New Proposal Would Let Companies Further Screw You Over With Terms of Service

A long line of legal experts say the American Law Institute proposal would make an already huge problem dramatically worse.
terms of service
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A collection of unelected lawyers this week is quietly pushing a new proposal that could dramatically erode your legal rights, leaving you at the mercy of giant corporations eager to protect themselves from accountability. Consumers are routinely subjected to overlong terms of service that all but dismantle their legal rights. Research shows such overlong agreements are rarely read by consumers, but are increasingly used to ban consumers from participating in class action lawsuits. Instead users are forced to participate in binding arbitration—an often lopsided process that usually favors giant corporations.


This week, legal experts say the American Law Institute (ALI), a coalition of around 4,000 judges, law professors, and lawyers, is planning to make the problem significantly worse.

Occasionally, this coalition (including all the members of the Supreme Court) meets to create “restatements,” effectively an abridged synopsis or reference guide for the latest established precedents and legal trends. While restatements themselves aren’t legally binding, they’re very influential and often help shape judicial opinions. Seven years ago, the ALI began pondering a new restatement governing consumer contracts—and your legal rights as a consumer. Today, the ALI meets to vote on the approval of this latest restatement. But a long line of legal experts have been blasting the group’s updated language governing consumer contracts. Specifically, they noted that the updated draft language proclaims that consumers would not need to read a contract to be bound by its terms. The draft states as long as consumers received “reasonable notice” and had “reasonable opportunity to review” it, the contract would be legally binding. Under this model, consumers wouldn’t need to even understand the contract to be bound by it, a problem given data suggests such agreements are often incomprehensible to the average user. The language was problematic enough to result in a letter this week by 23 state attorneys general, criticizing the ALI’s proposal as a major threat to consumer rights. “We believe the Draft Restatement represents an abandonment of important principles of consumer protection in exchange for illusory benefits,” the AGs argued.


John Bergmayer, Senior Counsel at consumer group Public Knowledge, told Motherboard that while restatements may not be legally binding they are hugely influential. He said that the ALI’s reworded interpretation of consumer legal rights is problematic because it would effectively allow corporations to impose contracts on customers without consumer consent.

“To call boilerplate language that consumers never read (or if they did read, could not understand) a “contract” simply has the effect of locking consumers in to terms that are likely to be stacked against them,” he said in an email. Traditionally, "contracts" are legal documents that are mutually agreed to after negotiation between two parties. Functionally, this isn't how Terms of Service, which few people read and few people can be expected to read and understand, work in the real world. “For some reason, everything you learn about contracts in the first year of law school gets tossed out the window when it comes to large companies unilaterally setting terms for consumers,” Bergmayer added.

Bergmeyer noted that the ALI’s updated language would simply make existing, obvious problems with incomprehensible consumer contracts even worse.

Consumers are already forced to agree to website, software, and media licenses with the “length and complexity of Finnegans Wake,” he said. Companies used to be banned from using such contracts to prevent you from participating in class action lawsuits, but a 2011 Supreme Court win by AT&T opened the door to including binding arbitration in contract fine print. These days, nearly every company you do business with now attempts to erode your right to a fair, traditional trial as a matter of daily business, creating a parallel legal system where consumer welfare is often an afterthought. Bergmeyer noted that the ALI’s new language would shift us toward a world where “companies can avoid having to respect consumers’ rights just by writing down the right series of magic words and putting them up on a website somewhere.” Blake Reid, a professor at the University of Colorado Law School agreed. In an email, he said the updated language would allow companies to force fine-print contracts upon consumers without even giving them a chance to accept or decline them. “This is an effort to further bind people to all the fine print that no one reads, which in turn means that any company you deal with can basically set the terms for your interaction and you may not be able to say anything about it,” Reid said. “The core of contract law is supposed to be 'mutual assent'—we enforce only those agreements that people are able to bilaterally negotiate with sufficient time and sophistication to understand what’s at stake,” he added. “This is pushing the opposite: allowing the most dominant companies in the world to set the rules for how consumers interact with them without any choice at all.” Both Reid and Bergmeyer stated that the ALI should be fighting against this trend, not supporting it. They’re not alone; a year and a half ago Senator Elizabeth Warren wrote the ALI to note the restatement language would be hugely problematic for American consumers. She reiterated that message this week in a statement to the The American Prospect.

“This supposed grand bargain will encourage judges to bind consumers to exploitive contracts drafted by expensive lawyers at giant corporations without any real opportunity to negotiate or opt out,” Warren said.