New OnGuard Online Section Offers Tips for Internet Auction Buyers and Sellers

The Federal Trade Commission and its partners in government and the technology industry today unveiled a new section of the OnGuardOnline.gov website with tips and activities to help buyers and sellers spot and avoid Internet auction fraud. The site’s interactive game, “Auction Action,” allows consumers to rack up points answering auction-related questions from different categories.

In 2005, the FTC received 80,450 complaints related to Internet auctions, or about 12 percent of the total number of complaints, making it the second most common kind of complaint after those about identity theft. The new Web site explains how Internet auctions work, the pros and cons of using different payment options, and how – as a buyer or seller – you can avoid the most common types of fraud.

The Internet auction complaints consumers sent to the FTC generally dealt with late shipments, no shipments, or shipments of products that weren’t the same quality as advertised; bogus online payment or escrow services; and fraudulent dealers who lured bidders from legitimate auction sites with seemingly better deals. Most complaints involved sellers, but in some cases, the buyers were the subject. The information on OnGuardOnline.gov includes tips for avoiding these frauds and others.

In addition to the auction information, OnGuardOnline.gov covers other online safety topics, including spyware, identity theft, phishing, and spam scams. The multimedia, interactive consumer education campaign was launched last fall by the FTC and a partnership of other federal agencies and the technology industry. OnGuardOnline.gov has received over 650,000 unique visits, and the FTC has distributed over 800,000 brochures and bookmarks. There is no copyright on the quizzes or other information on OnGuardOnline.gov; the information can be downloaded by companies and other organizations to use in their own computer security programs.



Reference:
http://www.ftc.gov/opa/2006/02/fyi0612.shtm

EU contract law to smooth Single Market for businesses

The European Commission proposed today, in a strategic policy paper, several options for a more coherent approach to contract law. The goal is to bring more legal certainty for businesses and simpler rules for consumers.

Contracts are the basic building blocks for relationships between businesses and consumers. The European Union’s Single Market is built on contract laws. However, businesses – particularly small and medium-sized companies – are hampered in cross-border sales because they must follow different contract laws for each of the EU’s 27 Member States. Only 8% of consumers buy online from another Member State. In addition, 61% of cross-border sales are rejected because traders refuse to serve the consumer's country. This is largely due to regulatory barriers and legal uncertainty about the applicable rules. To address some of these problems and boost the potential of Europe's Single Market, the European Commission proposed today, in a strategic policy paper, several options for a more coherent approach to contract law. A public consultation on the policy paper will run until 31 January 2011.

"I want a Polish, German or Spanish consumer to feel as safe when doing business with an Italian, Finnish or French company online as when they are at home. And I want Europe's small and medium-sized companies to offer their products and services to consumers in other countries without having to become experts in the national contract law systems of all other 26 EU countries," said Vice-President Viviane Reding, the EU's Justice Commissioner. "I call on consumers and businesses from all 27 Member States to contribute actively to the Commission's public consultation. This is certainly a time of crisis for Europe's economy. But it is also a time where we have an historic opportunity to drive economic growth by easing the cost of cross-border transactions. It is therefore now the time to make a quantum leap towards a more European contract law."

Contracts are essential for running businesses and making sales to consumers. They formalise an agreement between parties and can cover a broad range of matters, including the sale of goods and the provision of a service like the booking a flight or obtaining a loan. In a business-to-consumer contract, for example, an Irish consumer buys an MP3 player online from a French retailer. In this case, Irish contract law would apply if the French retailer has designed his website for Irish consumers.

Europe’s Single Market is based on a wide variety of contracts that are governed by different national contract laws. The co-existence of different rules can lead to additional transaction costs, increased legal uncertainty for businesses and lack of consumer confidence. Both consumers and businesses face significant barriers when they seek to take advantage of the EU’s Single Market. Transaction costs (like adapting contractual terms and commercial policies or obtaining translation of the rules) and legal uncertainty involved in dealing with foreign contract laws make it particularly hard for small and medium-sized enterprises, which make up 99% of all enterprises in the EU, to expand within the Single Market.

