Pluralistic: 10 Aug 2022

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A pair of shaking hands; one of them is demonic red, with sharp black talons. The demonic hands' cuff buttons are the glowing red eyes of HAL9000 from 2001: A Space Odyssey. Behind the two hands is a contract with a pen scrawling a signature.

A modest proposal to fix contracts (permalink)

Every time I click through one of those garbage legalese novellas you're expected to say "I Agree" to before doing something totally normal and inconsequential, I'm reminded of the legendary Lenny Bruce bit "Eat, Sleep and Crap."

In this bit, all civilization begins with agreements:

"Let's see. I tell you what we'll do. We'll have a vote. We'll sleep in Area A. Is that cool?"

"OK, good."

"We'll eat in Area B. Good?"


"We'll throw a crap in area C. Good?"

This social contract is the foundation of civilization. It's why you don't die from fecal-oral bacterial transmission.

Naturally, the legal profession has put a little more detail into the idea of what constitutes a contract in the years since. As Stanford Law's Mark Lemley writes in "The Benefit of the Bargain," "A canonical contract is a written agreement negotiated between two sophisticated parties."

But that's really only an infinitesimal fraction of the contracts that we make day to day. When you buy a apple from the grocery store, that's a contract: there's an offer, an acceptance, and a "meeting of the minds." You and the grocer both know what the terms of the contract are, even though neither of you discuss it.

The apple is now yours. You can sell it. You can bake a pie with it. You can throw it away. If it turns out to be covered in harmful bacteria or full of razor blades, you might be able to sue the grocer. But you can't just go and get another apple. You can't eat the apple and then return the core for a refund.

All of that stuff is governed by "implicit and explicit" rules, the "background norms" of contract law. Some of those background norms are common law. Some are statutory. Some have been codified in the Uniform Commercial Code and the Restatement of Contracts. When there is a dispute, judges filter it through all of these layers: what people normally expect, what Congress guaranteed, what earlier courts have found, what the parties signaled to one another.

The parties can alter the bargain, of course. You can haggle. The grocer can offer to throw in some grapes at half price. Bargaining enjoys a special place in contract law, because it's how we get the "benefit of the bargain" – the tailored offers that represent the confluence of the desires of buyers and sellers.

But there's limits on bargaining. It's not a contract if the bargaining takes place under duress, or fraud, or if the terms are extremely unfair, or if one of the parties can't form a contract because they are young, or intoxicated, or mentally unwell. A contract is an agreement, and an agreement requires freely given consent.

Or at least, it did.

By the middle of the 20th century, a new kind of bargain had proliferated: the "standard form," preset terms and conditions that were used to avoid costly and time-consuming negotiations. The standard forms might ask the seller to give up some rights, and also the buyer, and they were understood to represent the outcome of a free negotiation between firms of relatively equal bargaining power.

As corporate power expanded, these "deals between equals" were increasingly wielded by powerful corporations against relatively powerless individuals and workers. A canonical example of this is "binding arbitration waivers," which originally let companies agree to mediate their disputes through independent arbitrators and avoid costly court battles. But soon enough, companies were turning these instruments on their employees and customers, insisting that they give up the right to sue for redress should the company defraud them, maim them, or kill them. Instead, these disputes would be heard by corporate fake judges for hire, whose fees were borne by the company that had wronged you:

Binding arbitration waivers are just one example of how standard forms started to replace the background norms of contract law. Rather than both parties to a transaction being bound to terms determined by law and practice, they would be bound by fine-print, acres of it, written by powerful sellers who wrote comically lopsided "agreements" and brooked no negotiation to alter them. Anyone who's ever been presented with a long "agreement" at a hospital or a car rental agency or a fun-fair knows that there's no way to cross out objectionable clauses in the contract, even with the offer of paying more for a better deal.

Digitization led to a near-universal proliferation of standard forms, even in the offline world. The rise of clickwrap, shrinkwrap and browsewrap "agreements" created bizarre situations where you were said to have agreed to terms you hadn't read and couldn't read without first agreeing to those terms. It's common sense that this is not a "contract" – there's no offer made and accepted, no meeting of minds. That goes double for terms that are "subject to change without notice" (or just "subject to change"). It goes triple for terms that apply to third parties that you sell or give away a product to after your initial purchase – how can I agree to a "contract" that I never came within 100 miles of, simply because you gave me something that you got by "agreeing" to that contract.

