What Did You Agree To? Liability

In this part of the What Did You Agree To? series, the concept of liability will be looked at. Liability is often a word thrown around, without complete understanding. Effectively liability means level of responsibility or accountability. Should something happen you are responsible for it, or will be held accountable for it. That is Liability.

What happens if you don't want to be responsible for certain eventualities? That is called Limited Liability.

But why is this important in a contract? The contract is the source of the rules of the agreement. If someone agrees to do something or sell something, they may want to try to protect themselves by keeping their level of responsibility as low as possible.

If you have read my article Coat Check: General Disclaimer you will remember that Cindy left her coat at a coat check. the company had put up a sign saying "Not responsible for Lost or Stolen Goods." That is an attempt by the company to reduce is level of responsibility. It is Limiting its Liability.

When contracts address liability they are usually very heavily in favour of the company that wrote or presented the document. When a company tries to reduce their level of responsibility they usually do it through either

a) Express Disclaimers. i.e. The Coat Check.

b) Limited Liability Clauses.

c) Waivers

As this series is driven around paper contracts, we will stay focused on the Limited Liability Clauses, and Waivers.

Lets look at the Google Agreement we looked at in the second part of the series What Did You Agree To? Jurisdiction. In the event you did not read that article, the Terms and Conditions are the main governing rules for you using Goggles services. Section 15 talks about Goggles Liability. So we will use part of it as an example. Here is a piece of that section.

YOU EXPRESSLY UNDERSTAND AND AGREE THAT GOOGLE, ITS SUBSIDIARIES AND AFFILIATES, AND ITS LICENSORS SHALL NOT BE LIABLE TO YOU FOR:

The first thing you will notice is that it is all in capital letters. This is because the company want to limit arguments that you did not notice or did not understand the terms. Most mid to large sized companies will capitalize clauses that impact a persons rights. Its a great place to start when scanning a document. However not all do. So beware. Ideally you should be looking for key words.

You will notice the I have made the words EXPRESSLY and AGREE larger. This is because these words have been chosen specifically. In contract terms, the opposite to express, is implied. So Google did not want any confusion. They wanted it such that you openly accept, and AGREE to this limitation.

You will notice that the end of the sentence above says NOT BE LIABLE TO YOU FOR.

Now you know this is a list of things you Google say they are not responsible for. They are washing their hands of it. They are saying, if you relied heavily on the accuracy of an an advertisement, and that advertisement is inaccurate, you can not hold Google liable.

When you are looking at the agreement specifically look for these clauses. You will be amazed at what limits are imposed.

As a reasonable person, you know that any good relationship has boundaries. Clearly Google don't want to be on the hook for things not in their control. Trying to limit the liability is important is part of the ways to set up boundaries. But what happens when there is a loss, that is within their control, but the boundaries say it is not?

This is where things get a bit messy. Just because a company puts the clause in their agreement, does not mean they are allowed to rely on it. In actuality the law will step in. Sometimes there are particular laws for agreements in particular industry's. Insurance, Mortgages etc. Any industry that is regulated usually has regulations for the level of responsibility that must be honoured no matter what.

On that counter side there may be a section the describes the level of responsibility you have. Sometimes these provisions are not as obvious. In the Google Terms and Conditions here is the clause that sets the boundaries of your responsibilities.

5.6 You agree that you are solely responsible for (and that Google has no responsibility to you or to any third party for) any breach of your obligations under the Terms and for the consequences (including any loss or damage which Google may suffer) of any such breach.

Effectively if you breach the agreement, and Google suffers, they are saying you are responsible. Do you notice that the agreement uses the word responsible here, but liability or liable elsewhere? It is interesting, and very common in contracts. Sometimes the purpose is to make certain provisions clear, and other times it is to confuse.

Every agreement has boundaries of responsibility. The term liability is part of the responsibility boundaries. There are always two sides, so make sure you are aware of both sides.

If you are about to sign an agreement, and the liability clauses is confusing or does not make sense, you should get some legal advise. This is even more important when you are dealing with a regulated industry such as mortgages, investments etc. To speak to a lawyer, click HERE. Lawyers are online, and can answer your question within minutes for as little as $15.

The next article will be about Warranties.

Until then...


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What Did You Agree To? Confidentiality

This series is starting to gain popularity, so thank you to the readers who are subscribing. In this segment we are going to look at Confidentiality. This is of particular importance because this type of clause can be leveraged against someone, with serious consequences.

As you know when you agree to keep something confidential, you want talk to anyone about it. There are whole separate agreements called Non-Disclosure Agreements, or NDA's that revolve purely around confidentiality. NDA's are entered into by business, or individuals (like authors, artists, entrepreneurs ) who want to establish a confidential base before negotiating a contract.