The Commission, therefore, proposed different ways to make contract law more coherent in a Green Paper adopted today. Among the policy options considered are:

• The publication on the web of (non-binding) model contract rules which could be used in Europe's Single Market.
• A (binding or non-binding) “toolbox” for EU lawmakers when they adopt new legislation to ensure better and more coherent rules.
• A Contract Law Recommendation that would call on EU Member States to include a European contract law into their national legal systems, thereby partly following the model of the United States where all but one of the 50 states voluntarily adopted the Uniform Commercial Code.
• An optional European Contract Law (or a "28th system"), which could be chosen freely by consumers and businesses in their contractual relations. This optional law would be an alternative to the existing national contract laws and would be available in all languages. It could apply in cross-border contracts only, or in both cross-border and domestic contracts. It would have to guarantee a high level of consumer protection and legal certainty throughout the life cycle of a contract.
• Harmonisation of national contract laws by means of an EU Directive.
• Full harmonisation of national contract laws by means of an EU Regulation.
• The creation of a full-fledged European Civil Code, replacing all national rules on contracts.

Background

Under the Europe 2020 strategy – launched by President José Manuel Barroso on 3 March 2010, the Commission is currently tackling bottlenecks in the Single Market to drive economic recovery. This includes working on harmonised solutions for consumer contracts, EU model contract clauses and making progress towards an optional European contract law. The creation of an optional contract law instrument is also one of the key actions in the Commission's Digital Agenda for Europe issued on 19 May 2010.

The European Parliament gave its backing to the idea of an optional European Contract Law in a resolution on 25 November 2009. Former Internal Market and Competition Commissioner Mario Monti also identified in his Single Market Report of 9 May the advantages that an optional "28th system" would bring for consumers and businesses.

On 12 May, the Commission convened a new expert group to transform the so-called "Draft Common Frame of Reference" – a first draft for a European contract law developed over the past years under the EU's Research Programme – into a simple, user-friendly workable solution adapted to the needs of consumers and the reality of the business environment. The group, which is composed of legal experts and practitioners from all over Europe, is currently meeting once a month in Brussels. The public consultation started today will help ensure that the group addresses the most important problems faced today by consumers and businesses in the field of contract law.

The consultation will run until 31 January 2011. Its results will help the Commission prepare proposals before 2012.[1]

Reference:

[1]http://www.eubusiness.com/news-eu/contract-law.107

MySpace suicide case based on breach of terms and conditions

UPDATED: A US woman has been indicted on charges of perpetrating an online hoax because she violated MySpace's terms and conditions. Prosecutors reason that a violation of contract terms can lead to criminal convictions.

Sixteen-year-old Megan Meier killed herself when she received cruel messages from an online friend, 16-year-old Josh Evans, through MySpace. It then emerged that Evans had never existed but was an online alter ego created by Lori Drew, a 49-year-old woman.
State authorities initially investigated the incident but found no laws on which to launch any action against Drew. Federal prosecutors, though, launched an action based on MySpace's terms and conditions.

In order to send messages to Meier, they argued, Drew would have had to sign up to MySpace, providing false information to create an account for the fictional Josh Evans. That would have involved giving at least a fake name and date of birth, both banned under the terms and conditions.

Prosecutors said that because her activity was conducted in violation of the terms and conditions of the site, it became unauthorised use of the service.
A federal grand jury in California has indicted Drew on charges of conspiracy and on three counts of accessing protected computers without authorisation to get information used to inflict emotional distress on Meier, Associated Press reported.

Prosecutors are expected to argue at trial that a violation of MySpace's terms and conditions can be extrapolated into an offence.



Reference:
http://www.out-law.com/default.aspx?page=9140

Blockbuster terms unenforceable because of unlimited right to amend

Website terms were unenforceable because a provision on the right to change them in future was unqualified, a US court has ruled. Existing terms were 'illusory' because of the threat that future changes could apply retroactively, the court found.

