Another clause that can significantly distort the balance between a consumer and a service provider is a clause that gives the latter a unilateral right to terminate the contract at any time, for whatever reason. When consumers conclude contracts to use online services they expect, amongst other things, to be able to store their documents and photos (in case of cloud-based storage services or social networks) or to communicate with their families and friends (in case of social networks or e-mailing services). Clearly, from the consumer’s perspective, if the online service provider could terminate the contract at any time and for any reason that could seriously undermine the whole purpose of entering into the contract. Hence, if an online service provider informs consumers in advance that, e.g., they would only be able to store documents online, send e-mails, or use a social network for a month or two, such consumers would be likely to choose the service of another, more reliable party instead.
In many cases, the service offered by online service providers is “free of charge,” that is, not paid for in money. Whether consumers pay for online services in money or not may influence the evaluation of the unfair character of a contractual term. First, consumers may expect less certainty from a “free” service. Second, consumers could then not as easily prove that due to the service provider’s right to unilaterally terminate the contract without a valid reason the parties’ position would be significantly unbalanced. However, in many cases, consumers pay for such “free” services in other than monetary ways, typically, by being exposed to advertisements or by providing their personal data (see above the “Application of the Unfair Contract Terms Directive to Online Contractual Terms” section). The fact that the consumer does not pay a price in money can, therefore, not justify the online service provider’s right to terminate a contract for whatever reason at any time, in particular not, when the consumer has already provided her personal data and thus has rendered her performance. This fact should, therefore, be taken into account in the evaluation.
Changed circumstances may force a trader to discontinue a product or a service offered by that trader. For that reason, a term allowing the trader to unilaterally terminate the contract may be fair under certain conditions. However, such a term should consider the reasonable interests of the consumer. A right to unilaterally terminate the contract may be unfair, in particular, where the consumer has a reasonable interest in preserving the contract’s longevity, because she has foreseeably invested time and effort in the services offered by the trader, e.g., by importing and storing data in “her” part of the cloud. This is all the more true if the trader does not inform the consumer of its intention to terminate the contract or the service or does not observe a reasonably long notice period allowing the consumer to withdraw her data from the cloud and transferring it elsewhere (Bradshaw et al. 2011, pp. 203–204).
The Annex to the Directive contains two provisions dealing with the contract’s termination by the trader: paragraph 1 under (f) lists as a potentially unfair contract term a clause
authorizing the seller or supplier to dissolve the contract on a discretionary basis where the same facility is not granted to the consumer, or permitting the seller or supplier to retain the sums paid for services not yet supplied by him where it is the seller or supplier himself who dissolves the contract.
In addition, paragraph 1 under (g) concerns terms
enabling the seller or supplier to terminate a contract of indeterminate duration without reasonable notice except where there are serious grounds for doing so.
The provision under (f) deals with reciprocity: If the trader reserves his right to terminate unilaterally at will, such a clause is likely to be fair only where the consumer may do the same. It should be noted that the mere fact that the consumer is awarded a similar right to unilaterally terminate the contract does not automatically signify that the term is fair. As paragraph 1 under (f) of the Annex to the Directive indicates, the term could still be unfair if it allows the trader when he terminates the contract to keep the consumer’s remuneration for services not yet rendered. Such a term would imply that the trader receives at least a part of his remuneration for services he does not render. This could apply also in cases of “free” services where the trader is able to continue using (or selling) personal data received from the consumer without performing his part of the contract. The provision under (g) clarifies that in the case of a contract of indeterminate duration, i.e., a contract that does not end automatically and can only end through termination, termination by the trader in itself may be justified but the trader either is required to have serious reasons for termination with immediate effect or needs to respect a reasonable notice period. Therefore, terms allowing the trader to terminate the contract with immediate effect without there being serious reasons for such termination may be considered unfair. In such circumstances, additional problems may arise if the trader has immediately upon termination of the service deleted the consumer’s data stored within the service (Bradshaw et al. 2011, p. 204).
It seems likely that the CJEU, as it did with regard to terms allowing for a unilateral change of the price, will jointly evaluate these two Directive’s provisions when determining under which conditions a term allowing for unilateral termination can be considered as fair. In this respect, it should be remarked that if unilateral termination is possible too easily, contractual performance would be entirely dependent on the trader’s discretion, which would undermine the consumer’s trust in the binding force of the contract. Moreover, if unilateral termination is readily available to the trader, this would undermine the effectiveness of the rules developed by the CJEU to restrict the validity of terms allowing for a unilateral change of the price, as such rules could then be easily circumvented by traders simply terminating the contract and offering the consumer to conclude a new contract under acceptance of the changed standard terms or price.
