Question for lawyers/legal experts about fine print

[Melbourne]

@Northern_Piper

The English common law, followed by many Commonwealth countries, is hesitant to allow penalty clauses of this type except in very limited circumstances (eg as a genuine attempt by both parties to calculate damages in advance, either in a monetary statement or by a formula). Except in those limited circumstances, penalty clauses are unenforceable. See the House of Lords decision in Dunlop Pneumatic Tyre Co.:

Aus banks got done recently for penalty clauses. According to the press (so it must be true), penalty clauses were straight up illegal, and the banks got fined as well as having to give the money back.

These weren’t unconscionabile terms, but they weren’t just cost recovery either: the banks were making a substantial profit on penalties. And although not unconscionabile, they were stiff, and many people thought they were both unfair and under-documented.

[AK84]

There is also theContra proferentem rule whereby a clause will be construed against the drafter; especially in a case of standardised contracts, such as between a consumer and a large organizatio where there is a huge disparity in power.

Courts will also decide the case looking at all the facts. An unconsicable clause hidden in the fine print of a term of service agreement will probably not be upheld, as there is no equal bargaining power, the standard form is offered as a “take it or leave it”, the consumer has no real choice except to walk away, which might not be practiable.

Such a clause in an agreement between two large corporations is likely to be upheld, they are two rich organizations with big legal departments; its their own damn fault if they got screwed in the negotiations.

[Really_Not_All_That_Bright]

@Aangelica

Mostly because those sorts of provisions typically do not name a specific arbitrator, or when they do, it is an industry-wide professional neutral arbitrator (such as the American Arbitration Association), as opposed to someone with a sweetheart deal with the big company. I know many construction contracts (and subcontracts) specify that disputes must be arbitrated and the entity most often used for this purpose is the American Arbitration Association, which is strictly neutral.

Requiring arbitration is fairly common with a lot of contracts. However, with most arbitration requirements, it is non-binding arbitration, which means that someone’s right to pursue the matter in a court of law is not foreclosed - just requires them to go through the extra step of private arbitration first (or in the middle of, depending on the circumstances). Car insurance policies typically require arbitration, for example.

In most of the country, contractual provisions requiring arbitration generally are binding. There’s really very little benefit to non-binding arbitration as a contractual term. The whole point is that arbitrators who want to keep arbitrating will generally rule for the big company rather than the individual customer, since the big company will arbitrate many more times and the customer probably never will again.

[Bricker]

@AK84

There is also theContra proferentem rule whereby a clause will be construed against the drafter; especially in a case of standardised contracts, such as between a consumer and a large organizatio where there is a huge disparity in power.

Ahem:

@Bricker

This is itself legal, but it means that the terms of the contract are construed contra proferentem against the side that drafted the language – in other words, courts will interpret the language strictly against the contract drafters.

[Really_Not_All_That_Bright]

Well, while we’re on the subject, ahem yourself.

@Really_Not_All_That_Bright

Is the contract one of adhesion? That is, is there an opportunity to negotiate? For example, an apartment lease is usually a contract of adhesion because the apartment complex won’t rent to you if you scratch out the “no pets” clause.

@Bricker

… I am left to mention that these types of contracts are “contracts of adhesion,” which means that they are drafted by one party with the other party having essentially no opportunity to negotiate terms.

[Bricker]

@Really_Not_All_That_Bright

Well, while we’re on the subject, ahem yourself.

Well, sure, if you wanna be that way.