews in a year.
What choice does the consumer really have if these clauses are unavoidable?
>Most consumers... They simply sign without reading...
You seem to be implying that many people on HN do read them, and if that's the case, I would be very surprised. I certainly don't. There's frequently a new EULA I have to consent to when I update iOS, or iTunes, or some app, or sign into a cloud console, and the list goes on. If I read all of them it would probably add up to a good workday every week. I'm willing to bet that the number of people who are willing to devote that large a chunk of their lives to reading EULAS is somewhere near zero.
I edit the HTML on most end user agreements I sign to read, "I disagree and waive no rights," then I click that button.
I wonder in what sense these agreements are enforceable when they cannot prove that people actually agreed with them? Hard copies of contracts are kept for a reason, I always assumed.
I would really like to see that play out in court. The fix (for the companies) would be to simply include the text of the contract (or maybe even just a hash) in the form submission.
Turning into "not a contract" is a legal effect, though, and typically it's the desired one.
When there's a EULA or similar, the company is trying to form a contract with you, usually with lots of unfair terms.
If replacing the text with your own and clicking a button that you renamed from Agree to Disagree voids the whole thing, well, mission accomplished.
There would only be a problem if the law says that not only does your modification not form a contract, but that you acted in such bad faith that you actually still somehow agreed to the original contract.
Software doesn't necessarily need a license. Purchasing software can be simply a matter of handing over money in exchange for a copy of the software. Free downloads can simply be a matter of downloading a copy of the software. EULAs are everywhere, but not because they're necessary, only because software makers see some advantage in using them.
You've edited the quote to make it look like I said something I didn't say.
I said that "most consumers" could understand what contracts say if they actually read and put in effort to understand them.
I said that "people," meaning basically everybody, don't read contracts in the first place.
"Most consumers" and "sign without reading" aren't together in my original comment, either in space or meaning!
In any case, I certainly didn't mean to imply that HN readers are any different in either respect. I'm sure most HN readers could understand contracts, and I'm also sure that almost none of them actually read the boilerplate ones.
I don't have the time to read all this crap if I wanted to. And even if I did, I have no recourse to unreasonable terms. It's not like there's an actual negotiation going on.
There is also an imbalance in negotiating position in these agreements. If every credit card company you deal with says you must agree to arbitration, what leverage do you have to push back on that? There's just not enough competition in the market to push back on each one of the issues raised in these agreements.
Either the government needs to create enough competition in the market such that consumers have choice on these issues, or the government needs to advocate for the consumers.
I think this could also be pulled off by somebody like Costco. They already have a big membership and strong negotiating power. And a large part of their job is sorting through many possible merchandise options and only providing the good ones to their members. It'd be nice to see them take it a step further.
Let say that I sell a car with the fine print that said "To the extent permitted by applicable law, you may not drive it, move it or sell it".
Having the reading comprehension to read that is very different from the required legal comprehension to understand it. Customers who do read every contract they sign and see a clause about individual arbitration will have to parse it under the legal context in which the statement is put.
I'm going to take a contrary point of view: Class action lawsuits (where a group of customers sue a company that they purchased a product from) are almost always pointless and expensive wastes of money, and we should encourage contracts to forbid them.
* Many class-action suits end up with a result of lawyers get $50 million, and everyone who bought a product gets a coupon for more of that product.
* The threshold for what can be the basis of a class-action is extremely low.
* A good portion of "legitimate" class-action suits could also be construed as federal fraud / false advertising suits. (the example of a bank selling insurance that couldn't possibly be used would be an example)
All of these are different from, say, a town suing a company for environmental damage. In that case, there's no contract between the individual citizens of the town and the company, so this trend won't impact those lawsuits at all.
You're missing the social value of class action lawsuits.
There are basically three ways to have reasonably well run open markets: individual action, state action, and collective action.
Individual action often makes no sense. If a company shafts me for $10, I'm not going to spent the thousands or millions necessary to prove the error. I'll just write it off and be less trusting next time. But if a company can screw each American out of $10, they've made $3.2 billion, which is a great incentive, and also provides for fantastic legal defense. Net result: a lot of people have bad experiences, reducing consumer trust and making innovation harder.
State action is also often problematic. It's not bad at some things. But especially at HN, we don't want to encourage this as the primary means of market regulation. Governments are slow to move and risk averse. It's easier and safer for them to over-regulate, favoring incumbents and limiting innovation to what they can be persuaded to permit. (See, e.g., the car market.)
