Case Scenario: PER CURIAM: We consider whether a service provider may change the terms of its service contract by merely posting a revised contract on its website. Joe Douglas contracted for long distance telephone service with America Online. Talk America subsequently acquired this business from AOL and continued to provide telephone service to AOL's former customers. Talk America then added four provisions to the service contract:
(1) additional service charges;
(2) a class-action waiver;
(3) an arbitration clause; and
(4) a choice-of-law provision pointing to New York law.
Talk America posted the revised contract on its website but, according to Douglas, it never notified him that the contract had changed. Unaware of the new terms, Douglas continued using Talk America's services for four years. After becoming aware of the additional charges, Douglas filed a class-action lawsuit in district court, charging Talk America with violations of the Federal Communications Act, breach of contract and violations of various California consumer protection statutes. Talk America moved to compel arbitration based on the modified contract and the district court granted the motion. Douglas alleges that Talk America changed his service contract without notifying him. He could only have become aware of the new terms if he had visited Talk America's website and examined the contract for possible changes. The district court seems to have assumed Douglas had visited the website when it noted that the contract was available on "the web site on which Plaintiff paid his bills." However, Douglas claims that he authorized AOL to charge his credit card automatically and Talk America continued this practice, so he had no occasion to visit Talk America's website to pay his bills.
Even if Douglas had visited the website, he would have had no reason to look at the contract posted there. Parties to a contract have no obligation to check the terms on a periodic basis to learn whether they have been changed by the other side. Indeed, a party can't unilaterally change the terms of a contract; it must obtain the other party's consent before doing so. This is because a revised contract is merely an offer and does not bind the parties until it is accepted. And generally an offeree cannot actually assent to an offer unless he knows of its existence. Even if Douglas's continued use of Talk America's service could be considered assent, such assent can only be inferred after he received proper notice of the proposed changes. Douglas claims that no such notice was given. The district court's order compelling arbitration is vacated.
Case Question
1. What caused the long distance telephone Service Provided to Joe Douglas to shift from AOL to Talk America?
2. How did Talk America attempt to modify the contracts it received from AOL?
3. How did Talk America notify its customers of these changes to their service contracts.
4. Why did the court rule in favor of Joe Douglas?