Word barf

Senator Elizabeth Warren of Massachusetts seems like a good head with some real concern for her voting constituents. She’s an advocate of consumer reform, and one item on her agenda is elimination of take-it-or-leave it contracts for various products and services. Most common are mobile phone and cable TV services, but checking accounts are also an issue. She calls them “word-barf” contracts, meaning that they are unnecessarily long and serve only the interest of the party who prepares the contract. Courts are lenient in these matters, but it is rare that small matters like this ever make it to court. In addition, such contracts usually insert an arbitration clause instead of court settlement.

We recently listened to a sales pitch regarding a home security contract. I had a notion there was some threat there that we needed to manage, but quickly got over the idea. But we did tentatively agree to take their service. They asked us to sign and return a contract.

On reading it, I had the following objections:

• If we cancelled the contract, we would be liable for actual loss and “profits.” I found that too vague, and insisted on tighter language.
• Contract states in bold: “WE DO NOT WARRANT THAT THE SYSTEM WILL ALWAYS DETECT, OR HELP PREVENT, ANY BURGLARY, INTRUSION, FIRE, HOLD-UP OR OTHER SUCH EVENT.” (So far, so good.) “WE DO NOT WARRANT THAT THE SYSTEM CANNOT BE DEFEATED, BYPASSED, OR COMPROMISED OR THAT IT WILL ALWAYS OPERATE.” I found this just a tad lenient. I suggested the company stand behind its product. By necessity we rely on their expertise in judging what we need. If they screw up, they are liable, or at least reasonably so.
• Contract says “We may transfer or assign this Agreement to any other security company, financial institution or other entity. Upon assignment to another entity, XXX will be relieved of any further obligations hereunder.” Absolutely not, I said. If the company wants out, we want out as well. Otherwise, the security company could be just a shell, merely gathering annuities – i.e. – rent seeking.
• Inserted throughout were clauses stating that they were not liable for a host of things, even if due to their “negligence” or “breach of contract, breach of warranty or product liability.” I am not even sure this is enforceable, but nonetheless they cannot be allowed to excuse themselves from their own negligence.*
• Company is not liable for “improper or careless” activities. Ditto.
• Venue: I insisted that I have access to small claims court in our county. They wanted their own principle place of business, not clearly stated.
• Company wants the right to increase fees during course of contract. I said I wanted the entire agreement contained in the document. If their costs increase in the term, like all other earthly inhabitants, eat those costs.

The company representative insisted we negotiate on the phone and not by email. We went through my objections, often saying that it was a “standard industry agreement” or that their insurance company insisted on certain clauses. I suggested that if he were in a competitive business, like, say, a mobile phone company, [somebody help here – I can’t think of any competitive businesses in our country] that they might offer a boilerplate agreement, but allow for individual changes to suit consumers. Otherwise, as with mobile phones, no matter where consumers turn, it’s the same price, same contract, in effect monopoly capitalism.

Based on that, he did offer to change some of the above by addendum, but complained that he normally only does that for business customers, and not residential.

I had a bad feeling. I told him we’ll just get a dog.

These types of contracts are based on the assumption that consumers do not read them, and further, that even if they do, they do not understand them. It is possible to write a clear and concise contract in understandable language that would protect both company and consumer.** But it won’t be done until the law says it must be so.
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*While traveling in Alaska we hired a private plane to fly us over Cook Inlet to Clark Lake National Park to view some brown bears. Prior to takeoff, they asked that we sign a waiver stating that they were not liable for any accident, even if due to their own negligence. Unenforceable, I thought, but as a precaution, when they were not looking, I crossed out and initialed that clause. I then stepped out of the building and called my daughter telling her exactly what I had done.
**Reminds me of a story, perhaps apocryphal, of New York state and whole life insurance policies. Certain clauses were required by law, and a law was passed mandating that such clauses be printed in bright red. New York Life responded to this law by printing its entire contract in bright red.