Class action, on the other hand, fills an important gap. Companies know that they can't just screw everybody without risking a big lawsuit and a big payout. But plenty of problems get solved without government having to intervene. Class action basically allows for a "forgiveness, not permission" model for regulation. As long as your customers are happy and you treat them fairly, your risk is low.
If class action stops working as a way of redressing grievances, we'll see a lot of people agitating for increased government regulation. As an entrepreneur, I'd hate to see that happen.
> Many class-action suits end up with a result of lawyers get $50 million, and everyone who bought a product gets a coupon for more of that product.
Who pays that $50M to the lawyers? It's a zero-sum game, where should the plaintiffs win, the defendant loses big with very little effort on individual plaintiffs' parts.
What other remedy do consumers have against abusive corporations who act in bad faith, knowing full well that individuals won't take 40 or 400 hours out of their life to fight over $300?
I can absolutely see it going the other way as well, where an activist (or sock puppet for a competitor) can rally together a mob of people against whatever company they don't like this week. My response to that is that, in general, companies are in a position to defend themselves and should regard defending these cases as a cost of doing business.
The alternative is to ask consumers (especially those in poverty) to enjoy death by a thousand cuts as dozens of companies each take their pound of flesh from each and every one of them. In this case, the "cost of doing business" takes food off the table.
But class-action suits are ideal when a large number of people suffered a minor monetary loss. How are you going to deal with these cases if only arbitration is left? If these cases are handled on an individual basis nobody will seek redemption. Whether and how much the lawyers or the plaintiffs receive in compensation is not so important in my eyes, what matters is the exemplary effect on businesses.
I think it would be much better to make these obligatory consumer and employee contracts unenforceable to begin with instead of trying to fix this arbitration issue. They are predatory and exist only to protect the interest of these corporations. Everyday life shouldn't be a legal negotiation.
I would argue they are unenforceable "adhesion" contracts, which are basically non-negotiable contracts where one party has more power over the other, such as rental car, cell phone, and back of the form type contracts. Arbitration clauses are not some giant conspiracy by big business. The courts have been pushing it for years. True, they found a loophole to avoid class action suits, but this could be easily remedied by the legislatures.
It's a symptom of collapsing faith in the American judiciary. Individuals can't trust that innocence and good faith will protect them, and corporations have the same problem. This is their solution.
The NYTimes mentions me but completely skips the small claims removal portion, which is a bit frustrating. Right or wrong, individuals should be allowed to resolve disputes quickly and cheaply.
Above all, the purpose of arbitration clauses in consumer contracts is to eliminate class action lawsuits. Which may or may not be a good thing depending on your point of view. In the long run, companies will probably not see sustained relief from scrutiny of their practices. You'll likely see a move to a more European model, with fewer lawsuits but more aggressive consumer protection agencies.
> At the other end of the spectrum, the chamber also criticized so-called coupon lawsuits that generated big paydays for lawyers and little money for consumers.
So what? If the customers feel they were wronged and the court agrees, the company should give restitution. It is sad that the victims will get hardly anything, but getting 0.05% of a wrongfully-charged fee back is better than 0%. And the class suit was the only way a large malicious corporation would ever be held accountable, but they're trying to distract from that by complaining that someone else gets their money that was found to be unlawfully obtained.
> In interviews, corporate executives and defense lawyers predicted that consumers would use arbitration once it became more familiar.
So the old way was bad because ambulance-chasing lawyers sucked up all the money. Now there's hardly any consumer recourse happening, but it's OK, eventually they'll start hiring some lawyers... who for some reason will be a good deal for the consumers this time. It's a good thing we have a coalition of banks' lawyers looking out for the consumers' interests. /s
> “Clients were telling me they were getting killed by frivolous lawsuits and asking me what on earth could be done about it,” Mr. Kaplinsky said.
If a lawsuit can "kill" you, was it really frivolous? I am considering both a plaintiff-won suit that extracts millions from the company, or a plaintiff-lost suit that cost the company tens of thousands to defend. It would seem to me that in the former case, the judge decided they were in the wrong, so it's not frivolous. In the latter case, the more it costs to defend, the more likely it is that the plaintiffs had a reasonable complaint. I know I'm biased, but am I being naive here? It also bothers me to hear a complaint about what a corporation finds "frivolous" when the individuals on the other end are facing fraudulent charges, sub-minimum wages, and unchecked monopolostic abuse -- "frivolous" is the least of the individuals' complaints, by why is only the huge corporation's concerns protected by the law here?