A woman is suing video rental firm Blockbuster but the company said that its online terms and conditions require all disputes to be settled by arbitration. The woman, Cathryn Harris, went to court and won a ruling which said that the terms and conditions could not apply.
Harris is a customer of Blockbuster’s online rental service who uses social networking site Facebook. Facebook's ill-fated advertising system Beacon broadcast Harris's video rental activity to her Facebook friends. Harris objected and sued Blockbuster for passing on the details, but Blockbuster said that the suit breached the terms and conditions to which she agreed when she joined Blockbuster Online.
Its terms of use say that customers cannot sue it in court but must go to arbitration, and that they cannot take class action suits against it.
The US District Court for the Northern District of Texas has said, though, that Blockbuster cannot rely on any of its terms and conditions because a clause allowing it to alter them creates too much uncertainty for customers.
The terms said that Blockbuster could vary them at any time without giving notice, and that modifications would be effective upon being posted. They added: “You agree to review these Terms and Conditions of Use periodically and your continued use of this Site following such modifications will indicate your acceptance of these modified Terms and Conditions of Use. If you do not agree to any modification of these Terms and Conditions of Use, you must immediately stop using this Site.
The Court looked at a previous case in which Halliburton was allowed to keep its arbitration clauses because they specifically said that terms and conditions amendments could not apply retrospectively to pre-existing disputes.
"The Court concludes that the Blockbuster arbitration provision is illusory," said the judge, Barbara Lynn. "There is nothing in the Terms and Conditions that prevents Blockbuster from unilaterally changing any part of the contract other than providing that such changes will not take effect until posted on the website."
"There are likewise no 'Halliburton type savings clauses', as there is 'nothing to suggest that once published the amendment would be inapplicable to disputes arising, or arising out of events occurring, before such publication'."
"The Blockbuster contract only states that modifications 'will be effective immediately upon posting,' and the natural reading of that clause does not limit application of the modifications to earlier disputes," she wrote.
"The Court concludes that the arbitration provision of the Blockbuster contract is illusory and unenforceable," ruled the Court.
A US court had previously ruled against a company that had changed its contracts online without telling customers. Talk America was told that it could not change the terms and conditions of its phone service's use without expressly notifying customers.
"Even if [the customer] had visited the website, he would have had no reason to look at the contract posted there," said the judgment, from Judges Kozinski, Gould and Callahan. "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."
"This is because a revised contract is merely an offer and does not bind the parties until it is accepted," said the ruling.



Reference:
http://www.out-law.com/default.aspx?page=9967

Contract law reform: European Commission consults

The European Commission has outlined the various ways in which it could change contract law to encourage cross-border trading within the European Union. The Commission has published a Green Paper outlining seven kinds of new system the EU could adopt.

The Commission is consulting on the seven options which range from the publishing of suggested model contracts to an EU-wide law replacing all national contract laws.

The European Commission believes that contract law reform is necessary to stimulate cross-border trading, which has not been widely accepted by consumers or small businesses.
"Only 8% of consumers buy online from another member state," said a Commission statement announcing the consultation. "In addition, 61% of cross-border sales are rejected because traders refuse to serve the consumer's country. This is largely due to regulatory barriers and legal uncertainty about the applicable rules."
"I want a Polish, German or Spanish consumer to feel as safe when doing business with an Italian, Finnish or French company online as when they are at home," said Viviane Reding, the Justice Commissioner. "And I want Europe's small and medium-sized companies to offer their products and services to consumers in other countries without having to become experts in the national contract law systems of all other 26 EU countries."

The Commission Green Paper explains the seven kinds of new system the EU could adopt. These are:

1. non-binding model contracts;
2. a 'toolbox' for national legislators to use when passing national contract laws to improve consistency;
3. a non-binding plea to countries to incorporate a 'European contract law' into their laws;
4. the creation of an optional '28th system' EU contract law to add to the 27 member state legal systems;
5. partial harmonisation of contract law through an EU directive;
6. full harmonisation of contract law through a Regulation; and
7. an EU civil code on contracts which would replace national contract law.

"This is certainly a time of crisis for Europe's economy. But it is also a time where we have an historic opportunity to drive economic growth by easing the cost of cross-border transactions," said Reding. "It is therefore now the time to make a quantum leap towards a more European contract law."

The Green Paper is the work of an expert group convened by the Commission to create a 'common frame of reference' on which discussions could be based. The expert group contains three UK-based academics. They are Professor Simon Whittaker of Oxford University, Professor Hugh Beale of Warwick University and Professor Eric Clive of Edinburgh University.
Reding said earlier this year that she backed the creation of a '28th system' of contract law.
"Business-to-consumer relationships are complicated by 27 different regimes for contractual relations," she said in February. "That means that a consumer may be able to return a defective product for a full refund within 15 days of the sale in one country, whilst a consumer in another nation may get three months."

