s are everywhere. From the fine print
on your bus ticket
to the AGB
on your favourite software
. These are the bad boys
of contract law
. You're not expected to read or understand them, and they're generally written in hopes that no one will ever consider testing them in court
. Usually, no one ever does. To some extent, these "contracts," while lacking the usual characteristics of a bargain
, negotiated agreement, are necessary for the smooth functioning of the economy. Otherwise, you'd spend an eternity
waiting at Starbucks
while the customer in front of you haggle
d over the price of his "grande
no-fat half-caf mocha hazelnut jimsonweed
latte (with a sprinkling of nutmeg
)." However, as usual, the people who draft
the fine print take advantage. This is the true connoisseur
's guide to the anatomy
of the perfect adhesion contract.
Rule Number One for a Perfect Adhesion Contract: Even they that read must not comprehend
The language used must in general be sufficiently outlandish
. However, some pesky consumer
s have spoiled the fun, by requiring that an adhesion contract be drafted in "plain language." This just goes to show their lack of environmental consciousness
. Because the language itself has to be from Earth
, you're now stuck writing two and a half pages of "definitions
Option A: Enfeoff them into livery of the seizin of all their corporeal hereditaments
Rule Number Two for a Perfect Adhesion Contract: Structure is Everything
SECTION I:THIS AGREEMENT (HEREINAFTER: "AGREEMENT") SHALL CONSTITUTE THE ENTIRE AGREEMENT BETWEEN PEZEVENK INDUSTRIES (HEREINAFTER, MUTATIS MUTANDIS, "PEZEVENK", "WE", "US", "P.I.", "PEZ INDUS.", "THE FIRST CONTRACTING PARTY," OR ANY OTHER DESIGNATION THAT MIGHT HEREAFTER OCCUR TO THE DRAFTER HEREOF), AND CUSTOMER (HEREINAFTER "CUSTOMER", "CLIENT", "YOU", "THE SECOND CONTRACTING PARTY"), SUPERSEDING, VOIDING, AND RENDERING FOR THE PURPOSES OF ANY JUDICIAL PROCEEDING HEREAFTER INSTITUTED ARISING OUT OF THE PROVISIONS HEREOF OR THE TRANSACTION HEREBY CONCLUDED ALL ORAL, WRITTEN, SIGNED, OR PANTOMIMED STATEMENTS, DECLARATIONS, REPRESENTATIONS, EXPECTATIONS, IMPLICATIONS, AND INSINUATIONS IN ANY WAY RELATED TO THE TRANSACTION HEREBY CONCLUDED.
Option B: For "Plain Language" Jurisdictions: From OED to LSD
The first section is crucial. If they can't make it through the first section, chances are they'll give up. Here, there's so much excess verbiage, repetition, and poorly-embedded clauses that no one will be able to figure out that this allows you to misrepresent almost anything you want about the terms of the agreement without being bound to any of it. Moreover, even if the sentence structure somehow can be understood, who's going to figure out "mutatis mutandis" or "for the purposes of any judicial proceeding hereafter instituted arising out of the provisions hereof?"
SECTION I: For the purposes of this Agreement, the terms listed below are understood to have the following meanings:
(A) "Customer" shall mean you, your spouse, anyone eligible to inherit from you, or any person who purchases tangible things for personal use;
It's perfectly plain language, and will read like real English, but consumers will still need a searchable full-text concordance in order to make any sense of it. Just because it's "Plain Language" doesn't mean the words have to have their "everyday meaning!" This provides two sources of customer goodwill: first, you aren't trying to bury them in legalese, and second, these definitions allow you to include generous-sounding clauses such as this one:
(B) "A" shall mean "a", "an", or "the";
(C) "Including" shall mean "including, but not limited to";
(D) "Agreement" shall mean this Agreement or any other situation in which two or more people have the same opinion about a given thing. It shall also occasionally mean "dispute";
(E) "Injury" shall mean "any damage to person, property, job security, self-esteem, regardless of the person, thing, or event that caused it" when referring to Us, and "catastrophic physical harm caused directly, exclusively and indubitably by the egregious, intentional act of Us" when referring to you [ ... ]
SECTION XIV: We promise to provide you with full and fair compensation for all injuries caused to you, and you promise to provide us with full and fair compensation for all injuries caused by you.
People expect a text to flow logic
ally. They expect that consecutive
sentences will have some sort of relationship to one another. Similarly, they will expect sections of a contract
that are grouped together to have the same general purpose.
SECTION IV: We promise to provide you with a full and accurate statement of your current account balance and all recent credit and debit transactions.
SECTION V: If you feel that our statement is in error, we will verify our statement and correct any errors we find within ten (10) days of being informed of the nature of the error.
SECTION VI: You agree to waive your right to a jury trial before a court of law for any dispute related to this Agreement or your account, and agree to submit any dispute to binding arbitration, before an arbitrator of Our choosing. A request for arbitration may be approved by Us upon payment to Us of a filing fee of five hundred dollars ($500.00). Each party will bear one half of all costs arising from the arbitration, provided, however, that the prevailing party's arbitration costs and attorney fees will be paid by the other party.
SECTION VII: If your cheques or credit/debit card is lost or stolen, we promise to refund any purchases made with the card or cheques up to a value of six hundred dollars ($600.00).
Here, we've got three sections describing the rights of the customer, and, sandwich
ed between them, a provision
by which the customer relinquishes every right to take you to court, and agrees to pay you five hundred dollars for the privilege
of letting you decide whether you want to let the customer sue you. Experience
teaches that most people will not spend much time with Section VI
, if they even notice it.
