You agree to online contracts all the time

You sign online contracts every time you browse the Web, install some application or do just about anything on your devices. This is how it works.

How many online contracts did you agree to, today? Everything in this day and age is done online – whether it is shopping, browsing Wikipedia, sharing your thoughts on twitter or posting pictures on Facebook. In fact it has become so prevalent that people of absolutely all ages are occupied almost throughout the entire day with updates on their phones, tablets, laptops and PC’s. We are always connected and with that comes its own quagmire of “what am I actually agreeing to?”.

How you agree to so many online contracts

During your online shopping spree or when uploading a picture of yourself and your beloved feline companion, you have almost certainly come across an “I agree” button. Whether it is agreeing to provide a website with your location and/or email address (for location accuracy purposes) or whether you are agreeing that you are actually entitled to upload the picture, you are agreeing to “something”. That “something” is typically an online contract.

And, instead of fully understanding what we are agreeing to, we have simply become a species of “yes people”, only to happen to click the “I agree” button just to get your music download or complete your purchase. But what does that actually mean? By clicking on that ever increasingly intimidating “I Agree” button, we as online users may be binding ourselves to legally enforceable contracts with the online service provider. And I don’t know about you, but that really scares me.

But did we, as online users, actually “agree” to anything, really? As with any legal agreement, both sides, including the user, must agree to the online contract in the form of the terms and conditions being offered by the relevant online service you are currently using, whether it is Facebook or eBay, in order to create a legally enforceable “agreement”.

Understanding the difference between click-wrap agreements v.s browse-wrap agreements

Some service providers ask for your agreement by requiring you to click the “I Agree” or “Accept” button after being shown the agreement (i.e. a “click wrap” agreement). A common example of a click-wrap agreement is where a consumer is transported, usually by clicking a hyperlink, to a webpage containing terms and conditions which will be included in the agreement, where there is normally (at the end of the page) a button with the phrase “I agree” or “Accept” printed on or next to it.

I agree Screenshot - WTL blog post

As its name suggests, a click-wrap agreement requires a positive act from a consumer, still other service providers, try to characterise your simple use of their website as your “agreement” to a set of terms and conditions buried somewhere on the site, a sort of “what agreement are you talking about” site (i.e. a “web-wrap” or “browse-wrap” agreement). The browse-wrap is similar to the click-wrap agreement, and is often used under similar situations, except for one rather important difference.

Not all online contracts behave the same way. Where a click-wrap agreement actually requires a positive action to indicate agreement, a browse wrap agreement does not. It is sneaky that way.

Sometimes the terms will be displayed on the web page being used and other times it will not. A kind of “out of sight out of mind” scenario. An online user is not required to click on the terms and conditions if it is provided via a hyperlink, and there are very few ways to actually ascertain whether or not such a user was made aware of the terms and conditions. There are other similar themes as the click wrap or browse wrap, such as mandatory checkboxes (“check this box to indicate your agreement to our terms and conditions”) or email notices (“by continuing to use our service, you agree to the recent modifications to our terms of service”).

But thankfully not all methods, be they click-wrap or browse-wrap, are good enough to create “legally binding contracts”. I sense a collective sigh of relief.

But when are online contracts binding?

But when or how will such online interactions constitute binding agreements? The consensus here depends on which region you are in – by participating in online transactions in whichever form they are in, we can all basically assume that the interactions here will most likely be cross or trans-border.

This does create some difficulty in the sense that some territories, like The United States, are more evolved in this aspect than others. For example in South Africa there is very little to no case law on this matter. In the UK and EU they too have very limited case law or Legislation based on what binds a user to online terms and conditions except to say that they have established one rule

an online user should be provided with all terms and conditions in a manner that is readily available and easily accessible without inappropriately or irrevocably binding a consumer to terms he had no real opportunity to become acquainted with.

It seems rather polite of them and a decent way to conduct oneself when interacting online. Could one say “typical of the British”? Whereas the US have accepted as a rule of thumb, the click-wrap agreement for its obvious enablement of the user to assent to the website’s terms and conditions. In other words the user, by clicking that “I Agree” button acknowledges that they intend to bind themselves.

In South Africa we are sort of playing catch up with both the US and the UK. In this regard and with the application of our contract law as well as our Common Law, one needs to look at the intention of the parties as well as the actual agreement of the parties. With click-wrap agreements it is quite easy to ensure that the user indicates their agreement by making a mark in the relevant space.

document-428331_1920

In our Electronic Communications and Transaction Act, an electronic signature is defined as that of “data attached to, incorporated in, or logically associated with other data and which is intended by the user to serve as a signature”. It is therefore accepted that the function of a signature is some kind of personal mark which may be used to identify a party and to convey or confirm an intention to be bound. Common knowledge, I would assume.

In this context, this “mark” as an indication of a person’s agreement is the same as a click-wrap agreement. This in essence leads one to believe that the click-wrap agreement is more than just an “I Agree” Button, but rather an “I have been shown the terms and conditions, have read them and have agreed to be bound by them” button. If you are like me, I immediately think of my iTunes account and the constant need to “accept” their terms of use when updating your version of iTunes account. If I am absolutely honest, I have never actually read the terms of use before clicking “accept”. As astounding as that sounds from someone of my vocation, all I really want to do is download my music or update my WhatsApp application.