It is very possible you have never signed an NDA. That's fine, but what you have signed is agreements about confidentiality. Can you think of one?

....... Your Work.

That's right, its your job. Virtually every single employment agreement, or contract has a confidentiality provision in it. Lets look at a part of one of those provisions in a contract.

The Employee acknowledges that, in the course of performing and fulfilling his duties hereunder, he may have access to and be entrusted with confidential information concerning the present and contemplated financial status and activities of the Employer, the disclosure of any of which confidential information to competitors of the Employer would be highly detrimental to the interests of the Employer.

That is just a part of one of the standard provisions, but now you get the idea. You are saying by signing the agreement that

1. You will come into contact with confidential information
2. That information is valuable to the company
3. If you close it, you agree that the company can come after you
4. You agree that the value is not always tangible, so they may get an injunction against you
5. You will not disclose such matters at any time to any person or entity, living or dead.

Companies need to protect themselves. They invest a lot into building market share, putting together customer lists, establishing products, etc. So they want to make sure that someone does not come in, nab all their secrets and disappears.

In addition they don't want to have to sit and wait for court to hear the issue, and it be too late because the damage is done. So the most important aspect is the ability to get an injunction.

An injunction is an order from the court to prevent you from doing something. They may apply to the court, at very short notice, and ask the judge issue an order forbidding the disclosure of the information until there is a court hearing.

That prevents damage from being done, and allows the business time to put their case against you together.

You need to be careful with confidentiality, because it is often used as an "excuse to fire". Some of the same items I discussed in my Article FIRED: Personal Email at Work, apply. That being said an ounce of prevention is a pound of cure. Do not give your employer a reason to terminate you, or a pick a fight. Understand what the confidentiality provision is, and how it relates. You would be surprised how often you talk about the "Jackson Account" to your significant other, and technically you are breaching your agreement.

If you do have a legal question, and need to speak to a lawyer, click HERE. Lawyers are online, and can answer your question within minutes for as little as $15.



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What Did You Agree To? Indemnity

In the third part of this What Did You Agree To? series, we are going to look at indemnity.

What in the hell is indemnity, and why is it in most contracts?

I have made it clear from the start of this blog, that I will do my best to refrain from using words or terms that are confusing or don't make sense. However there are times when we need to use these term, especially when they are common and prevalent.

Indemnity is a commitment that any future losses will be covered. Now in plain language.

If you indemnify someone, then you agree to cover their losses if there is a breach. A common for of indemnity is when you publish an article on the Internet. The website you publish on will have an indemnity provision that basically says if they get sued for having copyright content, you agree to cover their costs.

These terms or provisions can be nasty little surprises later on. Here is an example.

Kyra hires Joshua Tree Construction to build a deck for her. As part of the agreement, there is an indemnity clause. The clause basically says that Joshua Tree wont be responsible for incidental damage to the neighbors land through the building of the deck.

So if some Mensa member from Joshua Tree shreds the neighbors prize roses, Kyra could find herself on the hook. Or at the very least in the middle of a huge battle.

Another example is in credit agreements. You usually agree to indemnify or cover all collection costs of the company that is trying to collect.

Many locations have laws that restrict what can be included in an indemnity clause. Just like the "General Disclaimer" talked about in my article COAT CHECK, a provision that is "agreed" too does not make it legal or enforceable.

When you are reading contracts make sure you look at the indemnity clause. Try to understand what they are asking or insisting on. Knowing ahead of time helps prevent surprises.

If you find that you are being called on because of an indemnity clause, you need to speak to a lawyer right away. If you need to speak to a lawyer, click HERE. Lawyers are online, and can answer your question within minutes for as little as $15.

So remember to read the indemnity clauses. Just because there is one, does not mean it is legal, and if you find yourself in a battle over one, then speak to a lawyer as soon as possible.

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What did you Agree To? Jurisdiction.

In the second part of this series, we are going to look at an often overlooked part of a contract. The location or jurisdiction you agree to file any dispute in.

What am I talking about? Well in many contracts, especially those over the Internet, there is a little clause that says you agree to go to their state/province if you have a dispute.

Here is an example from GMail's Terms and Conditions;

" You and Google agree to submit to the exclusive jurisdiction of the courts located within the county of Santa Clara, California to resolve any legal matter arising from the Terms."

The actual phrase is called "Forum Selection". The contract selects a forum, or location for disputes to be heard. in this case it is Santa Clara California.

Let me put this another way. If Google do something to your GMail that you feel you can sue them over, you need to do it in California. If you try to sue them in any other location, they will simply argue the agreement is clear that these issue need to be addressed in California. The court will probably rule that Google are correct, and the court has no jurisdiction over the issue. It's thrown out.

What does this mean for you?

