Most consumer contracts have one thing in common — the ability of the provider of goods or services to unilaterally change the terms of the contract.
This is true for credit card agreements, cellphone contracts, internet service provider agreements, media streaming contracts, cable or satellite television contracts, and brokerage account agreements, to name but a few. However, in all cases, the provider of goods or services wanting to change contract terms must give its customers advance notice of the change.
Sometimes change-in-terms notices are governed by statutory law, like the federal Truth In Lending Act and the Colorado Uniform Consumer Credit Code. Sometimes they are a product of the general law of contracts, which is big on the idea that parties to a contract should have, and be able to keep, the benefit of their bargain. As an end run around that issue, providers of consumer goods and services make their right-to-change terms a part of the bargain.
Not surprisingly, unilateral changes in consumer contract terms are a regular source of litigation, with the usual area of dispute being the adequacy of a change-in-terms notice. Recently, Ent Credit Union found itself in such a dispute with one of its customers, Cecilia Macasero; the case, this month, generated a lengthy decision by the Colorado Court of Appeals.
This dispute resulted from Ent taking steps to add a mandatory arbitration/no class actions provision to a contract. The customer in this case, who was wanting to pursue a class action lawsuit involving motor vehicle financing, claimed Ent’s notice of change in terms was inadequate and had failed to amend her original agreement with Ent, meaning she could proceed with her class action plans.
At the trial court, Macasero obtained the result she wanted, with the judge ruling that Ent’s use of emails and links to its website were not sufficient to provide her with effective notice. (It was not disputed that Macasero did not open or read the emails in question, or follow up on their linked references to website information.)
Ent appealed the trial court decision and vigorously defended its notice of change in terms procedures. In its opinion, the Court of Appeals went through a thorough (as in many pages) step-by-step review of what Ent did in an effort to notify customers of the change in terms.
The Court of Appeals also went through a thorough (as in even more pages) review of court decisions from across the country dealing with what constitutes adequate notice of a contract change in terms in a circumstance where the customer had not read a change-in-terms notice that had been delivered to the customer.
Ent prevailed on its appeal, with the Court of Appeals’ opinion making it clear that (1) customers have to pay attention to notices from providers of goods and services, and (2) electronic notices are just as good as mailed paper notices. However, a concurring opinion by Judge Sueanna Johnson made cogent arguments that the law has work to do to come up with better rules about what constitutes adequate electronic notice of a contract change in terms. For example, she said, the law needs to take account of the fact that people don’t pay much attention to emails these days because so many of them are junk.
For the moment, at least, per the Court of Appeals’ decision, there will be no class action and Macasero will have to present her individual claim to an arbitrator, whose ruling will be final and not appealable.
Jim Flynn is a business columnist. He is of counsel with the Colorado Springs firm Flynn & Wright LLC. He can be contacted at moneylaw@jtflynn.com.
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