Eeeek!

ALWAYS read the terms and conditions

Once I have finished writing this article, I think I will go avail myself (really) of Apple’s user terms and conditions and next time I click on the “I agree” or “accept” button make sure that I well and truly “Agree” or “Accept” because what I have learnt from writing this article (and which should be obvious) is that with everything, be it a written, a formal Contract or online terms and conditions – read before you click that button, it may hold more consequences than you think!

#justsaying

MTN’s misleading uncapped data bundle fine print

MTN’s uncapped data bundles are not what consumers think they are. They are complicated packages with rules that limit them dramatically.

EWN published a surprising story titled “The terms of MTN’s uncapped data explained”, in which MTN’s Chief Customer Experience Officer, Eddie Moyce, explains MTN’s activation requirement for its time based uncapped data bundle. Here is the radio segment:

The surprise is that this uncapped data offer doesn’t work the way you may expect. Consumers should pay careful attention to the fine print avoid being caught out, potentially at a substantial cost. Essentially, even though you have paid for the bundle, you still need to activate it by dialling a short-code which you receive by a SMS. If you don’t activate the bundle, you will use data at normal data rates and could wind up with a larger bill than you expected.

Two aspects of this story are problematic:

1. Why offer this sort of “uncapped” bundle that the customer still needs to activate in order to use it, even after paying for it?

This is really misleading. Most data bundles activate automatically when you have paid for them and the changes propagate across the network, don’t they?

The mechanism suggests that MTN intentionally created this activation mechanism knowing that many customers won’t actually realise they need to do it and will wind up paying far more. I checked the terms and conditions that apply to this package (I think – the MTN site is not exactly designed to find information easily) and it says the following:

  1. Activation of the MTN 1 Day Uncapped Internet Bundles

5.1 Customers may purchase an MTN 1 Day Uncapped Internet Bundle by dialing *141*2#.

5.2 Customers must activate the MTN 1 Day Uncapped Internet Bundle after purchase, by dialing *141*5#. The MTN 1 Day Uncapped Internet Bundle does not automatically activate .

5.3 Customers may only activate the MTN 1 Day Uncapped Internet Bundle if they have sufficient airtime in their airtime account or using their usage limit (for My MTNChoice customers). This excludes MTN Loyalty 1–4–1 Loyalty Points and any promotional airtime.

Data bundle details

These data bundles are typically “valid for a period of 24 (twenty four) hours”, although only “after [they are] activated”. I also wonder how many people are aware of when the data bundle kicks in? How many people assume (and reasonably so) that the package kicks in automatically and they start using the data right away?

The seemingly reasonable SMS from MTN with activation instructions is challenging. Many people ignore SMS messages they receive for various reasons and may not notice the significance of an activation message until long after their bill has hit triple digits.

This activation mechanism looks a lot like the dodgy tactics mobile content providers used to use before they were banned: automatically subscribing consumers to expensive content (think R5 or R7 per day until cancelled) subscription services without clear double opt-in mechanisms and pricing information. You wouldn’t expect major network operators to use misleading tactics such as these.

2. Why impose a “fair use value” cap of 150MB on an “uncapped” data bundle? That is tiny.

Then, to add to this, the notion that a bundle with a “fair use value” cap of 150MB is somehow an “uncapped” data bundle is ridiculous. That is a tiny amount of data when you consider that, as Eddie Moyce put it, people tend to buy these packages for specific reasons. One of those reasons would be that the customer needs to use a lot more data than his or her usual bundle allows (at least, cost effectively) in a short time period.

Here is an extract from the terms and conditions dealing with the “Fair Use Policy”:

9.1.4 Customers with an active MTN 1 Day Uncapped Internet Bundle shall be able to generate uncapped data usage, however, a fair use value/threshold as detailed in the table in clause 4 above will apply for the duration of the Validity Period.

9.1.5 Should the Customer exhaust the fair use value, as detailed in the table in clause 4 above, before the end of the Validity Period, the Customer’s data speeds will be reduced to 128kbps for the remainder of the Validity Period and the Fair Use Policy shall detailed in this clause 9 shall apply.

9.1.6 MTN further reserves the right to implement other measures and controls to ensure that the integrity of its systems is maintained, including but not limited to measures such as DPI (Deep Packet Inspection). DPI:

9.1.6.1 allows MTN to monitor aspects including, but not limited to, non-compliance with its Fair Use Policy and restricted protocols, prevent attacks from computer viruses/worms and identify SPAM. Such usage may be blocked or re-routed;

9.1.6.2 also allows MTN to throttle certain usage, such as peer to peer traffic;

9.1.6.3 shall also allow MTN to prioritize/filter certain activities, such as VoIP traffic, over other activities which are burdensome on the MTN network (such as video streaming);

9.1.6.4 in essence, this allows MTN to alleviate network congestion and improve service to all MTN customers.