Therefore, we predict that the CJEU would interpret paragraphs 1 under (f) and (g) of the Annex to the Directive in a way that would find a standard term allowing for unilateral termination by the trader to be unfair if
The trader need not notify the termination before effecting it (on the basis of paragraph 1 under (g) of the Annex to the Directive);
The trader need not state any reasons for termination (on the basis of paragraph 1 under (g) of the Annex to the Directive);
The trader may terminate the contract also in case of minor infringement of the contract terms by the consumer (on the basis of paragraph 1 under (g) of the Annex to the Directive);
The reasons for termination have not been stated in the contract or in the standard terms (on the basis of paragraph 1 under (g) of the Annex to the Directive);
The trader is not required to observe a reasonable period for termination, taking into account the consumer’s reasonable interests, apart from serious reasons justifying immediate termination (on the basis of paragraph 1 under (g) of the Annex to the Directive);
It is left up to the trader’s sole discretion to determine whether there is a serious reason justifying immediate termination (on the basis of paragraph 1 under (g) of the Annex to the Directive);
The consumer is not awarded a similar right of unilateral termination at will (on the basis of paragraph 1 under (f) of the Annex to the Directive); or
The trader is allowed to keep prepayments made by the consumer for services not rendered (on the basis of paragraph 1 under (f) of the Annex to the Directive).
On the other hand, if the trader has drafted the termination clause in such a way that the right to termination is limited to situations where the trader has a valid reason for it, these reasons have been stated in the contract, and a reasonable notice period would be observed, it is likely that a national court would not find such a term unfair, in particular if a reciprocal right would be granted to the consumer. A valid reason could be found in a situation where the consumer violated the terms of the service and the infringement was not merely minor in nature, but also where a digital product was outdated and replaced by a new product, making it economically unviable to continue the service. Moreover, the trader could almost certainly avoid the abusive character of the clause if he gave consumer an option to contest his reason for termination and if the termination would not be effected until a court or an ADR or ODR institution had ruled on the consumer’s complaint.
The relevant terms used by Facebook, Twitter, Google, and Dropbox with respect to unilateral termination are shown in Table 3.
First, we remark that consumer contracts with these online service providers are usually of indeterminate duration, which means that paragraph 1 under (g) of the Annex to the Directive applies to them. Dropbox’s termsFootnote 33 reserve the right for Dropbox to suspend or end services at any time at its discretion and without notice. This provision, therefore, mirrors the presumably unfair terms listed above under (1) and (2). In our view, the term is hence to be considered unfair on these two grounds. Exceptionally, when Dropbox terminates the contract due to non-activity during 12 consecutive months, Dropbox commits itself to give the consumer prior notice via the e-mail address associated with the consumer’s account. However, Dropbox still does not indicate how far in advance such a notice must be given (Bradshaw et al. 2011, p. 197). Even if we acknowledge that this term meets the first two requirements, it could, nevertheless, be regarded as unfair if the court would find the absence of an indication as to the length of the notice period as not prescribing a reasonable period for termination, as listed above under (5). These provisions are then potentially unfair on the basis of paragraph 1 under (g) of the Annex to the Directive. However, since Dropbox provides for a reciprocal right of unilateral termination to its consumers, consumers could not invoke paragraph 1 under (f) of the Annex to the Directive against Dropbrox.
FacebookFootnote 34 provides that when the consumer violates the contract’s letter or spirit, or if she otherwise creates risk or possible legal exposure for Facebook, it may terminate the contract. In particular, the latter part of this clause is drafted so broadly that even writing this paper could instigate a contract’s termination by Facebook of any Facebook-account we might have (Leydon 2013; Moses 2008). Moreover, the same term states that notification may be provided by e-mail or on the Facebook website the next time when the consumer attempts to access her account, suggesting that termination has already taken effect without respecting any notice period. Clearly, several of the possibly unfair terms listed above, in particular the ones listed under (1), (3), and (5), could be invoked here to contest the validity of Facebook’s terms (Rustad and Onufrio 2012, p. 1114; Wauters et al. 2014b, pp. 31–34). Again, consumers could contest Facebook’s terms on the basis that they fall under the category of potentially unfair contract terms as described in paragraph 1 under (g) of the Annex to the Directive, but not be able to invoke paragraph 1 under (f) of the Annex to the Directive.
The same applies to the standard terms used by Twitter.Footnote 35 In addition, Twitter provides in its terms that it may suspend or terminate the contract if it “reasonably believe[s]” that the consumer has violated the contract terms or the Twitter Rules. This implies that Twitter need not even prove that the consumer has breached her contractual obligations; it suffices if it reasonably believes that this is the case. This effectively means that the consumer would have to prove that she has not breached the contract, thus reversing the burden of proof. Such a term is listed as potentially unfair in the Annex to the Directive under paragraph 1 sub (q). And even if the consumer would prove that she has not violated the contract, this still may not be enough if Twitter nevertheless believes otherwise. In other words, this term in fact resembles also the possibly unfair terms listed under (2) and (6), reflecting some of the requirements listed in paragraph 1 under (g) of the Annex to the Directive.
Finally, Google’s termsFootnote 36 provide that it may suspend or stop a service altogether and, more specifically, that it may stop providing services to a particular consumer. This creates an unlimited, unrestricted termination right. Moreover, Google does not need to observe the notice requirement and termination of the contract may take immediate effect. Clearly, this term mirrors listed clauses (1) to (6) and is likely to be considered unfair on the basis of paragraph 1 under (g) of the Annex to the Directive.
We may, therefore, conclude that the termination clauses in the standard contract terms of each of these online service providers appear to be unfair in as far as they do not respect fairness requirements posed for termination of contracts of indeterminate duration. All these online service providers fulfil, however, the requirement of reciprocity in giving consumers an opportunity to unilaterally terminate their contracts as well.