The post is about consumers but there are cases when an employers's binding arbitration agreement is void. I am writing an article and will post when finished. It's important that employees know our rights.
Yet it appears a significant reason for the emergence of this phenomenon is the regulatory statute of the FAA which elevates arbitration to the same standard as contracts, and preempts state decisions on their enforcement, and moreover has had its restrictions (i.e. ability to waive class action in arbitration clauses) subsequently reaffirmed by SCOTUS.
As such, this has only created more surprises. But it's a folly to call it a failure due to lack of regulation, since this all takes place in an environment that is already heavily, and in fact often incomprehensibly regulated. The verbosity of standard-form contracts isn't incidental.
That's a very misleading characterization. The purpose of the FAA is to eliminate judge-created exceptions to enforceability of arbitration contracts. The premise is that arbitration clauses should be enforced the same as any other voluntary contractual provision and that the judiciary shouldn't be allowed to give such provisions special treatment. The verbosity of form contracts has nothing to do with regulation or the FAA, except to the extent that they waive "default rules" which often protect consumers.
In a law-heavy society, the rich, powerful and savvy can easily wield law preparation to exploit the average joe. It's been trending that way in the US since the beginning.
When this sets precedence, the possibilities for customers to defend their rights will be largely diminished.
One further step in direction to almighty international corporations and right-less countries and people. Already, many countries are regularly blackmailed by the big corporations.
The TTIP proceedings are also controlled by the industry lobbyists -- that is the reason, that those are kept so secret, that even the parliaments of EU countries are not allowed access to the data. With such regulations like TTIP, the possibilities to abolish customer laws in the countries will be also largely enlarged.
Perhaps companies that choose not to do this can market their products with an "100%-arbitration-clause-free!! " slogan somewhere. Then we could hope this catches on.
Corporations are assuming that we don't pay attention to this. It's OK to give an app or a business a 1-star review on the reason that the arbitration clause makes you uncomfortable.
Arbitration should probably be a near mandatory starter. What shouldn't be allowed, however, is absolute binding arbitration, where, constitutionally guaranteed, access to courts is disallowed.
Probably, a public arbiter would be highly successful. There is great need for arbitration and those who do it best could be rewarded appropriately.
I've always wondered: since I don't have the ability or power to negotiate these contracts, are they even a legal contract regardless of if I agree to them?
Moreover, as a consumer, all (or nearly all) establishments that sell similar products use similar contracts, so do I actually have a choice?
Maybe this depends on jurisdiction, but here in the UK these kinds of agreements have legal weight but there are also various consumer protection laws that can trump them if the terms are unfair or if the agreement doesn't disclose certain important information in a suitably prominent way.
Contrary to what the cynics are saying elsewhere in this discussion, those consumer protection laws are actually growing stronger and adapting better to the electronic age as time passes, at least here and apparently across Europe more generally. There were some big changes just this month, in fact.
An interesting experience we had while preparing terms for a new on-line B2C service was being advised by a lawyer who is actually a barrister (i.e., one who does courtroom advocacy) rather than the more usual solicitor. Our lawyer was very strongly in favour of using plain language and of having important but potentially non-obvious or unexpected terms prominent and near the start of the agreement. In other words, he was very keen that the agreement really should be written how you would hope these things would be written. His argument was that if brown stuff ever actually hit the fan, it's going to be up to a court to interpret the agreement, and that court is going to do so in a reasonable way based on what the parties involved thought they were signing up for. As such, it's less likely that a court would uphold some sneaky term hidden on page 974 that no normal user would ever have read, but if you have something unusual and it's clearly spelled out and prominently highlighted within the first few terms then it probably would stand up unless there's some strong legal argument against it (such as being automatically unfair under the consumer protection laws, for example).
If you're interested in more reading on this under US law, a few helpful search terms: "contract of adhesion", "unconscionability", "click wrap", "browse wrap", "meeting of the minds", "indication of assent".
The term activist judges is normally used against liberal judges but the corporate lawyers that Bush installed into the federal courts have been overturning long established laws and precedents at an astonishing pace.
I am very familiar with arbitration agreements and how they both are enforced and came about. For years companies have tried in vain to get theses clauses accepted by the courts and failed, until recently when SCOTUS chimed in with their decision: Congress wanted the Federal Arbitration Act (FAA) of the 1920s to be the law of the land and forced arbitration was considered statutorily okay.. The FAA [ https://en.wikipedia.org/wiki/Federal_Arbitration_Act, 1925] originally was a maritime law, where two parties in different countries would rather pick an arbiter to decide their dispute rather than in any one country.