This means that when you are contracting with someone, the court or places you can go to lodge a complaint may be limited to their location. Sometimes it is at the location of the companies head office.

You need to understand that this may complicate you getting the issue resolved if it turns into a legal battle. These clauses can also apply to Arbitration and Mediation as I discussed in the last segment.

Let's say you hire a graphic and website design company from Salt Lake. You are located in Memphis. The company just does not live up to their promises, and you feel you are owed a refund. But they have a clause in the contract that says, you agree to file any disputes in Salt Lake.

Well now you are looking at additional costs, and headaches to try to fight it. This extra hassle may be enough for you to just brush it off.

THINGS YOU CAN DO:

If you are in this situation, then you can use the box at the top right, or link at the bottom to ask a lawyer online for their opinion on your situation. With that information you can then decide how to proceed. You can also send me a message, and I will push you in the right direction.

If you are about to enter a contract, with one of these clauses, make sure you pay with a credit card. Credit Cards have very robust consumer protection, and often a refund, or charge back can be processed without having to go to court.

There is nothing wrong with a Forum Selection clause. As a consultant I always recommend businesses have one in their contracts. It keeps frivolous claims down, and controls legal costs. However as a consumer you now have to fight uphill to get what is rightfully yours.

Do not become overly concerned with a Forum Selection clause. Just be aware of it. Try to use credit cards with good protection. If in doubt send me a message and I will try to lead you in the right direction.

In the next segment I will discuss what Indemnity is, and why it is important.

Until then.

PMAC

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What Did You Agree To? Mediation/Arbitration.

In the first segment of this series, I am going to explain what Mediation and Arbitration is and why it may be in contracts or agreements you have agreed to without knowing.

When there is a dispute with an agreement, there are a few ways to handle it. Most people would assume that court is the pinnacle of trying to come to a resolution. Court brings with it delays, complexity, and expense.

Alternative Dispute Resolution (ADR) is the term used for solving arguments without having to go through the traditional legal channels. They include.

• Negotiation
• Mediation
• Arbitration

Negotiation is essentially a commitment to sit down and try to hammer out a solution with fairness, and a desire to solve. In the coming weeks I will have a few articles on negotiation techniques, and methods.

Mediation is used when the two sides still want to solve the problem but are at an impasse. A third neutral party is brought in, and tries to bring the two sides together, by highlighting common elements, and making sure the dialogue is fair, and balanced. A mediator does NOT pass opinion. A mediator does not evaluate if the outcome is fair. They only facilitate the sides reaching an agreement. A mediator will draft that agreement for the two sides so they now have something moving forward.

Family mediators are specially trained at dealing with family dynamics, and mediate separation, divorce, and custody battles. Mediators are also used commonly in employment situations, unions, collective bargaining agreements, etc.

Arbitration is when a neutral third party adjudicates the problem. Essentially they are a judge. They listen to both sides and then they issue a ruling. In binding arbitration, that ruling is, well binding. Both parties must honour it. It is very difficult to get the courts to try to overturn a binding arbitration decision.

Sometimes arbitration is not binding. Both sides can take the issue to court after a decision. However the results of the arbitration will be a good indicator of the outcome in court. A perfect example of arbitration is Judge Judy, People's Court etc. Although the "judges" had worked as real judges in their career, they are effectively arbitrators. the "court rooms" are not part of the legal court system. It is effectively private court.

If you have agreed to resolve all disputes through Alternative Dispute Resolution, you can still use a lawyer. It is advised that you always speak to a lawyer prior to a Dispute Resolution. Lawyers are allowed to represent you in mediation and arbitration settings. Often the issue can be solved within months instead of years. The total cost is usually much less, primarily because of how quickly it can be resolved in.

However if you agree to ADR you may not be able to sue in court, until you go through the agreed resolution process.

A few things to watch out for, are the location of where the Arbitration will take place. Companies will try to use a location close to them, so make sure you are aware of this.

Here is an example clause that would bind you to Arbitration.

Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrator(s) shall be binding, and may be entered in any court having jurisdiction thereof.

Other things that may be included in such a clause would be the language, location, number of arbitrators, time period to resolve, and sometimes even what dispute resolution company may be used to provide the mediators or arbitrators.

If you are looking in a contract to see if there is an arbitration provision, search for Dispute Resolution. That is a very common header for such a clause.

While agreeing to ADR (mediation/arbitration) in on itself is not a negative, your rights for going to court, or how disputes will be addressed could be affected. So it is important you understand how a contract can be disputed prior to signing the bottom line.

Next part of the What Did You Agree To? series will be about selective jurisdiction clauses.

Until then...


Copyright © 2009 Peter MacSweeney. All rights reserved. Reproduction in whole or in part without the express written consent of the author is forbidden. Contact the author through the comment form for all inquiries, including media.

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