EULAs + Arbitration = endless opportunity for abuse

John sez, "We all know EULAs, and for the most part, we hate them. However, they do serve a valid purpose. In a complex consumer society it allows quick contracting without teams of lawyers hashing it out over every consumer purchase. The problem is that EULAs are easily abused. Arbitration is the same way. It is valuable in that it cuts down on the cost of litigation, and it is a simple way to resolve disputes. When it's abused, it ends up being an end run around Due Process and very, very unfair. When you add Arbitration (a creature of contract) to a EULA (a contract) both the good and the evil are magnified exponentially..."

Contract law in the U.S. has a defense to this, namely a doctrine where any contract that is so manifestly unjust so as to shock the conscience will not be enforced. The problem is that like all tech law, case law is all over the place.

The piece ends with suggestions on how to use the great power of Arbitration clauses and EULAS with great responsibly. I even included an "ethical arbitration agreement" in the EULA.

The Unconcionability of Arbitration Agreements in EULAs. (Thanks, John!)

• [foobar]

  How are these quick contracts of any benefit whatsoever to anyone not writing them?

  We’d be better off if we established signatures as necessary for contracts.

• [JohnCJ]

  A mandatory scheme for one size fits all for licenses is not really the way to go. A better scheme would be a combination of (1) limitations on what may be imposed or disclaimed in an adhesion contract, and (2)an expansion and clarification of “unconscionably” with respect to modern tech.

  As for the one size-fits all, modular license approach, I think it’s a good idea so long as it is imposed via incentives rather than requirements.

• [Anonymous]

  Signing any contract is directly analogous to talking to law enforcement in that NOTHING good can come of either for YOU.

  Cops only talk to people to solve crimes. While ostensibly helping the police to that end is good for you, but in fact, any interaction you have with them increases your chances of being charged with a crime at some point in the future.

  Similarly contracts are provided ostensibly to specify your rights as a consumer, but in fact they only exist to bolster the contractor’s minimal or nonexistent “rights” in a situation. You have all the rights you need to buy anything from anyone; contracts serve to bastardize and distort that exchange, but they *NEVER* do so in a way that benefits the contractee… that’s because they’re *ALWAYS* provided by the contractor.

• [Avram / Moderator]

  In a complex consumer society it allows quick contracting without teams of lawyers hashing it out over every consumer purchase.

  I wasn’t aware that lawyerly out-hashing was a necessary part of the purchasing experience. I manage to buy stuff all the time without signing a EULA or having a team of lawyers following me around.

  EULAs are only part of the software-acquiring experience because commercial software vendors insist on licensing their software to you instead of just selling it.

• [JohnCJ]

  @Avram: Sadly, 9 times out of 10, you are correct. The freedom to contract has been abused to the point where it’s obscene. This is especially true in cases where corporations possessing hoards of in house counsel are going up against private individuals. It’s very similar to how copyright used between business may be OK but copyright attacking the individual consumer is not what copyright was intended to do.

  Just because something is misused does not mean you should ban it altogether. Spraypaint is used for tagging, but we shouldn’t have to ban it altogether (although I hate having to jump through hurdles to get it).

  I can think of legitimate uses for EULAs, such as non-abusive forum selection, legitimate disclaimers of warranty, etc.

  I have to side with massive reform rather than ditching the freedom to contract altogether.

• [Andrew Katz]

  In Europe, the following stuff is all now illegal when selling to consumers (see http://ec.europa.eu/consumers/cons_int/safe_shop/fair_bus_pract/ucp_en.pdf):

  Bait advertising
  Bait and switch
  Limited offers: Special offer, today only!
  Inconsistent Language of after-sales service: e.g. Marketing in English, after-sales services in Swedish
  Advertising products which cannot be legally sold
  Misleading impression of consumers’ rights: “Special for you”
  Advertorials: “Mixed messages”
  Security as marketing argument: Unduly playing on fear of security risks
  Decoy: “Reputable brand, or maybe not?”
  Pyramid schemes
  False claims regarding moving premises or cessation of business: “End of lease ! All stock must go!”
  Facilitation of winning chances: How to win the lottery
  False claims about curative capacity: “Trickium 24 cures disease”
  Market information
  Prizes: “Congratulations! You have won a prize”
  Falsely creating the impression of free offers: “Free sunglasses”
  Delivering Products not ordered
  Professional trader disguised as consumer
  Illegal After sales services: “Europe wide guarantees”
  Pressure selling: “Yes, you can leave once the paperwork is done”
  Aggressive doorstep selling: “Yes, I will leave, once the paperwork is done”
  Persistent and unwanted solicitations: “With the third phone call maybe a contract will be agreed…”
  Bogus Insurance claims: No one picks up the phone
  Direct exhortations to children: “Go buy the book!”
  Inertia Selling
  Emotional pressure
  Prize Winning

• [blu]

  The solution is simple, standardized licenses. Just come up with a set of standard licenses and assign icons to them to put on the outside of the box, similar to the CC license system and icons. Then have a “+” next to the icon if there are additional restrictions, which must be listed in plain language in the included license inside the box. Also require that any license with addition restrictions be available on the web without first purchasing the item.

  • [Felix Mitchell]

    @ BLU “The solution is simple, standardized licenses.”

    I assume you mean any company using a non-standard license would have to have a signed/negotiated contract with the other party.

    I’d be wary of creating a situation where (for instance) big record labels could lobby for the standard license to be favourable to them, and an independant label wanting to use a different license would face extra costs for them and inconvenience for their customers.

    We could get into a situation where companies in certain industries are effectively locked into using licenses that aren’t fair on them or consumers.

  • [Anonymous]

    blu, That is a terrific idea. Create fair license types and then let consumers favor providers that use those fair license types. Excellent.