By Nancy S. Kim
By now, you’ve heard the stories of passengers urinating in bags, slipping on sewage, and eating stale cereal aboard the Carnival Cruise ship that was stranded in the Gulf of Mexico — not exactly the fun-filled cruise for which the passengers had signed up and paid. Several lawsuits have been filed which Carnival is seeking to dismiss, claiming its contract prohibits them. Commentators reluctantly agree that it may be an uphill slog for the unhappy passengers because of the contract. Carnival Cruise’s contract, available on its website, restricts the company’s liability for most claims. It also contains a class action waiver, a mandatory arbitration clause, and a venue provision which requires that all claims be brought in Florida. This makes a lawsuit much more expensive for any individual passenger to bring.
There are some defenses to contracts that the law recognizes. The most applicable of these to this situation is “unconscionablity.” The defense of unconscionability recognizes the reality of the mass consumer contract and is raised in cases where a consumer signs a take-it-or-leave-it standard form but the terms are so unreasonably one-sided that the court should not enforce them. Consumers don’t read standard contracts because they can’t change them anyway — they are non-negotiable. Consumers (and that’s all of us) assume they’re harmless because everyone signs them. Anyway, we have no choice — it would be hard to function in this society if we didn’t accept standard form contracts. Banks, car rental companies, and credit card companies all use them.
But something has been happening to unconscionability as a defense to consumer contracts — its power and relevance have been diminishing in the past couple of decades. Coincidentally, it was Carnival Cruise that helped bring about this change.
About 20 years ago, a passenger slipped on a mat while on a cruise and tried to sue Carnival Cruise. At issue was whether she, a resident of Washington, was required to file her suit in Florida, as required by the terms of the ticket/contract. The case made it all the way to the US Supreme Court which held that the passenger was bound by the terms. In so ruling, the Supreme Court specifically stated that this was a unique case given the maritime setting, and that its decision should not alter what it means to call something a contract. But of course, it did. The Carnival Cruise decision created a sea change of unintended consequences and brought us to where we are today — the contracting of everything everywhere.
Courts sympathized with companies’ desire for seamless transactions and so ruled that backs of tickets, and pieces of paper slipped into boxes were “contracts,” — even though the consumer never signed anything and didn’t notice the terms. And then something else happened — technology advanced. The commercial world became paperless. Even our contracts became electronic. At first, companies required consumers to scroll through electronic pages and then click check boxes to indicate agreement before using a website. But marketing departments didn’t like the way these scroll boxes created a hiccup in their users’ online experience — so companies started to get rid of them. Instead, they used hyperlinks, with or without checkboxes, to indicate there was a contract and left it to the consumer to click on them to read the terms – which few ever do. Amazingly, courts have started to enforce these, too, as contracts.
Today you can’t use email, check your bank balance, or shop online without being subject to a contract. There are so many contracts that we don’t even try to read them anymore. It would be hard to get anything done if we read every contract that was thrust in our direction. That’s because mass consumer contracts are not intended to be read — they are intended to protect companies. Consumers often don’t read terms because there’s just too much information. It’s too difficult to sort out the relevant from the irrelevant. The Carnival Cruise contract, for example, is about a dozen pages of fine print.
Consumer contracts don’t have to look the way they do. Companies could do better. Hotels typically make guests sign a contract when they check in — and then they make them initial a provision stating that if they smoke in a non-smoking room, they have to pay a hefty cleaning fee. The extra step serves a purpose. Other companies, too, can draft their contracts in a way that’s more effective at communicating. They can draw a consumer’s attention to a particular provision.
You might wonder what’s the harm? Most of the passengers on the stranded Carnival Cruise ship would still have bought their tickets if they had read the terms of their contract.
But standard form contracts contain lots of different provisions. While you might be sympathetic to Carnival Cruise’s need to limit its business risk by eliminating class actions, you might be less sympathetic to find out that in the same contract (that probably none of the passengers read) is this clause:
“Carnival and/or its promotional partners have the exclusive right to include photographic, video and other visual portrayals of Guest in any medium of any nature whatsoever for the purpose of trade, advertising, sales, publicity or otherwise, without compensation to Guest, and all rights, title and interest therein (including all worldwide copyrights therein) shall be Carnival’s sole property, free from any claims by Guest or any person deriving any rights or interest from Guest.”
In other words, you might find your smiling mug on Carnival’s next brochure — even if you spent your cruise urinating in a plastic bag, slipping on sewage, and eating stale cereal. After all, you agreed to the contract — whether you knew it or not.
Nancy S. Kim is the author of Wrap Contracts: Foundations and Ramifications. She is a law professor at California Western School of Law and a visiting professor at the Rady School of Management, at the University of California, San Diego.