When signing up for a two year contract with your cell phone company, do you ever wonder what all that small print actually says?
Most people will take a moment to pause to think that they actually should read the small print before signing the agreement, but given the dense legal jargon and the only option being to step aside from the line at the Verizon store front to read the agreement just doesn’t seem practical. Besides even if you did read it and understand it, you wouldn’t be able to change anything. It’s pretty much take it or leave it if you want to have a cell phone, right?
Well most courts would agree with you. Contracts described above, and often found with most cell phone plans, cable TV services, or insurance policies, are referred to adhesion contracts. Adhesion contracts are defined by Black’s Law Dictionary as, “A standard-form contract prepared by one party, to be signed by another party in a weaker position, usually a consumer, who adheres to the contract with little choice about the terms.” Typically, adhesion contracts do not allow for any negotiations and are simply offered as a take-it or leave-it basis.
In today’s economy, most people come across these types of contracts on a daily basis whenever dealing with a large company. Some of the other common adhesion contracts consumers may encounter include “shrinkwrap” (where the terms of the contract are contained on or inside the software box which you can’t read until you buy the software) or “clickwrap” (where the terms of the contract appear on the computer screen when the software user attempts to install the software).
Adhesion contracts are enforceable just like any other legal agreement. But because of the extreme imbalance in negotiating power with adhesion contracts, courts will review an adhesion contract carefully. If the court finds the terms of the contract unconscionable and the consumer did not have a reasonable expectation of the contents of the agreement, a court may find the agreement unenforceable or void certain provisions.
Recently, the US Supreme Court addressed an issue involving an adhesion contract in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011). In AT&T Mobility LLC v. Concepcion, the plaintiffs, bring the lawsuit as a class action lawsuit, sued AT&T for false advertising after being charged sales tax on their “free cell phones.” At issue was an adhesion contract with AT&T that required all disputes to be resolved through arbitration. U.S. Circuit Court of Appeals for the 9th Circuit found the agreement to be unconscionable, relying on California’s Supreme Court decision in Discover Bank v. Superior Court 36 Cal. 4th 148 (2005)¸which held that class waiver in consumer arbitration agreements are unconscionable if the agreement is an adhesion contract, because disputes between the parties are likely to involve small amounts of damages.
The U.S. Supreme Court overruled the 9th Circuit opinion, finding that the Discover Bank rule was preempted by federal law on the basis that it “stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress” as provided in the Federal Arbitration Act (FAA) which encourages parties to resolve disputes through informal and speedier methods rather than in court.
So you may be wondering how this may affect you as a consumer. The simple takeaway is that it will now be more difficult for a consumer to challenge unfair or fraudulent business practices, especially where the damage to each individual consumer is small.
So yes, it is very important to read all the small print on your Verizon or AT&T cell phone contract.
Please contact Klaproth Law PLLC if you have been affected or bound to a contract you did not fully understand.
