New Microsoft terms and conditions limit users’ legal options

By Peter Gothard
04 Sep 2012 View Comments
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A new set of terms and conditions has been sent to existing users of Microsoft's online services – including Hotmail, SkyDrive, Messenger, Bing, MSN and Office.com – that effectively prohibits a user from filing a class action lawsuit against the company, or from settling disputes any other way but through a private arbitration procedure.

The new services agreement, applying to all the Microsoft services named in clause 1.1 of the document, as well as "any other software, website, or service that links to this agreement", comes into effect from 27 September 2012.

Further reading

Clauses 10.3 and 10.4 of the agreement illustrate Microsoft's demands, which Computing understands currently only directly affect US citizens, but may have repercussions in international law.

"Class action waiver. Any proceedings to resolve or litigate any dispute in any forum will be conducted solely on an individual basis," says clause 10.4. "Neither you nor Microsoft will seek to have any dispute heard as a class action or in any other proceeding in which either party acts or proposes to act in a representative capacity."

While the waiver could be construed as placing both Microsoft and its users on a relatively equal footing, the method of solving "individual" disputes could potentially place users at a disadvantage.

"Binding arbitration. If you and Microsoft don't resolve any dispute by informal negotiation or in small claims court, any other effort to resolve the dispute will be conducted exclusively by binding arbitration as described in this section," reads clause 10.3.

"You are giving up the right to litigate (or participate in as a party or class member) all disputes in court before a judge or jury," confirms the clause. "Instead, all disputes will be resolved before a neutral arbitrator, whose decision will be final except for a limited right of appeal under the Federal Arbitration Act. Any court with jurisdiction over the parties may enforce the arbitrator's award."

Clause 10.5 describes the arbitration process, revealing that such processes will be carried out by the American Arbitration Association – a private dispute resolution body with no direct public sector affiliation.

There are also concerns that, unlike similar contracts that have been operated by online services, including gaming companies Blizzard, EA and Valve, there is no visible way for current Microsoft service users to "not agree" with the new terms and conditions.

The new service agreement simply states: "This is the entire agreement between you and Microsoft for your use of the services. It supersede any prior agreements between you and Microsoft regarding your use of the services. All parts of this agreement apply to the maximum extent permitted by relevant law."

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