9.1.7 This Fair Use Policy may be amended by MTN, whether by clarifying, modifying, adding to or deleting certain terms and conditions. This is subject to the Modification of Terms and Conditions, including notice being provided to you, as detailed in clause 16 below.

Not only does the available data speed slow to 128kbps when you hit that measly 150MB but MTN also imposes a series of restrictions on how you can use the data and when. The end result is that your “uncapped” data bundle is more like a “you can’t do much with this ISDN-like connection but thanks for paying anyway” bundle.

But wait, there’s more:

  • MTN hides all these restrictions and qualifications in terms and conditions which few consumers will ever read, and
  • these restrictions are couched in fairly dense language and presented in pale text on a white background that no-one over 45 can read without squinting says a lot too.

MTN terms

One more thing – no business use for you

Oh, by the way, this package isn’t available for “commercial use” so don’t think you are allowed to use this package to give your small business a little boost either:

9.2 The MTN 1 Day Uncapped Internet Bundles are intended for consumer use only. This means that the MTN 1 Day Uncapped Internet Bundles may not be used for commercial use (which includes, but is not limited to the intention of promoting, enabling, subscribing to, selling (directly or indirectly) the goods, services or image of any person pursuing a commercial, industrial, craft, religious, charitable or political activity or exercising a regulated profession).

9.3 The MTN 1 Day Uncapped Internet Bundles exclude use of the following services:

9.3.1 Least Call Routing (LCR);

9.3.2 Routing devices; and/or

9.3.3 Commercial use.

9.4 Use of the above services shall be deemed abuse and/or fraudulent use of the MTN 1 Day Uncapped Internet Bundles and shall entitle MTN to immediately suspend and/or deactivate the Customer’s access to the MTN 1 Day Uncapped Internet Bundles.

So if you are a small business owner and you happened to buy this bundle and use it as part of your business (you could have sent a data message to a client telling them about your services, for example), you would be committing a fraud in addition to breaching the terms and conditions of the bundle. Talk about hostile to small business!

K.I.S.S MTN!

When I think about what is available outside South Africa, MTN’s approach to mobile services and pricing just doesn’t make sense to me. My current mobile service includes 5 000 minutes of calls, 5 000 SMS messages, 10GB of data a month and 500 minutes of calls to my family in SA (landlines in SA) for the equivalent of about R200 per month. It wasn’t always like this but regulatory changes and increased competition improved the situation for Israelis.

Instead of obfuscating an overly complex service, why not offer a simpler option that just let’s people pay their R40 for either a fixed amount of data or a realistic “fair use value” cap? Drop this silly activation mechanism and the ridiculous fine print. In other words, give people what they think they are getting or, if that is more than you want to offer, offer them something you are comfortable with and that makes sense to consumers.

Image credit: Pixabay

Which contracts photographers should consider using

Which contracts your clients should sign

A photographer asked a great question about contracts recently:

I would like to redo my contracts. Would like to know what do you get clients to sign before a shoot?

Disclaimer: This note is a fairly broad overview of many of the major themes you, as a photographer, should think about and which contracts photographers should sign with their clients. It isn’t legal advice or even the best advice for all photographers. It should give you a more informed starting point for a further discussion with your lawyer.

There are two key documents that you should have. The first is a contract governing your services and the other is some sort of privacy statement.

Services contract

The services contract needs to cover a number of themes both for clarity and to make sure you address your common risks. I also refer to services contract provisions as “terms and conditions” in this note.

For starters, use clear, well defined terminology is really important. It may seem pedantic but clearly defining key terms is essential for a clear and intelligible contract which, in turn, is more likely to be enforced if you ever have to test it. Obviously the content of the contract is very important but a contract written in confusing language can be very difficult to understand and enforce effectively. You typically include this terminology in a glossary in your contract.

Your services contract must obviously deal with your services, how you will communicate them and what you will charge for them. Think about issues like scope creep (where your services change without necessarily agreeing on the changes specifically) and amending your pricing as your scope changes. The model I prefer is to use a standard set of terms and conditions that refer to a separate booking form (that can be an online form or a paper form that your client signs) instead of preparing a lengthy contract that contains all the variables such as client details, services required and pricing. The booking form model that refers to the terms and conditions is less intimidating even though the terms and conditions, themselves, will be fairly detailed to make sure you deal with all the important themes.

One issue which comes up frequently in photographers’ groups is a cancellation fee. The Consumer Protection Act enables clients to terminate advance bookings subject to reasonable cancellation fees. Define those in your contract and set cancellation periods which may attract varying fees. For example, you may agree that if the client cancels a shoot 3 months before, the client will pay Rx; 1 month before, the client will pay Ry and 2 weeks before, the client will pay Rz. This will depend on your booking lead times; whether you can replace that booking and other similar factors. You will also need to align these cancellation fees with the Consumer Protection Act’s mechanisms and intent.