"Such a European Contract Law would exist in parallel to the national contract laws and provide standard terms and conditions," she said. "The United States started with a uniform commercial code to become a globally competitive economy. Why couldn't we have, in the end, a European civil code for our single market?"

The consultation process is open until 31st January 2011.


Reference:
http://www.out-law.com/default.aspx?page=11198

Browse-Wrap Agreements

Court holds that minors entered into valid ‘click wrap’ agreement with defendant IParadigms LLC (“IParadigms”) by clicking an “I agree” icon which appeared directly below an online Usage Agreement, and indicated their assent to be bound thereby.  Plaintiffs were high school students that were directed by the schools they attended to submit class work to defendant IParadigm’s “Turnitin” website to check for plagiarism.  As part of this submission process, plaintiffs were obligated to assent to the site’s Usage Agreement.  Because the Usage Agreement contained a limitation of liability clause precluding liability to plaintiffs as a result of their use of the Turnitin site, the Court rejected plaintiffs’ copyright infringement claims, which arose out of defendant’s storage of plaintiffs’ class work in a database used to check student homework for plagiarism.

In reaching this result, the Court rejected plaintiffs’ claims that, as minors, they were not bound by the terms of the site’s Usage Agreement.  Because they had accepted the benefits of the agreement – the ability to submit their class work for grade to their respective schools was dependent upon their use of the site – they could not escape the contractual conditions upon which such benefits were rendered.

The Court further held that plaintiffs’ copyright infringement claims failed because defendant had made a permissible fair use of their works.  In reaching this result, the Court relied on the fact that Turnitin’s use of plaintiffs’ school work was highly transformative of the original works, in that it added plaintiffs’ school work to a non-publicly available database used only to check for plagiarism by students.  The Court also rested its holding of fair use on the fact that defendant’s use did not impact the market for plaintiffs’ works, as the copies Turnitin made thereof were not available to the public, but rather maintained in a non-public database.

The Court rejected the counterclaims advanced by defendant iParadigms, including a claim for indemnification as a result of the commencement of this action.  This claim was based on a separate “Usage Policy” found on the Turnitin site.  The Court held that plaintiffs were not bound by this policy, which was not linked or otherwise referenced in the Usage Agreement to which plaintiffs were in fact bound.  There was no evidence that plaintiffs were aware of this separate “usage policy,” which was contained in a link on each page of the Turnitin site.  As a result, and because the parties’ contract stated that it constituted the full agreement between the parties, the plaintiffs’ use of the site was held not to create a valid browse wrap agreement, and the claim for indemnification, predicated on the Usage Policy, was dismissed.
The remaining counterclaims advanced by iParadigms arose out of the use of the site by one of the plaintiffs to submit class work to an institution he did not attend.  These claims for trespass to chattels, and violations of both the Computer Fraud and Abuse Act and Virginia Computer Crimes Act, failed due to the absence of the requisite damage.


Reference:
http://www.internetlibrary.com/topics/browse-wrap_agree.cfm

Case: Mortgage Plus, Inc. v. DocMagic, Inc., et al.

Plaintiff Entered Into Binding Online Contract By Clicking "Yes" Icon

Court holds that plaintiff entered into a valid agreement by clicking on an icon indicating its assent to be bound to displayed software license terms, and thereafter using defendant's software and services.  As a result, the Court, honoring a forum selection clause found in the parties' agreement, transferred the case before it from Kansas to California, the venue for suit designated in the forum selection clause.  In reaching this result, the Court rejected plaintiff's claim that it was not bound to the agreement because its assent had been given by an individual who lacked the authority to bind it to such an agreement.  The Court found that plaintiff had failed to establish this contention due to its failure to identify the individual(s) who give their assent.  In any event, plaintiff was bound because it had ratified its agent's acts by using the software and associated services for a period of six years.

