Blockbuster operates an online movie rental service in the US, which is subject to a user agreement.  In the recent US decision in Harris v. Blockbuster Inc., 2009 WL 1011732 (N.D. Tex. April 15, 2009), Blockbuster tried to deflect a customer’s lawsuit by using a standard mandatory arbitration clause in the user agreement. If the arbitration clause was valid, then the lawsuit would be dismissed and the complaint would be diverted from court to arbitration. Blockbuster’s user agreement indicated that Blockbuster could: “…at any time, and at its sole discretion, modify these Terms and Conditions of Use, including without limitation the Privacy Policy, with or without notice…”

The Court reasoned that the arbitration clause was “illusory” because Blockbuster could, under its amendment clause, make unilateral changes to the arbitration terms, even after a complaint was made. 

Lessons for business?

• For online terms, make sure your amendment clause is not completely arbitrary. Amendments should only be permitted with reasonable notice.
• When notice of amendments is given, ensure that changes are brought to the attention of users. In some cases it might be appropriate to email copies or mail hard copies of the amended terms to users.
• Obtain advice on a “saving provision”, which could have preserved Blockbuster’s mandatory arbitration clause.

Calgary – 10:45 MST