As a photographer the licensing aspects of your work are critical. The Copyright Act generally recognises your clients as the owners of the copyright in your photos if they commission you to do the work and agree on a fee for that work. This is good for your clients because they have more control over your deliverables but you have to consider what you will need to do with the photos. Because, by default, you are not the copyright owner in this context, you are not entitled to share the photos as part of your portfolio, restrict what your clients can do with the photos and exercise much other control over the photos’ use.

The Copyright Act gives you a way to change this default position. You can agree with your client to opt-out of the default copyright ownership mechanism in your contract. It is pretty straightforward but you need to include that in your contract. You may also want to think about including a mechanism in your contract which enables you to withhold your deliverables if your client fails to pay you, for example. This would be a separate clause in your contract.

Other clauses you’d include in your contract would be –

  • fees and payment;
  • privacy (linked to the privacy statement which I discuss below);
  • dispute resolution;
  • breach and the consequences of a breach;
  • termination;
  • common no-variation and similar clauses; and
  • domicilium clauses which can be pretty useful for different situations.

Booking form

A booking form is a convenient way to sign a client. Here are a few things to include:

  • Client details (name, contact details, address details);
  • Shoot details (date, times, locations);
  • Fees due (linked to specific deliverables), including deposits due;
  • Your specific deliverables;
  • Cancellation fees (you can include these in your terms and conditions but including these in your booking form makes them more prominent and confusion less likely);
  • Your details;
  • Express confirmation that your client agrees with your terms and conditions and privacy statement;
  • Signature and date fields (the form these will take if you use online forms can vary).

Privacy statement

As a photographer you are dealing with a lot of personal information. Using personal information often requires permission from the people the personal information relates to and the way you obtain this permission is a privacy statement (also known as a privacy policy or data protection policy).

As a starting point integrate your privacy statement with your services contract so when the client agrees to the services contract, s/he also agrees to the privacy statement.

Broadly speaking, the privacy statement must deal with these broad themes:

  • what personal information you will collect and from which sources (for example, automatically through your website, personal information your client volunteers through your booking form or contact forms and so on);
  • what you will do with that personal information (remember to include adding photos to your portfolio or Facebook page for marketing purposes, for example);
  • under what circumstances you may disclose personal information to third parties (these third parties may include your vendors for printing; law enforcement and other legal authorities); and
  • where you store personal information and, broadly, measures you take to secure the data (this will often mean identifying your hosting provider, especially if you use foreign hosting providers and will be transferring personal information across borders).

You will probably include other people in your photos (especially if you do functions and have the usual group photos) who have not signed your contracts. You should require your clients to obtain permission from people they want included in these group photos to be included and their agreement with your data practices which are explained in your privacy statement. How you do this can vary. You can prepare releases for subjects to sign and have them sign in advance or on the day or you can prepare something for your clients to have these participants sign. This can be a cumbersome process so consider the process with the least friction and which still results in permission from these subjects to take photos of them and use those photos for different purposes.

This is more important if you intend publishing photos on public platforms (for example, Facebook). Simply taking photos, making prints and handing these to your client probably won’t require you to go to these lengths because a subject who poses for a photograph clearly consents to being photographed. You’ll need to use your discretion.

It is very important to be sensitive about photos of children. You are not permitted to take photos of children and share them without their parents’ advance permission so make sure you obtain clear consents when it comes to children.

Get it in writing

If you capture the terms of your agreement with your clients in writing, you take huge strides towards reducing the likelihood of confusion and disputes. A written contract can be printed on paper. It can also be digital and part of an email or published on a website. Find the best medium for you that strikes a balance between clearly conveying your contract terms and being relatively accessible and convenient for your clients.

I have prepared a service contract and privacy statement for photographers which I’ve since updated. These two versions should give you a fairly decent idea of what your contracts could look like.

4 tips for developers selling software

Say you’re a software developer and your customer wants to buy your app, do you know what you should be thinking about when selling software? Here are a few contract tips:

Can you legally sell your app?

Unless you have developed the code for the app from scratch and haven’t used any previous code of your own or any third party code, your app is likely to be a composite of code you’ve written in the past for other projects and which may even form part of your general toolkit.

You may also be using code from other developers which could be licensed under a variety of licenses, including open source licenses like GPL and BSD.

When you sell something, you generally transfer all the rights in the thing to the purchaser. You have to have the rights to transfer in the first place and if you don’t own all the rights in that thing you are selling, you can’t really sell it to someone else. If you attempt to do that, you’ll find yourself with a contract you are legally unable to comply with and that is a problem.

Tip 1: Check the rights you can transfer in a sale first.

Know what you are selling

This sounds pretty obvious but it’s a more complicated question that you may have thought. From your perspective you’re selling your app but what is that app, really? Are you selling the finished product alone or does your customer want the source code too?

Many software purchasers want the source code because they are concerned that if they don’t have the source code, they could find themselves in a pickle if the app breaks and they can’t reach you to fix it. It is basically a business continuity concern and the more your customer relies on the app to operate its business, the more important have access to the source code will be.

