Contracts, Norms, and Privacy

1. Contracts, Norms, and Privacy Robert Sloan Richard Warner

2. Standard Form Contracting • The practice first flourished in the nineteenth century shortly after the rise of mass produced, standardized products, and it has served us well as a fair and efficient way to allocate the risks and benefits between buyers and sellers of hair dryers, toasters, microwaves, washing machines, home repairs, auto servicing, and a wide range of other products and services. • Pay-with-data exchanges are an instance of standard form contracting, no-negotiation, one-size-fits all contracts.

3. Offer and Acceptance • An offer is (1) a manifestation of a willingness to enter a bargain; (2) so made as to justify the offeree in thinking that his or her assent will conclude the bargain. • An acceptance is a (1) manifestation of a willingness to enter the bargain proposed by the offer (2) in a way invited or required by the offer.

4. The Duty to Read • The Duty to Read: If a party has an adequate opportunity to read and understand an agreement, then that party is treated as if he or she read the agreement even if in fact the party did not do so. • Carnival Cruise Lines. • So an offeor can “manifest a willingness to enter a bargain” even if the offeree is unaware of the terms of the bargain.

5. An Example • “Amazon provides website features to you subject to the following conditions. If you visit or shop at Amazon.com, you accept these conditions.” • Does the duty to read entail that I have agreed to the terms—including that my use of the site shall count as acceptance? • Recall that an acceptance is a (1) manifestation of a willingness to enter the bargain proposed by the offer (2) in a way invited or required by the offer.

6. The Apparent Difficulty • Contractual obligations are freely undertaken. • This requires knowing what the obligations are. • So how can hypothetical knowledge of terms and a “no other option” choice meet this condition?

7. Consent and Norms • When informational norms govern online businesses data collection and use practices, website visitors • give free and informed consent • to acceptable tradeoffs. • As long as the norms are value-optimal.

8. Informed Consent • A visitor’s consent is informed if the visitor can make a reasonable evaluation of the risks and benefits of disclosing information. • Suppose visitors know transactions are governed by value-optimal norms, then: • they know that uses of the visitor’s information—both uses now and uses in the unpredictable future—will implement tradeoffs between privacy and competing goals that entirely consistent with their values.

9. Tradeoffs • All informational norms—value-optimal and non-value-optimal alike—implement a tradeoff between privacy and competing concerns. • They permit some information processing, and thus secure some of its benefits, but they protect privacy by allowing only certain processing. • When the norm is value-optimal, the tradeoff it implements it is justified by visitors’ values. The tradeoff is acceptable in this sense.

10. Two Questions • First question : How we create norms? • Rapid advances in technology have created many situations for which we lack relevant value-optimal informational norms. • We have discussed this at some length. • Second question: If norms secure free and informed consent, what do contracts do? • To answer, we need a better understanding of standard form contracting.

11. The Contractual Norm • The norm governing terms in standard form contracts is the term-compatibility norm: • buyers demand contractual terms compatible with relevant norms. • This a second-order norm. • The relevant norms include product-risk, service-risk, and informational norms. • Profit-motive driven sellers conform to the contractual norm(given sufficiently competitive market conditions).

12. Free and Informed Agreement • Assume there is, for each contractual provision, • at least one relevant, value-optimal norm • with which the provision is compatible • Call this contractual norm completeness. • Our consent is informed as long as we know the terms are compatible with value-optimal norms. • No need to read the contract. • Our consent is free because the no negotiation, no choice contract is a pre-packaged deal that allows us to freely pursue our other goals.

13. So What Do Contracts Do? • What they don’t do is secure free and informed consent. Norms do that. • Contracts do what they have always done: define the legal relations between buyers and sellers for purposes of dispute resolution and business planning.

14. A Current Puzzle: Updating Contracts • Amazon: [1] Our business changes constantly, and our Privacy Notice and the Conditions of Use will change also. . . .[2] you should check our Web site frequently to see recent changes. . . [3] our current Privacy Notice applies to all information that we have about you and your account. [4]We . . . will never materially change our policies and practices to make them less protective of customer information collected in the past without the consent of affected customers.

15. The 9th Circuit’s Attitude • The 9th Circuit held such amendments unenforceable in Douglas v. Talk America, 495 F.3d 1062 (2007). • The court: • a service provider cannot unilaterally change the terms of its service contract by merely posting a revised contract on its website. • Parties to a contract have no obligation to check the terms on a periodic basis to learn whether they have been changed. • A revised contract is merely an offer So does not bind the parties until it is accepted. • An offeree cannot assent to an offer unless he knows of its existence.

16. Provide notice Do not require response Require response, do not allow any use of site Some respond Most do not respond Undesirable from a business point of view. Acceptance? Acceptance