Are the following Terms of Service clauses valid/enforceable?

Question

Wallhax is a website selling cheats for online games like Among Us, Apex Legends and dozens of others. Clearly what they do is in clear violation of these games' terms of services.

On their own terms of services however, they have some (superfluous if not poorly written) clauses meant to prohibit the affected game developers from buying and inspecting the cheats:

• You agree you are not an employee of [...] and are not a family member or acquaintance of the aforementioned.

• You agree you are not an employee of any law firm contracted with [...] and are not a family member or acquaintance of said firm.

• You agree you are not an employee of any company offering an anti-cheat service including [...] and are not a family member or acquaintance of the aforementioned.

• You are not an employee of any game development studio.

• You are not purchasing from our site for any investigative purposes.

• You agree not to impersonate another person.

• You may not access the The Service, the website, forums, or software of The Service if any of the above terms apply to you.

• If you violate any of the above terms you agree to pay Wallhax $30,000 USD for each login to our software and forums.

Now, imagine if a game development studio whose game's terms of services are violated thanks to Wallhax's products' assistance decides to ignore Wallhax's ToS, buys (either via a developer themselves or via a random person) the cheats, inspects how they work and updates the game to be resilient against them.

Also imagine that Wallhax discovers it and demands the studio to pay thirty thousand dollars for each time the developer logged in. The studio stonewalls Wallhax, stating that the services they provide violate the game's terms of services, and Wallhax takes them to court.

Would Wallhax manage to make the game developers pay the damages specified in the ToS?

Disclaimer: I do not belong in the group of people prohibited from accessing WallHax's products. Nor have I bought or do I intend to buy them. This question is of theoretical interest.

Answer 1

No

Penalty Clauses

Apart from the final clause, none of the others is remarkable: a business can choose who it does and does not do business with subject to anti-discrimination laws. Of course, a law enforcement officer acting in the course of their duties would not be bound by any contract.

However, the final clause is a penalty clause.

A penalty is a clause that sets a harsh monetary punishment for the breach of a contract term, or failure to uphold contractual obligations.

However, if the amount of money requested is greater than, or disproportionate to, the damage or loss that you actually suffer, there is the risk that this clause would be considered a penalty.

According to the court, a clause is a penalty if it requests the payment of an amount that is “extravagant” and “unconscionable” in light of the most significant loss that the breach could have caused.

$30,000 for me logging into the system would, on the face of it, appear to be a penalty.

Tortious interference

It is a tort (a civil wrong) to knowingly interfere in a contractual relationship between 2 parties.

Although the specific elements required to prove a claim of tortious interference vary from one jurisdiction to another, they typically include the following:

1. The existence of a contractual relationship or beneficial business relationship between two parties.
2. Knowledge of that relationship by a third party.
3. Intent of the third party to induce a party to the relationship to breach the relationship.
4. Lack of any privilege on the part of the third party to induce such a breach.
5. The contractual relationship is breached.
6. Damage to the party against whom the breach occurs.

The conduct of Wallhax clearly satisfies 1-5 with respect to an existing contract between a game developer and its users. With respect to damage, if they can demonstrate that the use of cheats cost them something - even $1, then there has been damage and the game developer can sue Wallhax.

Notwithstanding, because the purpose of the cheats is to induce users to breach their licence with the developer, Wallhax's contract has illegality of purpose at its core and is therefore void ab initio - a nullity from the beginning. That is, there is no contract.

Contracts against public policy

Even if Wallhax's conduct does not amount to tortious interference, the encouragement of people to disregard their contractual obligations - that is, to disregard their legal obligations - is clearly against public policy.

Contracts against public policy are also void ab initio.