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Can a business change its TOS?

A business can change its TOS, but it usually cannot do so without users' agreement. To understand how a business' TOS works, let's start with an overview of contract law.

Terms of Service are contracts

A website's TOS is a contract between the business and its users. In order for a contract to be binding on both parties, it must meet at least four criteria:

  1. An offer by one party.
  2. An acceptance by the other party.
  3. A "meeting of the minds," meaning that both parties understand that they are entering into a legally binding agreement.
  4. Consideration, which means that each party must agree to do something, provide something of value, or refrain from doing something.

The business satisfies the first element when it gives the user the opportunity to read the TOS. When the user clicks the button or checks the box indicating their agreement, the second element is fulfilled. A website's TOS could also state that a user agrees to the terms simply by using the site.

The third element can be tricky since most people click the button or check the box without actually reading the TOS. Courts have ruled that this counts as a "meeting of the minds" as long as the TOS does not contain anything outrageously unreasonable.

The fourth element, consideration, can be confusing. In the case of online TOS agreements, it refers to the exchange in which the business provides the user with an online service, and the user provides the business with something of value. If it is a paid service, the business receives money from the user. If it is a free service, such as most social media platforms, the business can sell advertising and monetize the user's data.

Changing the terms requires amending the contract

Once two or more people, such as a business and a user, have created a valid, binding contract, neither of them can change the terms of that contract by themselves. They must obtain the other party's agreement, and they must meet the four legal criteria again. The proposed change to the terms is a new offer, which the other party must accept, along with a "meeting of the minds." If the new terms make significant changes to the original contract, they may need to have new consideration.

A business therefore cannot change its TOS on its own and have those changes apply to existing users. The Ninth Circuit Court of Appeals reached this conclusion in a 2007 decision, Douglas v. Talk America. The court held that a business must notify users about proposed changes to the TOS and obtain their consent.

Consumer protection laws

Federal law and many state laws protect consumers from a wide range of deceptive, fraudulent, or unfair business practices. As mentioned earlier, businesses can enforce their TOS even if their users did not read them in their entirety, but only if the terms are reasonable and fair. Hiding unusual terms deep in the fine print of the TOS could be considered deceptive.

Signing away certain rights in the TOS

Businesses often try to find exceptions to the above rule. A business' TOS could include a clause in which the user waives the right to be notified about future changes. This would allow the business to change the TOS without notifying users.

It is possible that this would be enforceable. It would depend on whether users genuinely understood that they were waiving this right when they originally agreed to the TOS. Otherwise, it might be considered unlawfully deceptive. Companies still try to give themselves unilateral power to change their TOS, though, so it is best to be cautious.

Do customers have to agree to changes of terms and conditions?

A customer is not obligated to agree to a new or changed TOS. If they do not agree, however, the business might be within its rights to stop providing services to that customer.

Anyone who uses a smartphone has probably encountered updates to a provider's TOS. It is usually not possible to continue using an app, or the device itself, without agreeing to the new terms.

Are changes to terms of service legally enforceable?

As discussed above, changes to a TOS are legally enforceable if the user has agreed to them, or if the contract allows the business to change them without the user's consent.

Are changes to terms and conditions legally binding if not signed?

Any change to a contract requires the agreement of all parties, or proof that one or more parties waived their right to consent to changes. In most cases, a user will have to agree to changes to a TOS before they are enforceable.

It is rare these days for anyone to agree to a company's TOS by actually signing something. A signature is not the only way to show that someone has agreed to a contract. Agreeing to a TOS often involves checking a box or clicking a button on a computer or mobile device. The TOS could also state that a user demonstrates their agreement by using the service.

Am I entitled to any compensation or to cancel if a business changes its TOS?

In most cases, the main consequence for a business that changes its TOS without getting users' consent would be that it cannot enforce the new TOS provisions. In order to recover compensation, a user would have to show that the changes to the TOS caused them actual damage. If so, they might be able to make a claim for breach of contract or violation of a consumer protection law.

With regard to canceling services, many TOS agreements state that users can terminate the agreement at any time. Some notice might be required if they are paying the business for a service. If the TOS sets restrictions on how or when a user can cancel, they might be able to get out of the contract without any fees or penalties through a breach of contract claim. It might be possible to do this with a Complaint Letter to the company, and avoid a lawsuit. 

To learn more about your rights under a company's TOS, contact a Rocket Lawyer On Call® attorney for affordable legal advice.

This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.

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