Tuesday, August 25, 2009

What you intend and what you agree to are often quite different things.

Can Amazon take back from your Kindle a book you thought you'd purchased? Well, it did exactly that -- Kindle owners who'd obtained ebooks of George Orwell's 1984 and Animal Farm discovered last month that Amazon had simply deleted those books from their Kindles. No one seems to have known Amazon could do that -- the fact the Kindle connects electronically to the internet has until now always been considered a reason the Kindle is better than competing ebook readers.

But did Amazon have the contractual right to do what it did?

The first thing to note is that, according to the Kindle End User License Agreement ("EULA"), you do not "buy" an ebook from Amazon; rather, you merely purchase a license to use the ebook under the terms of the EULA. But was Amazon's action a breach of the terms of the EULA even though the agreement was not a sale?

If Amazon did breach the agreement, the fact it refunded the price of the Orwell books would not excuse the breach. You can't enter a contract and then unilaterally tell the other side to the deal you want to undo it. Are there other problems as a consumer you might have with the agreement?

Of course, figuring that out means that you'd actually have to read the agreement. 65 out of my 66 students (law students in a contracts class!) admitted in our first class they rarely or never read the online agreements they "agree" to. The only empirical survey I am aware of regarding consumer behavior in connection with online agreements found the following 7 years ago:
● 50% of the respondents said that they sometimes read online agreements and 40% never read them;
● Thus, only 10% of the respondents always read the online agreements that they encountered;
● Well over half of the respondents (64%) always click the Accept button and most of the others (35%) some times Accept;
● More than half of the respondents (55%) didn’t believe that they were entering into a legally binding and enforceable contract even after clicking I Accept;
● Most (79%) never ever kept a copy of any click-wrap agreement that they entered into;
● The majority of respondents (90%) indicated that they never completely read shrink-wrap agreements;
● 38% of the total respondents came from the IT/Internet/E-commerce industries.
Andrew Gatt, “Electronic Commerce – Click-Wrap Agreements: The Enforceability of Click-Wrap Agreements,” doi:10.1016/S0267-3649(02)01105-6 (2002).

But, as mentioned here the other day, and as Comment d to the Restatement (Second) of Contracts § 19 confirms, "[a]ctual mental assent is not essential to the formation of an informal contract enforceable as a bargain. This is made clear by the definitions of 'bargain' and 'agreement' in terms of “manifestation” of mutual assent." Again, as Comment b to Restatement § 2 states: "The phrase 'manifestation of intention' adopts an external or objective standard for interpreting conduct; it means the external expression of intention as distinguished from undisclosed intention."

In other words, even if you assume you bought an ebook from Amazon, you didn't if the agreement you likely didn't read (and might not have understood even if you had) states otherwise. Why? Because in clicking on the "I Agree" button, you manifested your agreement to whatever was set forth in the agreement.

You might assume, for example, that if you entered into an agreement with an online dating service provided by a well known company that the dating profiles would be real. Don’t. In Anthony v. Yahoo Inc., 421 F.Supp.2d 1257, 1260-61 (N.D. Cal. 2006), the plaintiff sued Yahoo!’s online dating service for, among other things, breach of contract. The plaintiff alleged that Yahoo! had breached its contract by creating and forwarding false profiles of potential dates to encourage subscriptions and renewals. Granting Yahoo!’s motion to dismiss the plaintiff's breach of contract cause of action, the court pointed out that there was no contractual term in the dating service’s user agreement that required it not to create or forward false profiles. Thus, the plaintiff was not justified in understanding that such a commitment had been made, and could not predicate a breach-of-contract claim upon it:
[Plaintiff] alleges that subscribers must agree to Yahoo!'s Terms of Service, Personals Additional Terms of Service, and Personals Guidelines. He asserts that (1) “Yahoo! entered into a valid, fully integrated contract ... representing its online dating services as genuine,” (2) “[a]ll parties to the contract understood the nature of the contract was intended to provide each paying subscriber with access to a legitimate and genuine online dating service,” and (3) Yahoo! “breached the aforementioned contract by ... creating and forwarding false and/or nonexistent profiles [.]”...

[Plaintiff] cannot identify any contractual term that requires Yahoo! not to create or forward false profiles. First, he asserts that Yahoo! breached its Personals Guidelines, which provide that “Yahoo! Personals gives Yahoo! users a way to find and interact with other people who may share their interests and goals. Just like a real community, different people may have different opinions and personalities in Yahoo! Personals.” He argues that Yahoo! violated this clause by creating and forwarding profiles “that do not represent other people who may share their interests and goals and are not part of a ‘real community.’ ” However, the language upon which [Plaintiff] relies merely describes Yahoo!'s dating service and does not commit Yahoo! to performing or not performing any particular action. See, e.g., Rest. (2d) Contracts § 2 (“[a] promise is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made”). [Plaintiff] cannot predicate a breach of contract claim upon it.
Id. At 1260-61 (citations and footnotes omitted).


  1. I believe that MOST companies use EULAs to not only convey how their service or program should be used but also to protect themselves if their service or product is not used appropriately.

    As an internet marketer (close to being former internet marketer), I know that services offered are consistently being used in an incorrect way and this is one way to protect liability for the company, though I am only partially sure of what liability is as of now.

    Professor please correct me if I'm wrong, which undoubtedly I am certain you will.

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