August 27, 2008

posted by Paul Ohm

Wait a minute. Suppose I send you a contract written in pencil, foolishly, rather than ink. And suppose that contract comes with a bottle of beer, and says "by drinking the beer, you agree to the contract."

Can I erase the terms in the contract and write new ones, and still drink the beer?

I think Panera has no problem because they used editable text fields -- they made an offer and specified an action which signified an acceptance. The fact that you transmit a counter-offer at the same time as the acceptance, all the while gobbling up the consideration, seems meaningless.

Let's adjust it away from malice and see what happens:

What if a freak glitch in my landlord's printer results in the loss of a strategic "not". Now instead of

"pets are not allowed"

it reads

"pets are       allowed"

If my landlord doesn't notice this fact before we both sign at the bottom, can Mittens move in with me?

John: From what I recall of contract law (and studying for the bar exam), Mittens can move in with you, but the parol evidence rules allows your landlord to produce certain extrinsic evidence to show that it was clearly a mistake.

Wait a minute. Suppose I send you a contract written in pencil, foolishly, rather than ink. And suppose that contract comes with a bottle of beer, and says "by drinking the beer, you agree to the contract."

Can I erase the terms in the contract and write new ones, and still drink the beer?

I think Panera has no problem because they used editable text fields -- they made an offer and specified an action which signified an acceptance. The fact that you transmit a counter-offer at the same time as the acceptance, all the while gobbling up the consideration, seems meaningless.

I think the difference is Paul that Panera's terms page is not just a mere notice, which arguably would create an implied contract, but rather seems to require a return manifestation of assent (i.e., the "I Agree" button). (If it is just a mere notice and all you're agreeing to is that you've received it, then editing is ineffective -- but I'm not sure the meaning of an "I Agree" button is just "I agree that I've received these terms.")

So if you edit it and then agree, you've at least made a counter-offer. But of course you know or should know that no one is on the other side reading the POST field as it comes back. Given the circumstances I don't think you can interpret Panera's performance as acceptance of the counter-offer. (Which is procedurally and likely substantively unconscionable, to boot.) So I doubt there's an enforceable contract at all.

First, let me say, I really like this blog. Second, I'm not a lawyer, I have only had one course in BLAW in business school. However, I did pay close attention during the contract law part :)

Can't some offers come with options for the offeree? If that is the case, what's to say Panera isn't implying the option is there to amend the terms before agreeing? Perhaps that's part of the consideration they gave when making the offer.

I work as a programmer, and I can say that Panera could VERY EASILY check to see that the ToS they supplied (in either a read-only or alterable textbox) are the same when you send them back? Which, by the way, read-only textboxes are very easy to get around - as an expert on the matter, I would expect it to be checked server-side.

Love the post!

John & Matt: If both parties are unaware of the mistake (in other words, if the lessor believes the instrument he is signing does not allow pets), then there has been no agreement and the K is void (see Sherwood v. Walker, the barren cow case).

If the lessor did know of the mistake, then the K is voidable only if the lessor knew or should have known that the omission was a mistake, or if inclusion of the mistake in the K would make it unconscionable (see Restatement Contracts 2d section 153).

Parol evidence would have nothing to do with it, as parol evidence is used to demonstrate a prior or contemporaneous oral agreement. It would come into play, for eample, if the landlord said "there's a typo regarding pets, but I just want to be clear that they are not allowed" and you said "OK". But in the case of a mistake, whether mutual or unilateral, there is no "meeting of the minds" and no K is formed, thus parole evidence is not needed because there is no K that you are seeking to have interpreted in light of the oral agreement.

As for Paul's original situation: Like the other Paul, I think the editing does not a contract make, because there is no action on the part of Panera that indicates acceptance. Ohm, of course, is trying to draw a parallel between that and buried ToS's, but I think the parallel is inapt. In a buried ToS case, the issue is whether the notice that a certain action, such as proceeding, constitutes acceptance of an offer to allow you to proceed. In Ohm's case, there is no action on the part of the counterofferee, and therefore no acceptance, and there is no issue of notice. Further, Ohm's purported K's all lack consideration, so this is all academic anyway (unless he can argue that "allowing me to surf your website" somehow constitutes consideration)

(Whoops, sorry for extreme computer glitch.)

Kenneth: You can't just say that the offer by Panera *could* be read as an offer of an option, rather it would actually have to be their intent to do so, or that they should have known that it would be interpreted as such. If Panera did not intend to have their offer be an option contract, then it cannot be one.... it does not matter that one "could" read their offer as constituting a blank-check option.

