The Dangers of Signing a Unilateral Terms of Service Contract with an Arbitration Clause.

Imagine you are the typical consumer with a severe allergy to nuts and dairy, so serious it is possible to experience the life-threatening consequences of anaphylactic shock. Now, imagine you are visiting a resort area that features a restaurant that publicly advertises “the accommodation of persons with food allergies” as a “top priority” and believes they will take the appropriate actions to accommodate your allergy. Now imagine that for whatever reason, something goes wrong, and you die.

Now comes your spouse seeking redress for the wrongful death.

But, the powers that be ask the Court to dismiss their wrongful death lawsuit and arbitrate the matter because you agreed to the “Terms of Service” on the company’s website and, even worse, agreed to the Terms of Service years before when you may have signed up for one of the company’s streaming services.

In our increasingly digital world, nearly every online service, app, or subscription requires users to agree to a Terms of Service (ToS or ToughShit) contract.

Most of us, myself included, have grown accustomed to quickly scrolling through these lengthy documents and clicking “Agree” without a second thought. Knowing that, buried within the dense legalese of these contracts may lie a dangerous clause: mandatory arbitration. Understanding the implications of signing a unilateral ToS with an arbitration clause is crucial for protecting your rights as a consumer.

The Illusion of Choice: The “Take It or Leave It” Hobson’s Choice

When you encounter a Terms of Service contract online, you are typically presented with a Hobson’s choice: accept the terms as they are or forgo the service altogether. This “take it or leave it” scenario leaves you no natural choice. Either you agree to the terms, including any arbitration clause, or you are denied access to the service.

This imbalance in bargaining power is a hallmark of adhesion contracts, where one party (usually the consumer) cannot negotiate the terms. Companies know that most users will accept the terms without fully understanding them, relying on the fact that the service offered is perceived as essential or highly desirable.

What Is an Arbitration Clause?

An arbitration clause in a ToS contract typically stipulates that disputes between you and the company must be resolved through arbitration rather than in court. Arbitration is a private process where an arbitrator (one or more individuals likely to be attorneys, retired judges, or industry experts) hears the allegations, assesses the claim’s merits, and makes a binding decision on the dispute and the settlement terms. This precludes class action lawsuits and wild and outrageous jury awards based on emotion and the persuasion skills of the attorneys presenting the case.

While arbitration is often touted as being faster and less expensive than traditional litigation, it can severely limit your rights as a consumer. 

1. Limited Recourse and Unfair Outcomes: Arbitration decisions are final and binding, with minimal opportunities for appeal. This means that if you are unhappy with the outcome, there is little you can do to challenge it.

2. Bias Toward Companies: Arbitrators are often chosen from a pool of arbitrators who work regularly with corporate clients. This can create a bias in favor of the company, as arbitrators may be motivated to secure future work by delivering favorable outcomes.

3. Confidentiality: Arbitration proceedings are usually confidential, meaning that the details of the case and the decision are not made public. This secrecy can prevent patterns of corporate misconduct from coming to the public’s or media’s attention, thus prolonging bad behavior.

4. Lack of Legal Protections: In court, consumers are protected by numerous legal safeguards, such as the right to a jury trial and the ability to appeal a decision. Arbitration strips away these protections, leaving consumers vulnerable to what may seem like arbitrary (pun intended) action.

Bottom line.

Unilateral ToS contracts, drafted by one party (the company) without input from the other party (the consumer), are designed to protect the company’s interests at the expense of the consumer’s rights.

Agreeing to a unilateral ToS with an arbitration clause effectively waives your right to seek redress through the court system. If the company engages in unfair practices or breaches its obligations, your ability to hold it accountable significantly diminishes.

In other words, you are screwed.

-- Steve