THE DEVIL IS IN THE FINE PRINT
THE LEGEND OF FAUST
Faust was a scholar. Frustrated after having worked for years without the hoped-for result, he suffered a crisis of faith. He got so frustrated, in fact, that he turned to “the Dark Side,” becoming a wizard of the dark arts. Finally he got so desperate he performed a ritual to summon the Devil. Mephistopheles answered his call. Faust made a pact. He would be granted success, fame, wealth, and all this would be his in exchange for one thing, Mephistopheles said. Faust’s eternal soul as payment for the bargain. Up until that point, Mephistopheles would grant Faust all the human heart might desire. . . four-bar cell phone service, a speedy internet provider, a new Tesla to drive, and his dream job as a stockbroker on Wall Street, immune from prosecution for even the riskiest of trades. All Faust has to do was agree to the terms and conditions…
EVERYWHERE A CONTRACT
Although most of us don’t make “Wall Street” money, many of us are in the same position. The government appears to be broken. At best, it isn’t functioning as it should. With our representatives failing us, we are left to our own devices. At every juncture we are presented with long, onerous agreements that stand between us and the next thing on our list. Something we have to tackle before we get where we need to be.
Like Faust, we are presented with contracts we know to be one-sided – contracts we know only too well that we have no real power to dispute, or to modify.
CLICK THROUGH OR DIE…
We see them before purchasing software or goods online, contracting to obtain telephone services, downloading an app for our smart phones, and more often upon entering employment. We are presented with one in some form or other, almost daily. They are so ubiquitous that when these documents are presented to us, we just hit “click” to acknowledge our acceptance of their terms We are so sure of our impotence in this exchange that we rarely read them. After all, what’s the point? We need that phone for work; we need that job to survive. So we sign them.
Is agreeing to be bound by provisions we neither know nor understand ever a good idea? What rights might we be giving away in the name of expediency? What are these contracts, and how did they come to be so wildly out of balance?
Many contracts into which parties enter use pre-drafted forms that one party presents to the other. A number of these forms constitute the kind of contract that has been labeled “adhesive.” One court described such “adhesion contracts” as follows:
“The term signifies a standardized contract which, imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party only the opportunity to adhere to the contract or reject it. . . . Such an agreement does not issue from that freedom in bargaining and equality of bargaining which are the theoretical parents of the American law of contracts. Yet, today the impact of these standardized contracts can hardly be exaggerated.” (Neal v. State Farm Ins. Cos. (1961) 188 Cal.App.2d 690, 694.)
Although many courts, like the one in Neal have recognized that adhesion contracts do not fit within the basic concepts of contract law, which assume a freely negotiated agreement between parties of relatively equal bargaining position, they have nonetheless refused to hold them uniformly invalid. This reluctance may be based on their ubiquity in modern American commerce, as observed by the Neal court.
On the other hand, although such contracts are not automatically invalidated, they are placed under special scrutiny. As another court summarized, “[a] finding of adhesion merely begins another inquiry – whether a particular provision within the contract should be denied enforcement on grounds that it defeats the expectations of the weaker party or it is unduly oppressive.” Intershop Communications AG v. Superior Court (2002) 104 Cal.App.4th 191, 201.) Under this analysis, a contract term will be invalidated if, but only if, the court finds that the contract does not fall within the reasonable expectations of the weaker party and is unduly unconscionable.
THE MEANING OF UNCONSCIONABLE
When it comes to being left holding the bag in today’s society, that last word is the key one. Unconscionable. The current U. S. Supreme Court seems to believe the concept is outdated and irrelevant, a remnant of some lost mythical realm. A tale as tall as the legend of Atlantis. They argue that if you are forced to sign a contract, you are going to be held to its terms. The court has no issue if these contracts change without notice. It does not matter if you ever understood what you agreed to be bound by. It matters only that you assented to the terms when you hit that “agree” button. To SCOTUS, unconscionability is just an excuse for people too lazy to read through a contract, and they’re not having it. Maybe there is some truth to that conclusion, but the scales of justice have never been so stacked against the consumer as they are today.
CALIFORNIA & QUIXOTE
California has been fighting a valiant, if Quixotic, battle against these laws. Our courts try to protect employees and consumers from these immutable adhesion contracts. We fight them when they bind employees and consumers to terms so unfavorable no one would agree to them if they understood their terms. Judges argue that those that were signed without the ability to negotiate their terms represent a deck stacked too highly against consumers.
The Supreme Court, however, remains in bed with Big Business. Each decision SCOTUS has made in the areas of corporate contracts with Americans in the past decade, has winnowed away more of the individual’s right to a fair deal. Employees and consumers are left unprotected. As the individual voice dwindles, corporate money gains more leverage in every situation. And the courts are allowing it.
Whether we are purchasing a phone or landing our dream job after a nightmarish hunt for a living wage, we are forced to signing away our rights to get to the next phase. These things to which we agree can come back to bite us in fairly meaningful ways.
WHAT CAN YOU DO?
What you can do is read as many form agreements as you can before signing them. This practice is particularly important with agreements for employment, because terms of employment are critical. Look for waivers of your class action rights, severance clauses, non-compete agreements, or clauses that claim all your work product – even from work done in your own spare time – belongs to the company employer. These may be negotiated, depending on the strength of your position, and often there are opt-out provisions for some of these clauses hidden in the “fine print.” If you do not know, you should not sign away your rights first and hope for the best later, because the current approach of the courts is to uphold most contracts, no matter how onerous the provisions.
The long term relief would be legislation to cure these issues. It might be a great time to write your legislators and express your concerns. While it may seem they don’t care about their constituents (and maybe they don’t), they do respond to direct complaints to their offices. The sound of your lone voice in the confines of a letter to your Senator or Congressman is amplified a thousand-fold, particularly if more than one person brings attention to an issue. They will assume you represent a certain percentage of the population. The seed will be planted.
So take whatever action you can to protect yourself down the line. If faced with a lengthy employment contract, call a lawyer. It will always be cheaper than the prospect of lengthy litigation years later, when your dream job has turned into a nightmare.
And you might want to do it soon, before Mephistopheles comes to collect.
Lazear Mack, LLP
Employment Law Attorneys
436 14th Street, Suite 1117