Think back to the last time you installed a program on your computer or an app on your smartphone. Do you remember having to check a box or click I agree at one point in the installation process? It was likely right below a window containing a lot of text that you ignored. That text was a contract, and it probably affected your right to sue the company that made the program or app in the event something is wrong with it. Companies often use their contracts to limit their liability and regulate whether and where their customers can sue them. Here are three common contract provisions that companies use to affect your ability to sue them:
1. Choice of Law
Choice-of-law provisions in a contract do exactly what their name suggests: They choose the law that will be used by a court in interpreting the contract. State courts may differ in how they interpret a word or phrase used in a contract, and the parties to a contract are allowed to choose which states law will apply to it. Doing so allows the parties to have some certainty about how the contract will be interpreted in the event of a conflict. These provisions will normally be enforced by courts, even if the courts are from a state different from the one chosen by the parties in the choice-of-law portion of their contract.
2. Forum Selection
Forum-selection clauses determine where a lawsuit can be filed. They are often used by large companies that do business in multiple states. While it might otherwise be legal to sue such companies in any state where they do business, if a contract with a forum-selection clause is involved, then any suit will usually have to be filed in accordance with that clause. If you file a lawsuit in a state other than the state named in the forum-selection clause, then the other party can ask the court to dismiss the case, requiring you to re-file your lawsuit in the correct state. Forum-selection clauses can be a benefit or a detriment: On the one hand, they can limit your own exposure to lawsuits in far-off states if the state chosen is convenient for you. On the other hand, they can force you to file suit in an inconvenient place if the state chosen is not where you live.
A contract can require that any dispute arising from the contract, including a dispute caused by a breach of the contract, be submitted to arbitration instead of being taken to court. If you file a lawsuit in a case involving a contract with an arbitration clause, the other party can ask the court to force you to go to arbitration rather than continue in court. Arbitration can be thought of as a private court, albeit often with less demanding rules of evidence and procedure. The advantage of going to arbitration instead of to a court is that arbitration can be less expensive, and less time-consuming, than filing a lawsuit and going to trial. Instead of a judge, an arbitrator or panel of arbitrators will accept evidence in the case and render a decision, called an award. The arbitrators award may be binding on the parties, or it may be non-binding. If its binding, then there are only limited opportunities for courts to review it.
Next time you install software on your computer or download an app to your smartphone, be sure to look over the Terms of Service, License, or whatever it is that the company that made the software calls the contract that you have to agree to during installation. It probably includes at least one of the clauses discussed above, and likely includes all three. You should take the time to understand how the contract affects your recourse against the company if problems arise with their software. For more information on any of this, this lawyers site can help.