Zappos's crappy EULA found unenforceable, leaving Zappos without a legal leg to stand on

Of all the stupid clauses in the license "agreements" that the Internet crams down your throat, the cake-taker is "this agreement subject to change without notice." In other words, you're "agreeing" to anything and everything that the company dreams up, for the rest of time. This clause -- and its place in a "browsewrap agreement" that you supposedly agreed to just by visiting a website with "by visiting this website, you agree to our terms of service" on the bottom of it -- was found to be unenforceable by a federal judge in Nevada, who voided out the company's whole agreement on that basis, leaving the company vulnerable to lawsuits after a password leak affecting 24 million customers.

Eric Goldman's posted analysis:

Zappos can hardly be surprised by this adverse judicial ruling. We have known for years that browsewraps are unenforceable (see some of the cases discussed here) and judges clearly dislike unilateral amendment clauses (see, e.g., the uncited Ninth Circuit's Douglas ruling from 2007 and the cited 2009 ruling in the Blockbuster/Facebook Beacon case).

Still, the ruling leaves Zappos in a bad position. Its contract is legally irrelevant, meaning that all of the risk management provisions in its contract are ineffective--its disclaimer of warranties, its waiver of consequential damages, its reduced statute of limitations, its clause restricting class actions in arbitration...all of these are gone, leaving Zappos governed by the default legal rules, which aren't nearly as favorable to it. Losing its contract provisions meant Zappos is legally naked.

Avoiding this outcome is surprisingly easy. Use clickthrough agreements, not browsewraps, and remove any clauses that say you can unilaterally amend the contract.

That's pretty grim: you can load up nearly any BS you want in a EULA, and so long as you stick it in a clickthrough "agreement" and it's binding. Good time to remind you all of my own email sig, the original "Reasonable Agreement:

READ CAREFULLY. By reading this email, you agree, on behalf of your employer, to release me from all obligations and waivers arising from any and all NON-NEGOTIATED agreements, licenses, terms-of-service, shrinkwrap, clickwrap, browsewrap, confidentiality, non-disclosure, non-compete and acceptable use policies ("BOGUS AGREEMENTS") that I have entered into with your employer, its partners, licensors, agents and assigns, in perpetuity, without prejudice to my ongoing rights and privileges. You further represent that you have the authority to release me from any BOGUS AGREEMENTS on behalf of your employer.

Feel free to use this in your own contexts, of course!

How Zappos' User Agreement Failed In Court and Left Zappos Legally Naked (Forbes Cross-Post)



  1. This EULA horses**t needs to be sorted once and for all.

    Here’s how I think it can be done. with a classic Shylock clause inserted into a popular application that everyone clicks accept to without reading. Flash, Java update, PDF reader, Firefox, etc.

    The clause specifies that by agreeing to this statement you agree to the transmission of personal identifier information and files from your PC. and that you hereby agree to transfer ownership of all your worldly possessions to the owner of the application, including the fruits of all future labour etc, and agree to go work in a east European coal mine or something to pay off the debt.

    And then have someone come claim what is agreed to in a court of law.

    EULAs are designed not to be read, be open ended and to obfuscate the clear laws, by offering the illusion that it is a legally binding contract. But both the author and the user are fully aware that the contract is never read in full. With this in mind, does the ‘I Accept’ button constitute a legal signature? Considering that there is no identifier to the individual who pressed the button, I suspect it’s not.

    1. The absolutely wacky clause in a EULA thing has been done, though I don’t think it’s gone to the point of a serious legal battle.  The problem with this tactic is, a court can simply rule a term of the agreement unconscionable, while leaving the rest of the terms in place.  You *might* get some traction if you managed to impact a large enough group of ordinary people, but that would be tough to do and probably end up costing quite a bit of money.

  2. I’m not a lawyer, but it’s my understanding that (in the US, and generally speaking) one cannot waive one’s rights under the law by signing a EULA.  Further, it’s my understanding that the EULA cannot take precedence over law.  An extreme example would be murder.  One cannot agree to be murdered.

    That said, all laws are not created equal, and I imagine that common law takes precedence (hence this judge’s ruling and it’s apparent effect).

  3. Check out the little proggie called EULAlyzer (free for personal) which seems to do a nice job of reading EULA’s for you and pointing out problem areas.

  4. That “this agreement subject to change without notice” line isn’t an invention of the internet. Read the fine print on any contract you take with any cell provider, cable company, credit card, etc. It’s pretty standard boilerplate everywhere, and has been for a long time. Online EULAs are late to the game, I’m afraid.

  5. “This agreement subject to change without notice” is actually pretty interesting.

    If the entity presenting the contact is saying “We might make changes to the contract text, for future customers”, all is well, though I don’t see why that’s necessary to note in the contract itself.  But that’s not really the issue.

    If they’re trying to say that they can change the contract without telling you, then in what sense is it an “agreement”?  

    And if the issuing entity can change the agreement without notice by this clause, what’s to stop me (or a third party) from doing the same?

    “Yes, well, you raised my cable rates from $44 a month to $48 without telling me, so I feel, under these circumstances, that an amendment to our agreement for a $12 million indemnity payable to myself isn’t unreasonable. And I took out that bit about changing the contract without telling anyone, too, so you can’t change it back.”

    1. The fun part is if they say “This agreement is subject to change without notice”, but forget to specify “by us only.”

      Then YOU get to change it any time you want, too.

      Edit: I’m a moron. See, this is what happens when you don’t read things fully. :P
      Edit2: The problem is I’m pretty sure most of the time they DO cover the “only we can change the agreement.”

      1. Whenever I hear “This call may be recorded for quality assurance purposes” I take it as granting me permission to do so.  Okay, will do, thanks for reminding me!

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