Is the Internet turning contract law on its head?

Contract image.According to Richard Warner, in “Turned on its Head?: Norms, Freedom, and Acceptable Terms in Internet Contracting”, a paper recently made available on SSRN and BePress, many commentators contend that it is, though in his view it is not. The issue is basically very simple: either the current law of contract is capable of regulating internet contracts because they are after all still contracts, or the current law of contract is not capable of regulating internet contracts because the internet is too different from its current reach that it cannot cover internet contracts. It depends on whether you stress the “internet” element, or the “contract” element. I stress “contract”, and take the view that the current law can easily accommodate internet contracts, for the simplistic reason that a contract is still a contract. Warner does too, in less simplistic terms:

Precisely this issue arises in current controversies over end user license agreements (EULAs) and Terms of Use agreements (TOUs, the agreements governing our use of web sites). Commentators complain that, in both cases, the formation process unduly restricts buyers’ freedom; and, that sellers and web site owners exploit the process to impose terms that deprive consumers of important intellectual property and privacy rights. The courts ignore the criticisms and routinely enforce EULAs and TOUs. There is truth on both sides of this court/commentator divide. EULAs and TOUs are standard form contracts, and a standard contract formation process can guarantee acceptable terms and enhance freedom; however, in the case of EULAs and TOUs, the process is currently defective in ways that result in unfair terms that reduce freedom. … The theory applies equally to Internet and non-Internet contracting, and this shows that the Internet is not turning contract law on its head; however, the theory also reveals that Internet contracting poses serious, unmet challenges to contract law. The problem is that EULAs and TOUs contain terms not currently governed by appropriate norms. As a result, the EULA and TOU formation process departs from the ideal formation process in ways that result in unacceptable, freedom-reducing terms. In the case of EULAs the offending terms involve prohibitions on reverse engineering and transfers of software to third parties … [whilst in] the case of TOUs, the offending terms concern the collection of information by businesses and web sites and implicate privacy concerns.

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