But a series of court cases prompted by powerful tech firms chipped away at the idea of consent as a bedrock of a contract, and that began to leak into the physical world, so that all manner of things, even concert tickets bought for cash at a box-office come with terms and conditions that you can only read after you buy the ticket and scan the QR code on it.

Think for a moment about how weird this is. The default for a contract is an offer made and accepted, with an exchange of value. You walk up to the box office, hand over cash, get a ticket. The terms of that bargain are, by default, the "background norms" of contract law – the mix of legal rights, customary expectations and historical precedents that govern nearly every contract we enter into.

But after getting your ticket, you turn it over and it says, effectively, "Surprise! You actually agreed to a totally different bargain. You thought you were making an offer. You thought we'd accepted it. But actually, we were making an offer to you, and though we never told you about it or even told you it existed, you have now agreed to it!"

It's hard to overstate what a big deal this is. The black letter of contract law is the law. As Lemley says, "Law is not normally optional." You don't normally get to decide which laws you follow. But with contract, "the principle of mutual assent" means that two parties can literally sign away their legal rights.

This is obviously a risky business. The rights that Congress's laws give you are yours and they represent deliberation and fact-finding about the ways things can go wrong and how to prevent them. Even if you want the right to bargain away "eating in a restaurant where the chefs wash their hands after taking a shit" or "getting brain surgery from a sober neurosurgeon," you don't want to be arm-twisted into that agreement. You want it to be freely made.

Is a contract "freely made" when the counterparty is a monopolistic corporation? Do you have an alternative when Walmart has driven out all your town's mom-and-pop retailers? Or when there are only two mobile phone OSes and they both have comparable abusive take-it-or-leave-it contracts? Or when your electricity or broadband or water are provided by a monopoly utility?

A century ago, the Supreme Court ruled against publishers who printed notices in their books banning resale. Today, it's not clear that this case would go the same way – indeed, in the topsy-turvy world of the standard form, you might "agree" to these terms if you pick the book up out of the trash behind the bookstore:

As Lemley writes, "the cumulative effect of these changes is to unmoor contract law from the very things that make it contract law. Most consumer contracts in the modern world lack anything like traditional notions of assent."

But he's got an idea, "sheer elegance in its simplicity."

Lemley reasons that since contracts require a showing of voluntary assent, we should force companies that want to offer their customers a "standard form" (e.g. a EULA) to also offer them the "default terms" (e.g. contract law). If the customer chooses the EULA over the standard, "You bought it, it's yours" deal, then you know that they truly agreed to the EULA and a real contract was made.

Lemley argues against companies offering take-it-or-leave-it deals, that is, "You can have the EULA or the default rules, but if you choose the default rules, the deal is off and you can get the hell out of my shop." As with the EU's GDPR, Lemley says that this plan only works if companies have to deal with you whether you choose their EULA or the default sale rules.

That's because "if there is no actual bargain around [your EULA], but just a unilateral statement of preferences, there is no reason we should throw away the legal rules contract law has already established."

Properly designed, this would mean that companies that didn't want to sell on the default terms would have to make their EULAs "sufficiently clear and sufficiently attractive that consumers who have a meaningful choice to take the default rules the law offers want your package of terms instead."

And it means that "if you hope to impose a term consumers won’t like – say, a limitation on warranties or a requirement to arbitrate and give up class action claims – you will need to offer them something sufficiently attractive that they will choose your package over the default rules."

The default rules for contract don't cover lots of important details: "price, quantity, precise nature of goods, etc." That means that Lemley's proposal would leave sellers free to set those elements of the deal.

Now, this opens up a potential weak spot. What if the seller says, "If you buy according to my EULA, the price is $25. If you buy according to the default rules, the price is $1 million?" That would neatly sabotage the whole plan, because no one is going to choose to buy at the $1m pricetag.

Lemley says that one way to fix this is to simply prohibit price discrimination based on the terms the buyer is willing to accept. But he's got another way, one that is absolutely delightful.

Lemley says that if a seller prices their product at $25 with the EULA and $1 million without, then the buyer who accepts the EULA is handing over $999,975 worth of value when they click "I agree." Lemley says we should tax that as income.

