As I understand, EULAs and TOS are a type of adhesionary contracts. The Legal Information Institute at Cornell University defines an adhesionary contract as “a standard form contract drafted by one party (usually a business with stronger bargaining power) and signed by the weaker party (usually a consumer in need of goods or services), who must adhere to the contract and therefore does not have the power to negotiate or modify the terms of the contract.” This sounds just like EULAs and TOSs. They are written by one party, the video game developer, and signed by the weaker party, the gamer, who must adhere to the contract if they want to play the game and has no option of modifying the terms.
Adhesionary contracts are also used outside of video games. If you’ve ever bought car insurance, travel insurance, or any other type of insurance, you’ve almost certainly signed an adhesionary contract as their us is standard practice in the insurance world. As I’ve learned in Insurance Law, because of the one sided nature of adhesionary contracts, Courts interpret any ambiguity in such contracts against the author (also known as contra proferentem) as it was solely in the authors power to avoid the ambiguity when the contract was drafted.
Therefore, one would think that courts would also interpret EULAs and TOSs against game developers and in favour of gamers, but, if I remember Professor Festinger’s earlier lectures correctly, this is not typically the case. Why do you think this is? Just like between an insurer and an insured, there exists a large power imbalance between game developer and gamer, and yet developers seem to have EULAs and TOSs interpreted in their favour.
Perhaps the disparity is because of what the adhesionary contract provides. For gamers, the adhesionary contract provides pleasure, whereas for the insured, the adhesionary contract provides peace of mind. Therefore, it is possible that the court places greater importance in peace of mind than in pleasure, but should they? After all, when it comes down to it, is peace of mind really that different from pleasure?
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What appears to be the defining characteristic in insurance contracts is the allocation of risk. That is, the transfer of risk from the insured to the insurer. Because the insurance company agrees to share the risk of loss with the policyholder, it is imperative that the policyholder act in good faith by fully disclosing all information that affects the insurance company’s level of risk. Full disclosure allows the insurer to protect itself by charging the policyholder a premium that accurately reflects the level of risk it is undertaking or even refusing to issue a policy if the risk is too high. By the same token, full disclosure also allows the insured to ensure that the policy fits his/her needs. To steal the words of Lord Mansfield “good faith forbids either party by concealing what he privately knows, to draw the other into a bargain from his ignorance of that fact, and his believing the contrary”. I believe it is this expectation and obligation to deal in good faith that ambiguity in insurance contracts generally resolve in favour of the weaker party. Indeed, this characteristic appears to have led the courts in adopting the doctrine “Uberrima fides” in interpretinginsurance contracts, rather than what usually governs other contracts– “caveat emptor”. In other words, I don’t think it’s so much the power-relationship that leads the court into interpreting contracts in favour of insured, but rather the obligation to deal in good faith. With that said, no such relationship between gamers and game developers exists. Moreover, there are other common law remedies that address issues relating to power-disparities between contracting parties (i.e. duress,etc.).
I definitely think the TOS and EULA are akin to adhesion contract since they “powerful party” drafts the contract and the “weaker party” have no place to bargain, they can only accept the contract on its face. In addition, from what I remember (which is very vague) from first year contracts, I believe “Contra proferentem” is the preferred approach when the K is in standardized form and where the parties are of unequal power – http://en.wikipedia.org/wiki/Contra_proferentem. It is not only restricted to insurance contract, so from what I remember, I do think the power-relationship can be factor. In addition, other CL remedies such as duress, undue influence are rarely successful when argued but perhaps Jon can provide some clarification in these aspects.
In addition, I do ponder about why EULAs and TOS are not treated as adhesion contract and why wouldn’t consumer protection legislation come in. I agree with dmchugh that perhaps the purpose of the contract might be a factor since I suppose one can potentially argue that one needs insurance in one’s life but don’t need pleasure from video game (which I personally don’t agree).