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Unilateral amendment clauses can be dangerous if not done right

Many consumer contracts contain unilateral-amendment language along something like the following lines:

Provider may, from time to time, give Customer written notice of amendment to this Agreement. Any such amendment will automatically become effective as specified in the notice unless, within X days after receiving the notice, Customer responds by giving Provider notice of termination of this Agreement.

Such clauses can be useful when, for example, a seller uses a standard form contract with multiple customers or resellers and needs the ability to amend the agreement without incurring a lot of administrative burden and expense.

But — especially if the contract is between A Big Company and a consumer — some judges likely will look askance at such a clause. In one such case, a federal district court ruled that a unilateral-modification clause, in Blockbuster Online’s user agreement, made the agreeemt illusory, rendering its mandatory-arbitration provision unenforceable. Harris v. Blockbuster Inc., No. 3:09-cv-217-M (N.D. Dallas Apr. 15, 2009) (denying Blockbuster’s motion to compel arbitration).

Some commentators have expressed doubt that the decision will hold up on appeal. In the meantime, however, it might be prudent to include one or more ‘savings’ clauses to the effect that unilateral amendments will not modify vested rights or dispute resolution procedures for disputes already in progress.

After reading the Harris v. Blockbuster ruling, I re-edited the unilateral-amendment language in the clause library.

(Hat tip: Jonathan Frieden at E-Commerce Law Briefs.)

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