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New Case Limits Changes to Terms of Service

Many businesses find it helpful to have written and agreed-to terms of service for their clients or customers. These terms may be on paper or posted online, and may include regulations for usage of information, facilities or property.

A recent case has limited the flexibility a business has when amending terms of service, and it’s a good reminder that you should consider your terms of service very carefully, as you could be bound by them with limited ability to amend them later.

Changes to Club Policy Cause Controversy

The case arose when a family paid $40,000 to join a golf and country club in their development. At the time they joined, the club had a policy that if someone resigned, they would be refunded when a new person joined.

After they joined, the club sent out a notice that it was changing its policy to reflect that people who resigned would be refunded only after three new members joined.

The family eventually resigned, but were denied their refund, as three new people hadn’t joined the club pursuant to the new, updated policy. The family sued, alleging the club breached the agreement as it existed when they joined.

The club countered that its original agreement specifically stated the club could change its policies at any time with notice, and that it did, in fact, provide notice of the change to the family.

Court Rules Against Club

The court noted that contracts are interpreted based on their plain meaning, and interpreted by the intent of the parties. The court did agree that the club reserved to itself the right to amend its policies at any time, but that this language had been interpreted in other cases to mean that clubs or companies can amend privileges of membership—not substantive rights such as the ability to join, or withdraw with a refund.

Because the family’s substantive rights in membership and refund had vested, the court held those rights couldn’t be altered by a subsequent unilateral change in the policy.

Caution for Businesses

Terms of service with change clauses are often used by businesses, especially those that anticipate long-term, continuing relationships with clients or customers. In recognition that a business can’t anticipate what the future holds, the business will often want flexibility, and try to avoid being bound by contractual provisions that may be outdated, poorly written, or incomplete later on. It is understandable that businesses that may not be able to anticipate the future may wish the ability to alter agreements.

But businesses that have similar provisions in their contracts or on their websites should take heed of this decision. Simply reserving the right to change or alter a policy doesn’t give a business carte blanche right to change substantive terms after something has been agreed to.

Businesses can, of course, change any policies with the consent of the consumer or customer. Generally, that should be written consent.

Planning for your businesses future means making sure your agreements and contracts are enforceable and suit your needs. Contact Tampa business attorney David Toback to discuss how to make sure that your business is doing all that it can do to avoid problems later on.

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