The challenges with selling the source code include disclosing your secret coding sauce that makes your code so valuable. Those trade secrets could give your customer or even a competing developer who encounters the code later an additional competitive edge over you. Another challenge is that selling your source code outright could have an impact on other projects which leverage elements of that source code because you will have far fewer rights to use that code once it is sold. This means you have to consider the impact on your obligations towards existing customers too.

Tip 2: Carefully consider precisely what you are selling and what the implications are of selling it to your customer.

Clearly define what you are selling

This also sounds obvious but it isn’t. In your mind you are selling an app but how would a person outside the deal be able to identify what you are selling, objectively? Is the app totally self-contained and in a box that can be easily identified? Chances are it may be a bit more complicated than that.

The reason why you need to be able to clearly define what you are selling is twofold: your contract needs to be clear on this and your customer’s expectations of what it will receive from you must correspond with your understanding of what you are selling.

How you define your app may depend on the nature of the app but here are a couple ideas:

  • Include detailed and app-specific functional specifications;
  • Depending on the app, possibly use a hash derived from the app’s code as a sort of fingerprint to identify it;
  • When describing the software’s functionality, avoid generic descriptions that could apply just as easily to software you are not selling;
  • Consider versioning your software and referencing specific versions being sold, if appropriate.

Tip 3: Define or describe the software being sold very clearly to avoid any confusion later.

Consider alternatives to an outright sale

A sale may not be appropriate because of its implications. Often a license agreement meet your customer’s requirements and help you avoid the problematic consequences of a sale so don’t be afraid to suggest that instead.

Licenses can be customised to suit most requirements and can, for example, be exclusive to the customer. The benefit of that sort of license is that the customer has the comfort of knowing you won’t make that software available to someone else and you retain enough rights to meet your other obligations.

If you go ahead with a sale and your customer insists on source code too, consider placing the source code in escrow with a trusted escrow agent with specified conditions which would trigger the source code’s release. Those conditions may include your business closing, you and your team failing to respond to requests for support for a period of time or some other set of conditions that would address your customer’s concerns.

If you sell your source code along with your app and you require elements of the source code to meet existing obligations to other customers or based on other licenses you agreed to, you may want to make sure you either withhold certain rights for yourself or license what you need back from your customer as part of the deal.

Tip 4: A sale may not be the best deal type and even if it is, this isn’t a one size, fits all approach. Customise the deal to suit everyone’s requirements.

Law is code too

Just because your sale agreement is a legal construct doesn’t mean similar rules you apply to your code don’t apply. Work with your lawyer or legal advisor to develop a contract that works properly and doesn’t leave you with bad dependencies and worse consequences.

Look at your contract as an app in its own right. Does the code make sense and does it function effectively given all the constraints and requirements?

Update (2014-06-10): Something else to bear in mind is the new VAT on digital goods sales. Developers who make more than R50 000 will have to register with SARS to pay VAT. It’s a pretty low revenue threshold.

Take a look at this article on MyBroadBand titled “Get ready for VAT on e-books, apps, digital music” for more information about how this affects you.

How you could sell a car in 2034 without a hefty contract

This article was originally published on LinkedIn as “How I sold my car in 2034“.

En Vauxhall bliver demonstreret af sælgeren

Prologue

Contracts are increasingly complex and difficult to navigate, even with recent efforts to simplify the language we use. Much of this is the result of efforts to express complex and interrelated legal and compliance concepts in words and since every legal writer has his or her individual style, the variations in contracts are staggering.

Recently one of my clients asked me for a single paragraph that somehow encapsulated a vendor contract. My response was that such a thing is extremely risky and not pragmatic. There is simply too much in a contract of that nature to adequately express in a single paragraph. Instead, I suggested a couple of options that streamlined the interface for the complete contract.

Later that night I thought about the request further and what it would take to create a “1 paragraph contract” for my client. I realised that such a thing would look very different to the contracts we have now. In fact, the path to a an effective contract that could be expressed in such a short form could lead to a radical overhaul of the broader legal and compliance environment that underpins almost everything we do.

Imagine that instead of expressing those complex and interrelated legal and compliance concepts in words, we reverse the process and establish a syntax to express those concepts more abstractly and yet in a way that still includes all that stuff the “fine print” is designed to cater for in our every day dealings? We could develop a new way of going about our business that doesn’t require lawyers writing pages of contracts that may still be susceptible to interpretational differences.

Going further, what if the way we contract ties directly into a broader contracts profile we all have from our first contract and which gives assurances as to what we can legitimately contract for? This is just the beginning of what could be possible. Legal frameworks could be developed, implemented and enforced programmatically. It would mean a radical transformation of the legal profession, possibly the end of much of the profession as we know it today. On the other hand, it would mean that people could go about their lives, dealing with each other with more confidence, far less uncertainty and without needing to spend so much on unintelligible legal fees.

The story below is a hypothetical scenario which should give you an idea of how this could work. Whether this scenario becomes a reality one day is another question altogether. I suspect that two developments will be key drivers: the so-called Internet of Things and cognitive systems like IBM’s Watson.