Parties Entered Into Binding Contract

Plaintiff Mortgage Plus Inc. is a mortgage lender.  Seeking assistance in processing loan closing documents, plaintiff contacted defendant DocMagic, which markets a software product that aids in the preparation of such materials.  A customer uses DocMagic's software to input data which it transmits to DocMagic for insertion into the appropriate documents.  These documents are then transmitted by DocMagic to the customer via e-mail for its use.
At plaintiff's request, DocMagic sent plaintiff a CD-Rom containing its software, and started processing documents for plaintiff.  Claiming the documents DocMagic produced contained errors, plaintiff commenced suit in Kansas, where it does business.  In its suit, plaintiff claimed that DocMagic had, by its conduct, breached the parties' contract.  Plaintiff also asserted claims of breach of warranty and negligent misrepresentation.
To utilize defendant's software, it is necessary to install it on a computer.  At the outset of this process, a customer is presented with the terms and conditions of a software license governing its use of the DocMagic software, and asked to indicate his assent to be bound by clicking a "yes" icon.  If the customer does not wish to be bound, he is given the option of clicking a "no" icon, in which event the software will not load, and he will be unable to make use of it.
The Court held that by clicking the "yes" icon in these circumstances, plaintiff had entered into a valid and binding agreement.  Said the Court:

[I]t is undisputed . . .  that Mortgage Plus had to affirmatively click the "Yes" button in assenting to the Software Licensing Agreement as a prerequisite to installing the DocMagic software.  It further is undisputed that the software would not be installed if Mortgage Plus did not accept the terms and conditions of the Software Licensing Agreement.  Plaintiff had a choice as to whether to download the software and utilize the related services; thus, under the specific facts presented here, installation and use of the software with the attached license constituted an affirmative acceptance of the license terms by Mortgage Plus and the licensing agreement became effective upon this affirmative assent.  The Court finds the clickwrap agreement here is a valid contract

Plaintiff Bound Because It Ratified Its Agent's Acceptance Of Terms - Lack Of Authority Defense Rejected

In reaching this result, the Court rejected plaintiff's contention that the UCC applied to this transaction, holding that the contract at issue was predominantly one for the provision of document preparation services to which the UCC did not apply.
The Court also rejected plaintiff's claim that it was not bound to the software license because the individual who clicked the "yes" icon lacked the authority to bind it.  The Court held that plaintiff had failed to establish this contention because it did not identify the individual who clicked the "yes" icon, and therefore could not establish that he lacked the requisite authority.  In any event, plaintiff had ratified its agent's allegedly unauthorized action by continuing to use the DocMagic software for a period of six years after the agent first clicked the icon.  Said the Court:

It is well-settled that a party with knowledge of the facts can ratify an unauthorized act through conduct.  Ratification is the adoption on confirmation by a principal of an unauthorized act performed on its behalf by an agent.  One example of such ratification is election by the principal to treat the act as authorized, which includes attempting to enforce the contract or retain the benefits of the contract.

*          *          *

Here, on at least three occasions over the course of six years, an individual with the Mortgage Plus organization installed the DocMagic software and each time was required to assent to the Software Licensing Agreement in order to complete such installation.  While Mortgage Plus fails to identify the individual who accepted the terms and conditions of the Software Licensing Agreement before downloading the software, there is no dispute that for six years after such acceptance Mortgage Plus consistently utilized the loan document preparation services associated with the software.  The undisputed facts establish Mortgage Plus utilized the software to create and electronically submit literally hundreds of user worksheets to DocMagic for processing and preparation of final loan documents.  By doing so, Mortgage Plus obtained the benefits of the Agreement, and thereby ratified any unauthorized acceptance of its terms.

Court Transfers Case To Venue Specified In Forum Selection Clause

Finding the contract valid, the Court directed the transfer of the litigation to California in accordance with the forum selection clause in the parties' contract.  While not dispositive, such a clause was 'a significant factor' in the traditional balancing applicable to venue transfer motions.  Here, the Court held it outweighed any competing concern of inconvenience to plaintiff and its witnesses given Mortgage Plus' presence in Kansas.  In directing transfer of the entire case to California, the Court held that the language of the clause before it was broad enough to encompass both Plaintiff's contract and negligent misrepresentation claims[1].



Reference:
[1] http://www.internetlibrary.com/cases/lib_case356.cfm