Planet Money – Surprise, you just signed a contract! How hidden contracts took over the internet

Intro

In this episode of the “Planet Money” podcast, titled “Surprise, you just signed a contract! How hidden contracts took over the internet,” the hosts explore the world of hidden contracts and how they have become a common part of our online activities. They discuss the history of contracts, the rise of standardized contracts, and the legal implications of entering into contracts without actively agreeing to them. The episode raises questions about the impact of these hidden contracts on our freedom and the role of the law in protecting individuals in contract agreements.

Main Takeaways

Contracts and Legal Consequences

• Terms of service have real legal consequences, even if we don’t read them.
• Airbnb user Greg Seldon’s discrimination lawsuit was thrown out because he unknowingly agreed to a contract that prevented him from suing Airbnb.
• By hitting the sign-up button, Greg agreed to a 17-page legal document.
• Every time you register for a website or install an app, you’re probably entering into a legally enforceable contract, even if you never signed anything.

History of Contracts

• The law of contracts has been rewritten over the past 200 years to favor the economy over individuals.
• The birth of the modern contract in the 1800s created a society full of people making choices for themselves, making their own deals.
• The second revolution in contracts in the 1850s saw the emergence of standard form contracts due to the rise of expensive products like sewing machines.
• Standard form contracts have been rewritten over the past 200 years to favor the economy over individuals.

Rise of Internet Contracts

• The rise of internet contracts began in the 90s with a landmark lawsuit, ProCD pro-cv versus Idenberg, which changed the definition of entering into a contract.
• Shrink-wrap contracts were becoming common in the software industry to protect companies from customers copying their CDs.
• Federal circuit court judge Frank Easterbrook writes a landmark opinion that shrink-wrap contracts are valid, breaking contract doctrine.
• Judge Easterbrook’s decision on a case opened the door to the idea that contracts can be entered into without active agreement.

Hidden Contracts and User Consent

• Easterbrook’s compromise sets off the third revolution in contracts, where the question is whether customers got a chance to notice the contract.
• Different types of contracts include click-rap, sign-in wrap, scroll wrap, and browser wrap.
• Courts focus on how noticeable the contract is, including font size and link color.
• Contracts have evolved from a sign of empowerment to a sign of helplessness.

Summary

Contracts and Legal Consequences

Terms of service and online contracts have significant legal consequences, even if users do not read them. The story of Airbnb user Greg Seldon’s discrimination lawsuit illustrates how hidden contracts can prevent individuals from taking legal action against companies. By simply hitting the sign-up button, users unknowingly agree to lengthy legal documents. This raises questions about the enforceability of contracts that users may not be aware of.

History of Contracts

The history of contracts reveals a shift in favor of the economy over individuals. The modern contract, born in the 1800s, empowered individuals to make their own deals. However, the emergence of standardized contracts in the 1850s, driven by expensive products like sewing machines, tilted the balance towards favoring the economy. Over the years, standard form contracts have been rewritten to prioritize economic interests over individual rights.

Rise of Internet Contracts

The rise of internet contracts can be traced back to a landmark lawsuit in the 90s. Shrink-wrap contracts, commonly used in the software industry, aimed to protect companies from unauthorized copying. Federal circuit court judge Frank Easterbrook’s opinion validated the validity of shrink-wrap contracts, challenging traditional contract doctrine. This decision opened the door to the concept of entering into contracts without active agreement, leading to the proliferation of hidden contracts online.

Hidden Contracts and User Consent

The third revolution in contracts revolves around the question of whether customers have a chance to notice the contract. Different types of hidden contracts, such as click-rap, sign-in wrap, scroll wrap, and browser wrap, have varying degrees of visibility. Courts now consider factors like font size and link color when evaluating the enforceability of hidden contracts. This shift has transformed contracts from symbols of empowerment to symbols of helplessness, as users often overlook the terms and conditions they unknowingly agree to.

Conclusion

Hidden contracts have become an integral part of our online activities, with significant legal implications. As users, we often unknowingly enter into contracts that favor the economy over our individual rights. The evolution of contracts, from empowering individuals to limiting their freedom, raises important questions about user consent and the need for greater transparency in online agreements. It is crucial for individuals to be aware of the terms and conditions they are agreeing to and for the law to strike a balance that protects both economic interests and individual rights.