How I sold my car in 2034

I arranged to meet Andre on a sunny Sunday morning, 28 May 2034, to sell him my vintage car. I hadn’t met him in person before but I knew it was him because I received verification of his identity when we shook hands and sat down through an interaction between our CitIdents, the SmartNet and some or other authentication process my contract technician told me happens in the background. We met in a local teahouse and chatted while the waitron delivered our orders. Andre asked me about my run earlier that morning (my best time yet) and I congratulated him on his daughter’s latest masterpiece which he shared the night before. We then turned our attention to the deal we were about to make.

Andre kicked off the discussion with a quick data request to access the car’s entry in my Registry. He reviewed the car’s purchase and service history along with its logged mileage and general condition. It pretty much matched the data representation I posted with my sale ad the week before and he was also able to confirm that I was the car’s owner and entitled to sell it to him in the first place. He didn’t say anything but I suspect he also ran a quick valuation check through SmartNet to confirm my asking price was reasonable. This sounds like a lot but he finished his initial review in the time it took me to empty a sachet of sweetener into my tea and stir it.

He smiled and said he was comfortable with the car’s history and condition as well as my price. We exchanged data requests for access to the relevant portions of our contract profiles in our respective CitIdents (this has become standard practice when contracting these days). We both received confirmation that we had the necessary legal capacity to sell and buy the car (Andre’s verification included confirming with my bank that I have paid my vehicle finance and the bank had transferred ownership to me). Andre’s bank confirmed with me that he had sufficient funds to pay for the car on our agreed terms and established a payment link to my bank account for a one way funds transfer.

We decided, for the sake of tradition, to conclude our contract with a handshake. Our wrist tokens registered each other’s proximity as I said “I, Paul Jacobson, agree to sell you my car for our agreed price today.”. Andre smiled again and, in return, said “I accept your offer to buy your car today.”. With that our respective CitIdent’s registered the details of our agreement: the car being sold, our agreed purchase price, the current date and time as well as our verified identities. The SmartNet quickly polled our CitIdents for the further information it required to complete the legal and logistical aspects of our deal, advised the relevant local authorities so they could update their records and I received a data notification that the car had been removed from my Registry and transferred into Andre’s along with confirmation of the first of Andre’s payments.

We chatted a little more, finished our tea. Andre took a call from his partner and while he was chatting, I took a moment to review the transaction records newly associated with my CitIdent’s contract profile. Sure enough the sale was symbolically represented using the usual cheerful info-icons with the broad parameters of our transaction supplemented with the usual conditions, restrictions and permissions provided by the SmartNet’s latest contracts AI. The latest models finally introduced cross-jurisdictional compatibility between different regions’ contract models.

Andre finished his call, I sent payment to the waitron with a tip and thanked Andre. For a moment I couldn’t understand why the car didn’t respond to my proximity and unlock and then I realised it wasn’t mine any more. Senior moment. Since it was a lovely Autumn morning I decided to take a pod home and spend the rest of the day with my wife and children.

Smarter design for more efficient legal service delivery

The more I think about this challenge, the more I believe it is becoming a design challenge. In particular, I am really interested in how interaction design can be applied to digital risk management to revolutionise our legal and compliance interactions.

Alex Hamilton published a terrific post on the radiant.law blog about addressing legal service delivery inefficiencies. His post is titled “Creating Standards” and, although it is probably aimed more at lawyers, he touches on an important aspect of risk management:

Standard documents are a necessary, if not sufficient, start to fixing the inefficiencies of legal service delivery. For in-house teams in particular, pulling standards together, whether form agreements, playbooks or other tools, can be a real challenge; especially as the day to day reality of “more-for-less” overwhelms long term projects.

I’ve maintained for some time now that effective risk management is more than just about documents. The real value is in the insights that go into how legal frameworks are structured and how they function. Lawyers whose business models depend on selling contracts are going to find it pretty difficult to survive (if they aren’t already). I keep seeing new services popping up online which offer more and more sophisticated legal document assembly options (one of my clients is doing some very interesting work in this space) which are becoming easier to use and much more affordable than conventional legal services.

Developing smarter legal frameworks has a lot more to do with knowledge and information management with an emphasis on smarter solutions. radiant.law is part of a new wave of legal services firms which place more emphasis on value and discarding convention that exists for its own sake. I think my eyes roll involuntarily every time I hear a lawyer object to something I propose merely because what I suggest runs contrary to “the way things have always been done”.

Many lawyers are stuck in mind-numbing ruts. They resort to laborious workflows and document models with little thought about whether they are still relevant or whether there are more effective solutions for clients’ solutions. One of the other blogs I subscribe to is Adams on Contract Drafting through which Ken Adams challenges legal writing conventions and approaches. I find myself reading contracts I receive from other lawyers to review and even many of my older document models and becoming increasingly frustrated with convoluted and repetitive language. One of my mantras at the moment is “simplicity” and each time I work through a legal document, it becomes an opportunity to simplify the wording and structure.

