9th Circuit rules against contract changes by fiat

Appeals court puts the burden of notice of contract changes on vendors, not customers. It's an important ruling for the software industry.

It's long been a practice within the software world to refer to terms and conditions of a service or product via URL.

In other words, I might sign a physical contract with Customer X, but the contract points to all sorts of other online "documents" for specifics of training, support services, etc. Savvy attorneys, therefore, require that such "moving targets" be removed, forcing them to be hard-wired into the document.

But now the U.S. Court of Appeals for the 9th Circuit (which covers California, Washington and Oregon) is helping the not-so-savvy, as ComputerWorld reports. You can read the ruling in its entirety here (PDF).

The court said that because a contract is an agreement between two parties, one of the parties cannot change it unless the other party agrees to the change...

"Even if [the customer] had visited [the vendor's] Web site to pay his bills, he would have had no reason to look at the contract posted there. Parties to a contract have no obligation to check the terms on a periodic basis to learn whether they have been changed by the other side."

As someone who manages contracts for my company, I can say that the court's ruling is burdensome because it means we have to amend contracts every time we want to change policies. However, it's a good ruling for the customer, because the onus really should be on the vendor to provide such information, rather than for the customer to have to monitor it.

Of course, the 9th Circuit covers just one area within the U.S. and doesn't apply to those outside its jurisdiction. Still, on something like this I would assume that the other circuits will follow its lead. It's a reasonable ruling. In addition, because the 9th Circuit's territory includes so many of the industry's heavyweights, it should have a strong ripple effect in how those outside this region do business as well.

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About the author

    Matt Asay is chief operating officer at Canonical, the company behind the Ubuntu Linux operating system. Prior to Canonical, Matt was general manager of the Americas division and vice president of business development at Alfresco, an open-source applications company. Matt brings a decade of in-the-trenches open-source business and legal experience to The Open Road, with an emphasis on emerging open-source business strategies and opportunities. He is a member of the CNET Blog Network and is not an employee of CNET. You can follow Matt on Twitter @mjasay.

     

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