If a prize were to be awarded for the world's clunkiest prose, the paragraphs of indecipherable text that make up "terms of use" agreements would surely win. These legal thickets are designed to protect companies from litigious online shoppers and users of web services. Some firms require agreement, as when users are asked to click a box before creating an Apple ID. Other sites explain their policies without seeking customers' explicit consent. Few consumers read these terms, let alone understand them.
Because they involve no negotiation between customer and company, firms often insert language conferring broad protections to lower their risk of liability. But in a new twist, legal disclaimers designed to limit lawsuits are now unleashing litigation.
A surge of lawsuits in America claims that companies' online agreements violate consumers' rights. Consumers are banding together in class actions against targets including Apple, Avis, Bed Bath & Beyond, Toys 'R' Us and Facebook. The cases have a tinge of the bizarre, citing a law passed before companies even had websites. And the lawsuits accuse companies of illegally limiting lawsuits, a convoluted argument. Nevertheless, the litigation could have broad implications for the firms involved and for future class actions.
The suits seek to exploit the Truth-in-Consumer Contract, Warranty and Notice Act (TCCWNA), enacted in New Jersey 35 years ago. This was intended to prevent companies that do business in the state from using contracts, notices or signs to limit consumer rights protected by law. The lawsuits are not just targeting firms headquartered in New Jersey, but any that do business in the state.
Whether the lawsuits will succeed is unclear. Whatever the outcome of individual claims, the barrage of litigation will probably prompt firms to adjust their online terms. For example, a company might no longer add words to terms-of-use agreements that seek to limit liability from gross negligence or fraud.
That would be good news for consumers. But changes to terms of use do not always serve their interests. A growing number of firms, emboldened by favorable Supreme Court rulings, have adopted clauses that limit class-action suits. Consumers are instead restricted to resolving disputes individually, in arbitration.
The TCCWNA cases may inspire more firms to add such caveats. That might limit frivolous suits. But consumers with grave complaints would be unable to sue, either. In the end lawsuits over restrictive contracts may make them more restrictive still.