It doesn’t stop there. The process of simplifying your digital risk management extends to technologies you use to manage your resources. I like Hamilton’s suggestions to use search to index and organise; wikis to constantly improve your framework models; treat your legal framework development model like an open source development model and “release early, release often” and, of course, create better standard document models.

Inefficient legal service delivery is increasingly a design challenge. In particular, I am really interested in how interaction design can be applied to digital risk management to revolutionise our legal and compliance interactions. This video titled “Connecting“, below, blew my mind about a year ago. I think it hints at a possible future for the work people like Hamilton and I do.

New restrictions on intellectual property transfers outside South Africa

Nokia Lumia launch-46

Michalsons Attorneys recently pointed out that the Currency and Exchanges Act was recently expanded to address intellectual property transfers outside of South Africa. The Act, through its regulations, requires any person wishing to export “capital” or any “right to capital” from South Africa requires permission from the South African Reserve Bank. Until recently, the definition “capital” did not include intellectual property (and this was confirmed in a recent Supreme Court of Appeal judgment).

The President amended the regulations in terms of this Act in June 2012 and altered the definition of “capital” to include intellectual property and expanded the scope of “export” to include a “transfer” of any intellectual property outside South Africa. Individual property can be transferred in 2 ways: licensing or assignment. Assignment is a complete transfer from one party to another. When intellectual property is assigned from one party to another party, the party receiving the intellectual property generally becomes the new owner of that intellectual property and the only party that can exploit that intellectual property. The party that assigned that intellectual property in the first place gives up the rights to exploit that intellectual property altogether.

On the other hand, licensing intellectual property means giving another party permission to exercise certain of the rights the licensor (often the intellectual property owner or someone who has already obtained a licence which includes the ability to sublicense the intellectual property to another party) has in that intellectual property. An example of this is where a content license grants a licensee permission to make a copy of the content. When licensing intellectual property, the licensor usually retains the original rights in the intellectual property and merely extends some of his or her permissions to the licensee. Unlike with assignment, the licensor generally retains the ability to exercise the rights granted (although this depends on the specifics of the license) along with the licensee.

As an aside, we often come across digital agencies that assign their copyright ownership to clients without thinking twice and not realising that doing this means they can’t exercise the rights they may need to sustain licenses they have granted already to the content they have handed over (which has contractual implications for the agency given that they are now technically incapable of performing that obligation of licensing the content) and that they can’t build on that intellectual property going forward. In these sorts of situations, an appropriately drafted license is often far more suitable, even if it is fairly broad.

While the term “transfer” almost certainly covers intellectual property assignment, it is not clear whether it includes licensing. If it does, it probably doesn’t cover non-exclusive licensing (Michalsons apparently spoke to a South African Revenue Service representative who advised that licensing is not included – I wonder if the “SARS” reference in the Michalsons post shouldn’t be a reference to the South African Reserve Bank, though) but even if it is included, non-exclusive licenses shouldn’t be included in that restriction (including non-exclusive licenses would be highly problematic and would lead to a deluge of requests to the SARB to permit a range of licenses that are on virtually every website and service with a decent set of terms and conditions). Unfortunately the regulations appear unclear.

What does appear clear is that any content owner intent on assigning the rights in that content to a party outside South Africa will have to factor in the requirement for the SARB’s consent into its agreements (companies would, for example, have to include conditions in their agreements making the agreements conditional on this consent being obtained from the SARB). This would, specifically, pose fairly serious challenges to local companies that transact with foreign companies that requirement intellectual property assignments to them in their agreements and it may be far more viable to explore licensing arrangements if the word “transfer” in the amended regulations doesn’t include licenses.

This change to the regulations adds to an already complex regulatory overhead that companies bear, especially for businesses which rely on their intellectual property as core aspects of their offerings. It also means that companies must be far more careful about how their intellectual property is made available to clients and providers and avoid assignments unless they are absolutely necessary.

Digital agencies that skimp on legal are negligently exposing themselves and their clients to substantial claims

Catch the highlights:

I’ve noticed an alarming trend with many digital agencies and the account managers responsible for advising their clients on their digital marketing initiatives: they view legal frameworks as something akin to the undercoat on a wall. It seems to be a good idea although it’s better to keep it thin, hidden away and forgotten about.

One of the concerns seems to be that legal content distracts from the fun and social elements of the campaign and too much emphasis on it would only upset the fans. It’s a grudge purchase and because no-one is really going to cause any real trouble the smart ORM people can’t manage, legal terms are added because, well, that’s just how it’s done. At least, this seems to be the thought process that too many marketers put into legal frameworks for their campaigns.

Nothing kills the mood of a social campaign quite like a lawyer insisting on a dizzying array of legal terms and conditions to address an unclear set of risks and using language no-one except the lawyer seems to understand, let alone appreciate the significance of. We lawyers have not been very good at conveying the importance of what we do, particularly where there are few practical examples of their value. We are in a risk management business and a lot of the work lawyers do is in anticipation of likely risks and aimed at reducing both the likelihood of those risks occurring and, if they do, the resulting fall-out.