What may surprise people is it's not just the signing of a contract, which enables this clause to be enforced, but also just a business' intent to settle cases arbitrarily. For instance, opening up a package of something you just bought might show intent that the contract therein is what you agree to. One nurse wasn't going to sign her rights away to an arbitration agreement, so she told her company 'no' to renegotiating her employment contract. But the courts upheld that she knew the intent of her employer and forced her into arbitration.
These companies are hiring their own judges, basically. What's scary is that these just aren't private contracts, and private court systems we are dealing with -- but private law!
SCOTUS ruled recently that even if the parties do not like the outcome of the arbitration decision, they have no legal recourse. Imagine going into a situation where a company knows the history of a judges decision and you do not? How incredibly unfair, let alone intimidating. I wouldn't even bother to sue, would you?
I won't go on about this. I can write a lot. Here's a list of links I collected about companies shorting the normal process of laws that protect citizens. The area is non-compete agreements:
1. Why can't consumers take a class action to an arbitrator for resolution.
2. Why can't consumers shut down these arbitrators, by suing with a claim that the arbitrators are not neutral? It is impossible for a company to single-handedly choose a "neutral" arbitrator.
It probably should not be uniformly illegal. For example, settling a lawsuit generally involves promising not to sue. Perhaps such agreements need to be supervised, which would take them out of the domain of "click-through" contracts.
That's not even an important requirement though. If you settle a lawsuit and then sue anyways the judge can look at the original issue and the aftermath and choose to throw it out as you have been compensated at that point.
Opt-out of Agreement to Arbitrate. You can decline this agreement to arbitrate by clicking here and submitting the opt-out form within 30 days of first accepting these Terms.
Wow that's a skeezy place to bury it. Their email drip spampaigns don't remind me to check the arbitration options when they tell me all about how to make the most of my new account.
The article mentions this towards the end, but dismisses their utility. I wonder when the opt-out period begins -- on acceptance of the contract, presumably.
While many companies also include an opt-out provision on arbitration — typically between 30 and 45 days — few consumers take advantage of it because they do not realize they have signed a clause to begin with, or do not understand its consequences, according to interviews with lawyers and plaintiffs.
Upon defection of a click-through license (probably doable, given the formal language of legal contracts), examine the text for arbitration clause with opt-out text, and pop up a little dialog or sidebar that says "click here to opt out of the arbitration clause". That might require manual identification of how to do so initially, but I could imagine building contract signatures so that the process could be further automated for others.
Dispute resolution is a problem where there are always more disputes to resolve than there are resources to do them adequately. There's a reason lawsuits are the exclusive domain of the wealthy, because if we let everyone use the system, it would collapse under its own weight.
The right way to solve resource allocation problems is through the market which inevitably makes tradeoffs. Arbitration is just such a market solution. What's nice about market solutions is that we can regulate them. But it takes a long time to know what the regulations should be. Until then it's buyer beware.
This is the second step of undermining individual liberties in favor of corporate oligarchies, by subverting the justice system. Thr first step, of course, was subverting the legislative system via citizens united, turning elections into bidding wars.
There isn't much left to do now except slowly turn the dials.
EDIT: I guess the obvious next step is subverting state authority entirely, through things like the TPA, that put corporate interests above that of "democratically" elected states.
Eh, once Congress starts acting in bad faith against citizens, what's the harm in SCOTUS exceeding its authority? The law derives is legitimacy from its effect on the society it governs, not from the grace of God.
Even if someone is willing and able to read a 44 page contract the first time, the next time version 1.0.1 of something comes out you are generally given a 44.5 page contract to re-agree to. "Somewhere" in there, they changed something; good luck figuring it out. So even if the version you read gave you permission to sue, the amendment that you clicked-through-in-agreement later may have given away that right (an amendment they probably made because somebody sued them).
We solved this type of thing years ago, the solution just hasn't made its way into legalese: use revision control. I wish that large documents were:
- Publicly revision-controlled with a system that has clients everyone can easily use (i.e. no arcane commands, and push-buttons for the most common things like "compare to last version").
- Public accountability for the entire revision history of every single line. If somebody wants to add [Horrible Clause A] two months after I first signed it, then I get to know exactly who made the change and if I want to I can take a look at other changes they've made to other documents.