Rule Number Three for a Perfect Adhesion Contract: The Christmas Tree Principle
So far, we've covered the basics: making sure that no one who actually reads your contract will have the slightest idea of what they're "agreeing" to. Now that you've got the smokescreen
up, it's time for the fun part. This could be called the "Christmas Tree Principle," because you've now laid the groundwork
for a contract that contains every term and condition
you could possibly want. The only thing limiting your ambition
s is the off chance that a consumer will actually take you to court.
Keeping them Out of Court:
On the off chance that someone will actually try to sue you, it's important to make sure that your contract is ironclad
and prevents you from ever having to explain why it isn't unenforceable
. Luckily, Congress
and the U.S. Supreme Court
are your friends. Congress has provided us with the Federal Arbitration Act
, and the Supreme Court has interpret
ed it to pre-empt
all sorts of consumer protection
laws. Arbitration is a godsend
if you're worried about litigation
. Instead of a relatively affordable procedure
that costs little or nothing to the consumer because of contingency fee
bleeds them dry from the very beginning. First, they have to pay an exorbitant filing fee
. Then, they have to pay the arbitrator an hourly fee of at least several hundred dollars. A week in arbitration can easily add up to over $20,000.00. Plus, you get to pick the judge, who is generally pleasantly disposed toward you so that he can get your repeat business. Plus, there's no appeal, and they'll probably get no discovery
. Thus, the top item on our Christmas List will be:
Any disputes arising out of the performance of this Agreement shall be exclusively subject to binding arbitration before an American Arbitration Association arbitrator. The costs of such arbitration shall be borne equally by the parties. Arbitration proceedings shall take place at the headquarters of PEZEVENK INDUSTRIES, in Vanuatu. The Customer shall not be entitled to obtain depositions, submit interrogatories, or request any documents from PEZEVENK INDUSTRIES. The Customer explicitly and irrevocably waives his/her right to a jury trial and to an appeal from any decision of the arbitrator. The Customer may initiate arbitration by submitting an arbitration request to PEZEVENK INDUSTRIES along with a processing fee of five hundred dollars ($500.00). This section shall not be construed to limit, abridge, or otherwise affect the right of PEZEVENK INDUSTRIES to obtain legal or equitable relief in a court of competent jurisdiction.
The last sentence is key. You
don't want to limit your ability to go to court.
on this theme is the classic forum selection
clause. Maybe you're not totally averse to going to court. Maybe you don't want your customers to think
you are averse to going to court. But you still definitely don't want to them to have a chance at winning a verdict
. Here's the solution:
Any and all disputes arising from the performance of this Agreement shall be subject to the exclusive jurisdiction of the courts of St. Kitts and Nevis. The Customer expressly waives his/her right to bring any action related to this Agreement in any other jurisdiction, including that of his/her domicile or principal place of business.
Of course, this doesn't work everywhere. While the U.S. Supreme Court has said that clauses like this aren't per se unconscionable
, some states have decided to be spoilsport
s. In addition, these clauses are unenforceable under the laws of the Federal Republic of Germany
Just like fish just isn't the same without white wine
, forum selection clauses can't turn the screws all the way without an appropriately burdensome choice of law
clause. Choice of law clauses allow you to apply the law of practically whatever jurisdiction you want to your contract. Erie Railroad v. Tompkins
may have screwed up traditional forum shopping
, but the choice of law clause is to forum shopping what amazon.com
is to book shopping. You can have the legal system of your dreams without leaving your company headquarters
Any and all matters related to this Agreement shall be governed by the law of Kiribati.
Now that you've made filing a lawsuit procedurally and practically unfeasible
, it's time to make sure that anyone who does somehow managed to break through the triple-thickness brick wall of arbitration-forum selection-choice of law and get you into a courtroom will still have no chance of winning.
In the event that your product is dissatisfactory or fails to function as advertised, PEZEVENK INDUSTRIES shall provide you, upon proof of purchase and defect provided by you via certified mail within three (3) days of purchase, with a free gift certificate to STARBUCKS COFFEE in the amount of five dollars ($5.00). This shall constitute your sole remedy and PEZEVENK's sole responsibility. Specifically, PEZEVENK makes no warranty, express or implied, including, by way of example only, any warranty as to merchantability, fitness for a particular purpose (including that for which the product is advertised), user health and safety, and compliance with applicable law. To the extent that the law of your jurisdiction implies such warranties in consumer transactions, you hereby expressly and irrevocably waive any and all such implied warranties. PEZEVENK shall further not be liable for any special, consequential, punitive, or exemplary damages arising out of the use, design, construction, or marketing of the product.
With this provision, you've not only given yourself carte blanche
to make outrageous claims in your product advertising, but you've also totally limited your liability. At the most, you're out $5 worth of Starbuck's coffee. Shielding yourself from any implied warranties of merchantability and fitness for a particular purpose is particularly useful, since this means you don't even guarantee that the product works at all.
Now you've got it made. Most customers won't even have a chance to balk
since they won't have read a word of your contract. Those that do may be completely discouraged from ever trying to seek redress
in any court, and you've gotten them to "agree" to accept practically no redress in the event that they do decide to complain.
As ironclad as this contract may seem, there are those meddling judges who occasionally beg to differ and try to rewrite the contract you've spent so much time designing. In order to be certain that a court can't throw out your entire contract by invalidating a single provision, it's important to have a severability clause:
If any provision of this Agreement is held invalid, unconscionable, or otherwise unenforceable by a court, or is or becomes otherwise unlawful, the parties agree that such provision shall be severed from this Agreement; the remaining provisions of this Agreement shall not be affected thereby.
As utterly outrageous as some of these clauses may sound, many of them are in use. In particular, the provision that requires the consumer to pay a fee to the company in order to sue them (if the company decides to allow it) is based on the arbitration clause used by Circuit City
in its employment contracts, and was recently invalidated in Circuit City Stores Inc. v. Mantor