9th Circuit Court Says Companies Can't Change Contract Terms Simply By Posting Changes On A Website


Parties to a contract have no obligation to check the terms on a periodic basis to learn whether they have been changed by the other side. Indeed, a party can’t unilaterally change the terms of a contract; it must obtain the other party’s consent before doing so….

…Nor would a party know when to check the website for possible changes to the contract terms without being notified that the contract has been changed and how. Douglas would have had to check the contract every day for possible changes. Without notice, an examination would be fairly cumbersome, as Douglas would have had to compare every word of the posted contract with his existing contract in order to detect whether it had changed.

- Ninth Circuit Court ruling (PDF) that that Talk America couldn’t just post contract changes on its company website and compel customer acceptance without otherwise notifying customers.

[via CL&P Blog]

Comments

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  1. Anonymous says:

    No, but they can mention it on the back of your monthly bill in 2-pt font with only 15 days to challenge the change…at which point, they close the account and your balance immediately comes due.

  2. Galls says:

    Phone Companies, Electric Utilities, Cable Companies, Gas Utilities may finally stop rapping us now!!! Hurrah now our collective asses can finally heal!!!


    Ok maybe not.

  3. homerjay says:

    well, its better than a stick in the eye.

  4. Hawk07 says:

    Companies are slick nowadays in an increasing techno-driven world and when people sign contracts, they don’t have the expertise to understand them when it’s been lawyered up.


    In a text box no larger than what’s here on Consumerist, I copied and pasted Circuit City’s extended warranty on HDTVs. This little textbox turned into 24 pages in MS Word.

  5. speedwell (propagandist and secular snarkist) says:

    Eh, Ben, I sent you the direct link to the ruling days ago and you answered my e-mail saying you’d check on it. Who’s “CL&P Blog?” Do you expect people to contribute tips to you when you credit other people?

  6. Nytmare says:

    @Hawk07: It’s my theory that those tiny legalese textboxes originated in software install wizards which all use a small single-size dialog box, but webmasters copied that inappropriate layout verbatim onto the web without ever rethinking it.

  7. cuyahoga says:

    While this is great for consumers. I wouldn’t be surprised if this was appealed to a higher court and the 9th Circuit was overruled. Their decisions are thrown out quite often by higher courts for some reason.

  8. Major-General says:

    @cuyahoga: It wouldn’t be that they also make rulings so out of line with the rest of the law that they have to be shown the pimp hand.

    I have a feeling this one may stay though.

  9. FLConsumer says:

    This is a good step in the right direction… BUT, it’d be nice if the law required plain-English disclosures.

  10. aikoto says:

    @speedwell:

    CP&L Blog is Consumer Law and Privacy Blog put out by Public Citizen, one of the best consumer protection organizations around. Give them their due and don’t direct link to the ruling.

  11. aikoto says:

    The real question is whether the company can just add it to their Terms of Service from the beginnnig. The way I read this, the reason the company couldn’t make the new terms stick was because they tried to change it WITHOUT binding the customer to having to read the agreement for changes.

    Most companies have notices from the very beginning that you have to read the agreement for changes.

  12. ptrix says:

    What happens if the contract states in it, in small print, that “terms are subject to change without notice”? technically, they would be giving notice of the fact thet the contract could change, and might still get away with their current tactics.

    could someone find out about that?

  13. crnk says:

    @ptrix:
    Then it isn’t technically/legally a contract. At least that is how I understand it

  14. Pelagius says:

    Your revised contract has been up for your perusal for months – albeit behind a locked door in a disused lavatory with no lights in the basement, but it was there.

  15. aikoto says:

    @Pelagius:

    Hitchhiker’s guide to the galaxy comes to mind.

  16. nequam says:

    @cuyahoga: The only higher court is the US Supreme Court. It’s unlikely the Supreme Court would consider this case. The real question is whether other courts will follow suit with the the 9th Circuit.

  17. SBR249 says:

    Hmmmm, usually to change a contract, both parties would have to consent and the changes have to be agreed to by both parties. Since they inserted the “terms are subject to change without notice” does that mean that it applies to both parties? Like I could unilaterally change the rate of my cell plan “without notice” to Verizon?

  18. ExGC says:

    A couple observations:

    Although this is a Federal case, it only applies to California, as it is based on and interpreting California contract law, which is far more consumer friendly than any other state.

    It is not clear whether the terms of the original contract provided that AOL/Talk America could change the terms by posting them on their website. If this were expressly part of the contract, it might be enforceable (although the California consumer protection statutes might overrule this in a non-negotiable)consumer contract.

    It is clear that the court based its decision on the fact that there was no notice of the change. Thus, all the company had to do to avoid the problem was to notify the consumer in an email or letter and then have them continue using the service.

    The 9th Circuit is by far the most overruled of any Federal Appellate Court. That said, the Supreme Court would not likely take this case because it is limited to California. The California courts could clarify this themselves and, while not technically affirming or overruling this case, could render it moot or more clearly the law.

  19. aikoto says:

    @SBR249:

    Awesome. Try it an let us know.

  20. speedwell (propagandist and secular snarkist) says:

    @jeremyduffy: I didn’t direct link to anything… I sent an e-mail referencing the blog I found it discussed on. If you don’t already read Howard Bashman’s well-regarded, layman-accessible blog dealing with appellate court matters, you should add it to your daily reading: [howappealing.law.com]

  21. Uriel says:

    Ahahahahahahahahahahahahahahahahahahahahahahahahahaha!!!!!!!

  22. LionelEHutz says:

    There they go again, those 9th Circuit commie pinko bastards.

  23. scott5834 says:

    @ExGC:

    The 9th Circuit is by far the most overruled of any Federal Appellate Court.

    That’s a bit hyperbolic. They’re not overruled often when compared to other appellate courts.

  24. Consumer-X says:

    A contract consists of three elements:
    1. An offer
    2. An acceptance
    3. Consideration by both parties.

    The offer and the acceptance are usually simple concepts and are determined using an objective standard.
    Consideration is the key element here. Consideration conceptually is a “loss of freedom”. That means that both parties to a contract must have to do (or not do) something they previously did not have to do (or had to do).

    If I agree to mow your lawn on Saturday for $20 then I have lost my freedom to not mow your lawn on Saturday and you have lost the freedom to not pay me $20.

    There must be this “loss of freedom” for there to be an enforceable contract. There is no contract if the agreement is “I may cut your lawn sometime if you pay me $20″ because “maybe” cutting your lawn “sometime” is not a loss of freedom.

    Any modification of an agreement requires an additional offer, acceptance, and consideration.

    With all this long winded explanation in mind, how can Credit Card companies unilaterally change the terms of a contract? How can they modify the terms without an additional offer, acceptance, and consideration?

    Can the Lawyers reading this please hip me to why that is allowed?

    Thanks

  25. Nytmare says:

    @cuyahoga: For the same reason that a lot more of their decisions are left standing. That reason being they’re quite large.

  26. kc-guy says:

    @Consumer-X

    The last time my Discover card made changes to the credit card agreement, it gave me the “option” to close my account if I did not wish to accept the new terms…seems to me the problem is the inability to maintain the service agreed to under the initial contact.

    I’ve mowed half of your lawn. Now pay me another $50. Or you can cancel your service. Just be glad I’m not charging you the $51 early termination fee.