By the time a transaction becomes the subject matter of a dispute (usually when “lawyers’ letters” are called for) or disputes go to court, lawyers are generally in damage control mode. Something has gone wrong and either there weren’t adequate protections in place to anticipate or even resolve the dispute before it went pear-shaped or there just wasn’t anything in place and the client took a leap off a cliff expecting to be caught by fluffy clouds and adoring customers, not hitting the rocks below.

Unfortunately the risks to these agencies and their clients can be very real.

What could go wrong?

You’re working for a digital agency and you’re asked to set up a Facebook Page to support a client’s campaign. You recommend “house rules” for the Facebook page and, in doing so, you implicitly advise your client (yes, this is basically what you are doing) to use the house rules on the basis that they will afford the client adequate protection from likely legal risks. In other words, when you (whether you be an account manager, copywriter or someone else) prepare those house rules and give them to your client to use on their Facebook Page, you’re telling them that these legal terms and conditions are intended to protect the client. Unless they have their own lawyers to check those house rules, they are likely to rely on your advice, assuming you’ve had those house rules checked out and approved by a competent lawyer.

If those house rules then turn out to be inadequate and the client finds itself faced with a claim of some sort that could have been avoided with adequate terms and conditions, then you really should have some sort of liability cover in place because you may need to rely on it to protect your business from a negligence claim. Well, that’s assuming your agency’s liability cover protects it from negligence claims based on bad legal advice. If the agency has professional indemnity insurance cover, it may be limited to negligence in the context of the agency’s business, namely digital marketing and communications, strategy, community management and so on. Liability for legal professional negligence is a somewhat different set of risks and the liability cover you thought was in place may not be available.

What happens next is a complex, costly and drawn out series of legal battles largely because you assumed that house rules are largely a formality and need not go much beyond a set of rules asking fans not to be rude, to play nicely together and respect the client’s brand. Odds are, those house rules didn’t cover copyright concerns, properly contextualise product or services-related information on the Page, privacy and how fans’ personal information is used (Facebook requires brands to have their own privacy policies to govern collection and processing of fans’ personal information) and a number of other considerations. This means the house rules lacked a real framework governing to what extent fans can rely on information you present them with through the campaign, whether they can use content on the site and to what extent, how you can use their personal information … you get the picture. Maybe everything will turn out just fine, perhaps not. Can you afford to take the risk?

Why are terms and conditions so important?

Terms and conditions are contracts between customers and providers. They are premised on the legal requirement that a contract can only really be binding on parties who have reached agreement that they be bound by the contract and on the contract’s terms. This is somewhat of a generalisation because the law has evolved to created exceptions on the periphery of this ideal scenario but the concept of a “meeting of the minds” is central to our contractual law.

That said, this doesn’t explain the reason why terms and conditions are contracts. The reason they are contracts is that the one party seeks to impose obligations on the other party and can only do so where the other party agrees to assume those obligations. In this case, the client wishes to establish a framework for fans to participate in, say, the Facebook Page and that framework comprises certain rights and obligations. In order for fans to be brought into a contract with the client, terms and conditions describing the parameters of this contract with a fair degree of detail are necessary. Without them, you have a lot of vagueness and uncertainty as to who can do what and with what. That is a recipe for a dispute due to mis-managed expectations, among other things.

A legal doctrine called the doctrine of “quasi-mutual assent” is what allows website and similar terms and conditions to bind parties to contracts even though they haven’t necessarily engaged in a more conventional and interactive contract negotiation process (that is, where one party is faced with standard terms and conditions and told to accept them or not take advantage of the related service).

Even with this doctrine, the terms and conditions must be detailed enough to establish an adequate framework governing the foreseeable aspects of a fan’s interaction with the Facebook Page, micro-site or some other aspect of the campaign. If the terms and conditions are vague or don’t cover important issues which they should cover, our courts have ruled that not dealing with important provisions can be pretty much the same as saying they don’t apply or should not be considered. If you, as the agency representative, have been instructed to ensure that fans are aware that, for example, product prices published on Facebook are not necessarily current purposes, are subject to verification and may be changed without notice and you don’t actually provide for this in the “house rules”, you may find that fans may be entitled to rely on and even insist on those published prices. That means you failed to comply with your client’s instructions and exposed the client to the loss being required to honour those prices resulted in. This is a relatively benign example but the potential prejudice could be more severe.

Add to this the possibility of class action lawsuits by angry consumers who feel they have been misled by inaccurate information in a marketing campaign which is not properly contextualised by adequate terms and conditions (let alone the reputational harm when the client is portrayed as a liar due to the inaccurate information), you may appreciate just how valuable these terms and conditions can be.

Here is a suggestion

Resist the temptation to cobble together house rules or other terms and conditions based on what you may have seen elsewhere online or may feel are adequate given the nature of the campaign and chat to your agency’s lawyer about the possible risks (likely risks, even if you are open to some degree of risk) and work with your lawyer to create a legal framework that adequately caters for those risks and remains consistent with your campaign’s look and feel. It is achievable and could help avoid a very messy and costly dispute.