This is a fascinating way of looking at the problem of price-gouging and other ways of sabotaging a fair contracting system: it aligns the incentives of companies with their customers. Companies that gouge on "standard deal" buyers are effectively pricing the value of their EULA. Companies can avoid paying additional tax on their EULA sales by pricing the non-EULA sales at the same price.

Likewise, if companies hope to make EULA sales, they're going to have to write EULAs that reasonable people will find attractive. Any reasonable person faced with a deal that goes, "You can buy this and it's yours, or you can read this 15,000 word legal document and buy it on the terms therein" is going to go for the former.

Lemley says that a lot of companies will simply give up on EULAs at this point. I mean, of course they will. The whole point of a EULA is to take advantage of idiotic court precedents that say that you can form a contract without any negotiation, without any meeting of minds, without even having a chance to read the contract. Contracts offered on these terms are going to be absolute trash. The whole point of this exercise is to get companies to throw away those "contracts" forever.

"The reason we’ve blundered into a world governed by standard form agreements is in large part the fact that they seem costless to implement. Making them costly for companies (because they demand attention from consumers) may actually be healthy because it will limit the adoption of terms that would never have been part of a contract in a prior age."

I once threw away a couple years' worth of my life fighting against the standardization of DRM in web browsers. The representatives from the giant corporations pushing for this all argued that it was okay to hijack control over your browser while you were watching a movie because you "agreed" to it when you created an account with Netflix or another streamer.

And yet, these same engineers went absolutely bananas because my emails to the group mailing list had this gag disclaimer, which I've used off and on since the early 2000s:


By reading this email, you agree, on behalf of your employer, to release me from all obligations and waivers arising from any and all NON-NEGOTIATED agreements, licenses, terms-of-service, shrinkwrap, clickwrap, browsewrap, confidentiality, non-disclosure, non-compete and acceptable use policies ("BOGUS AGREEMENTS") that I have entered into with your employer, its partners, licensors, agents and assigns, in perpetuity, without prejudice to my ongoing rights and privileges. You further represent that you have the authority to release me from any BOGUS AGREEMENTS on behalf of your employer.

They were right to be outraged. Taken at face value, this is an outrageous "agreement." And yet, I was merely proposing to bind a couple dozen engineers and lawyers from giant multinational corporations to it – and they were proposing to bind billions of people – every person who used a web browser, forever – to far more onerous terms.

Anyway, I lost that one, but it sure was ironic, huh?

(Image: EFF, Cryteria, CC BY 3.0, modified)

Hey look at this (permalink)

This day in history (permalink)

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Colophon (permalink)

Today's top sources: Corynne McSherry (

Currently writing:

  • The Bezzle, a Martin Hench noir thriller novel about the prison-tech industry. Yesterday's progress: 507 words (30743 words total)

  • The Internet Con: How to Seize the Means of Computation, a nonfiction book about interoperability for Verso. Yesterday's progress: 502 words (26998 words total)

  • Picks and Shovels, a Martin Hench noir thriller about the heroic era of the PC. (92849 words total) – ON PAUSE

  • A Little Brother short story about DIY insulin PLANNING

  • Vigilant, Little Brother short story about remote invigilation. FIRST DRAFT COMPLETE, WAITING FOR EXPERT REVIEW

  • Moral Hazard, a short story for MIT Tech Review's 12 Tomorrows. FIRST DRAFT COMPLETE, ACCEPTED FOR PUBLICATION

  • Spill, a Little Brother short story about pipeline protests. FINAL DRAFT COMPLETE

  • A post-GND utopian novel, "The Lost Cause." FINISHED

  • A cyberpunk noir thriller novel, "Red Team Blues." FINISHED

Currently reading: Analogia by George Dyson.

Latest podcast: View a SKU: Let’s Make Amazon Into a Dumb Pipe

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Upcoming books:

  • Chokepoint Capitalism: How to Beat Big Tech, Tame Big Content, and Get Artists Paid, with Rebecca Giblin, nonfiction/business/politics, Beacon Press, September 2022

  • Red Team Blues: "A grabby, compulsive thriller that will leave you knowing more about how the world works than you did before." Tor Books, April 2023

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