And even if we could interpret the offer by Panera as including an unlimited option, one would have to find consideration not just for the promises made by Panera and written in by Ohm, but also independent consideration supporting the option to write in whatever he wants. Even if that massive hurdle was overcome, you would have to also convince a court that Paul Ohm's agreement to proceed is adequate consideration for an option to get anything in the universe he can possibly describe in a text box.

Sometimes I find that many people, lawyers included, think that contract law is full of interpretive possibilities. The fact is, though, that it is fairly mechanical and precise. Having something that "almost" looks like a K is useless if there is a minor detail that prevents its formation.

I do not think you would need to stretch to find consideration here. Panera and many other restaurants provide WiFi in order to bring customers into the store and keep customers there so that they will buy more food and draw other customers.

Also, whether allowing you to use their WiFi after you change the terms of the offer constitutes Panera's acceptance of your counter-offer is an interesting issue and more than a mere academic exercise. No?

Brooke: No. As far as consideration goes, why would your use of their wifi network be consideration for the promises that they make but that you wrote into the text box? Consideration must be bargained for, and you must limit the scope of your legal rights in exchange for the promises from the the other party. There is no commitment to purchase. Nor, really, is there a commitment to do anything on your part. Their offer of free wifi is certainly consideration for getting you into their store, but your use of the wifi once you are there is certainly not consideration for any promises on their part you might want to counteroffer to them.

As far as whether there is an acceptance: acceptance requires a manifestation of assent. There are narrow circmstances when assent can be signaled through silence (see R2d Contracts section 69), but this is certainly not one of them (and assent through silence at a minimum requires notice of their actually being an offer, which there is not here). I fail to see how not acknowledging a counteroffer constitutes an acceptance.

Consider this: if I stood on the street in front of a private shopping mall parking lot that had a sign on it that told me what the terms of my parking on the lot were, I certainly could not simply replace the sign with one that said that the owner of the parking lot, in consideration of me deigning to grace the lot with my car, promises to give me a million dollars. What is different in the current situation? We certainly would not say that the mall has a duty to monitor potential considerationless counteroffers and affirmatively reject them.

Matt, John, David

Re: mittens.

Well, first states vary on this.

First, David, with the barren cow case, you are confusing mistakes in communication with mistakes about the facts. The court’s belief in Sherwood was that both parties believed the cow was barren, and it turned out not to be. That’s different than someone just screwing up in writing down the contract. The difference is that in a mistaken communication, there is a meeting of minds, but they don’t express themselves properly. By comparison on the barren cow case, they weren’t even clear on what they were getting.

If there is a mutual mistake in the actual writing of the contract, proven by clear and convincing evidence, then the contract can be reformed to reflect the actual intent. The contract isn’t void.

But you are right to say that if there is a unilateral mistake, and the non-mistaken party knew or should have known about the mistake, then the party can then void the contract.

But failing those, the contract is enforceable.

As a lawyer that works with ToS on a regular basis let me point out a couple things. First, the modified version of the contract is a rejection of the original terms and a counter-offer. So unless you can show acceptance of and assent to the new terms, your use would actually be unauthorized.

Acceptance of new terms would be pretty tough to show. I think that you'd have only one viable way to show acceptance: performance (they offered you the service FOLLOWING the new terms). But here performance is not going to get you the notice of the new terms--as necessary for assent.

So, the question is whether there could actually be notice and assent. I think that the only thing that would have "notice" of the new terms is the computer receiving the changed version of the agreement. I'm not aware of any case where a computer (or webserver) can be the agent for the purpose of assenting to a changes to the contract. That seems like a stretch.

So, in a brief post, I think that you successfully rejected the terms and your subsequent use was either unauthorized or governed by the terms of the first agreement (your continued use of the service despite rejection is performance evidencing acceptance and assent to the terms).

mmm, it's not clear from your post whether your work with ToS means that you're often drafting them for companies who propound them. If so, your argument is consistent with what one would expect your clients to assert.

I think nonetheless Kenneth raises an interesting factual point about how easy it is to automate checking the contents of the text-box. If it's a simple matter to do so, and if it's a simple matter for the website's server NOT to assent, by detecting a modification of the original ToS and then refusing to allow the user to use the site, your argument seems weaker. The problem is that, if Kenneth is right, the site owner would have means within its control to prevent the problem ever from arising. To nail a user for "unauthorized" use of the site when it's a simple technical fix for the site owner to prevent the use (and perhaps even negligent by the owner to provide an editable text box when it had no intention to read what the user might write therein) seems rather draconian, albeit consistent with the totalizing aspirations of many IP owners nowadays.