Contracts, Norms, and Privacy
Robert Sloan
Richard Warner
Standard Form Contracting
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The practice first flourished in the nineteenth
century shortly after the rise of mass produced,
standardized products, and it has served us well
as a fair and efficient way to allocate the risks
and benefits between buyers and sellers of hair
dryers, toasters, microwaves, washing
machines, home repairs, auto servicing, and a
wide range of other products and services.
Pay-with-data exchanges are an instance of
standard form contracting, no-negotiation, onesize-fits all contracts.
Offer and Acceptance
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An offer is (1) a manifestation of a willingness to
enter a bargain; (2) so made as to justify the
offeree in thinking that his or her assent will
conclude the bargain.
An acceptance is a (1) manifestation of a
willingness to enter the bargain proposed by the
offer (2) in a way invited or required by the offer.
The Duty to Read

The Duty to Read: If a party has an adequate
opportunity to read and understand an
agreement, then that party is treated as if he or
she read the agreement even if in fact the party
did not do so.
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Carnival Cruise Lines.
So an offeor can “manifest a willingness to enter
a bargain” even if the offeree is unaware of the
terms of the bargain.
An Example
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“Amazon provides website features to you
subject to the following conditions. If you visit or
shop at Amazon.com, you accept these
conditions.”
Does the duty to read entail that I have agreed
to the terms—including that my use of the site
shall count as acceptance?
Recall that an acceptance is a (1) manifestation
of a willingness to enter the bargain proposed by
the offer (2) in a way invited or required by the
offer.
The Apparent Difficulty
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Contractual obligations are freely
undertaken.
This requires knowing what the obligations
are.
So how can hypothetical knowledge of
terms and a “no other option” choice meet
this condition?
Consent and Norms
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When informational norms govern online
businesses data collection and use practices,
website visitors
 give free and informed consent
 to acceptable tradeoffs.
As long as the norms are value-optimal.
Informed Consent
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A visitor’s consent is informed if the visitor can
make a reasonable evaluation of the risks and
benefits of disclosing information.
Suppose visitors know transactions are
governed by value-optimal norms, then:
they know that uses of the visitor’s information—
both uses now and uses in the unpredictable
future—will implement tradeoffs between privacy
and competing goals that entirely consistent with
their values.
Tradeoffs
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All informational norms—value-optimal and nonvalue-optimal alike—implement a tradeoff
between privacy and competing concerns.

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They permit some information processing, and thus
secure some of its benefits, but they protect privacy by
allowing only certain processing.
When the norm is value-optimal, the tradeoff it
implements it is justified by visitors’ values. The
tradeoff is acceptable in this sense.
Two Questions
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First question : How we create norms?
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Rapid advances in technology have created many
situations for which we lack relevant value-optimal
informational norms.
We have discussed this at some length.
Second question: If norms secure free and
informed consent, what do contracts do?

To answer, we need a better understanding
of standard form contracting.
The Contractual Norm

The norm governing terms in standard form
contracts is the term-compatibility norm:
 buyers demand contractual terms
compatible with relevant norms.
 This a second-order norm.

The relevant norms include product-risk,
service-risk, and informational norms.

Profit-motive driven sellers conform to the
contractual norm (given sufficiently
competitive market conditions).
Free and Informed Agreement
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Assume there is, for each contractual provision,
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Our consent is informed as long as we know the
terms are compatible with value-optimal norms.
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at least one relevant, value-optimal norm
with which the provision is compatible
 Call this contractual norm completeness.
No need to read the contract.
Our consent is free because the no negotiation,
no choice contract is a pre-packaged deal that
allows us to freely pursue our other goals.
So What Do Contracts Do?
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What they don’t do is secure free and informed
consent. Norms do that.
Contracts do what they have always done:
define the legal relations between buyers and
sellers for purposes of dispute resolution and
business planning.
A Current Puzzle: Updating Contracts
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Amazon: [1] Our business changes constantly, and our
Privacy Notice and the Conditions of Use will change
also. . . .[2] you should check our Web site frequently to
see recent changes. . . [3] our current Privacy Notice
applies to all information that we have about you and
your account. [4]We . . . will never materially change our
policies and practices to make them less protective of
customer information collected in the past without the
consent of affected customers.
The
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th
9
Circuit’s Attitude
The 9th Circuit held such amendments unenforceable in
Douglas v. Talk America, 495 F.3d 1062 (2007).
The court:
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a service provider cannot unilaterally change the terms of
its service contract by merely posting a revised contract on
its website.
Parties to a contract have no obligation to check the terms
on a periodic basis to learn whether they have been
changed.
A revised contract is merely an offer So does not bind the
parties until it is accepted.
An offeree cannot assent to an offer unless he knows of its
existence.
Provide notice
Require response, do not
allow any use of site
Do not require
response
Some
respond
Undesirable from a
business point of
view.
Acceptance
Most do not
respond
Acceptance?