Commercial Terms & Conditions Are Confusing and Non-Negotiable: Why Bother to Read Them?

December 8, 2014

Boilerplate T&Cs in commercial sales documents are often larded with legalese: tedious, unnecessarily complicated, and often confusing jargon. Even if you read them – and even if you think you understand them – if there are terms you don’t like, they are probably non-negotiable. So why read them?

A man from Wisconsin (Plaintiff) and an Italian company (Defendant) created a Wisconsin Limited Liability Company. The operating agreement for the LLC was written in English and provided that the “agreement shall be governed and construed in accordance with the laws of the State of Wisconsin.” This is a choice of law provision. Attached to the operating agreement was an exhibit that was written in Italian. Plaintiff did not read or speak Italian; he did not ask for or receive a translation of the price list during the negotiations; and he did not have legal counsel present. The parties signed or initialed every page of the agreement and the exhibit. The last page of the exhibit provided, in Italian, that the “exclusive jurisdiction for any disputes shall be the Court of Turin [Italy].” This is a forum selection clause. If both provisions were enforceable, the agreement would be governed by Wisconsin law but tried in Italy.

Plaintiff filed suit in Wisconsin and Defendant moved to dismiss, arguing the case could only be heard in Italy. Plaintiff argued that wouldn’t be fair (it would be, he argued, “unconscionable”) to compel him to bring the case in Italy. Plaintiff explained he did not read the forum selection clause. The court was not impressed: “failure to read a contract, particularly in a commercial contract setting, is not an excuse that relieves a person from the obligations of the contract.”  Plaintiff complained that he could not read Italian. The Court was equally unpersuaded:

We find it nothing short of astounding that an individual, purportedly experienced in commercial matters, would sign a contract in a foreign language and expect not to be bound simply because he could not comprehend its terms.

The Judge dismissed the complaint. This Wisconsin plaintiff would need to go to Italy for relief.

In 1991, the US Supreme Court enforced a forum selection clause in fine print on the back of a cruise-ship ticket. The Court acknowledged that a cruise ship ticket is “a form [boilerplate] contract the terms of which are not subject to negotiation.” The Court explained that when a party is confronted with non-negotiable terms, the party is not compelled to accept the unacceptable (the prospective passengers “presumably retained the option of rejecting the contract with impunity”).

Another court enforced terms and conditions that could only be found on the Internet (“one line of fine print in its documents referencing online Standard Terms and Conditions.”)  You may think it is unreasonable to have to look up T&Cs on a website, but it may be necessary.

Conclusion: Do not sign a contract unless you have read, understood, and agreed to the terms. If you understand the terms, and if you are not in agreement, you have three options: negotiate more favorable terms, walk away from the deal, or roll the dice.

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