Can a business unilaterally change a contract?

Question

Suppose a customer enters into a lease- or subscription-type agreement with a business, where the business either provides a physical thing that the customer takes and uses, or the business does a thing for the customer such as mows the lawn every other week, or provides the customer with remote access to something such as internet access, web service hosting, or some online content-access service: the point is that the customer need never see or interact with any person from the business, after the agreement is reached. What passes for a written agreement simply states that the business provides that access or use of the thing to the customer for 1 year, and the customer pays a specified fee which is due up front (and was paid). There is, in particular, no clause allowing either party to terminate the contract with or without a refund (pro-rated or otherwise), no clause allows either party to unilaterally change the terms of the agreement, and no clause requires the parties to renegotiate if one side wants something.

However, there is also nothing that prohibits one party from attempting to modify the terms of the agreement. The business could propose a new term in the contract, and the customer might accept that term. I am interested in the case where the business sets forth a new term, and the customer is not interested. The customer might explicitly reject the new term; if he does not explicitly reject the term, and also does not explicitly accept it, does silence have the same effect as explicit rejection? To be concrete about the new term, assume that it is a clause about the agreement and not the service, so for example a mandatory arbitration clause, a waiver of liability, or a non-disparagement clause.

In this scenario, the customer has a continuing right to that service, and by accessing the web site, using the equipment or allowing the mowers to mow the lawn as usual, it is reasonable to assume that they are simply exercising their rights under the old contract, and have not implicitly accepted the new terms. On the other hand, it might not be inconceivable that the courts have discovered an obligation to explicitly respond, whereby failing to reject is as good as accepting. Is it a clearly settled matter of law how silence along with continued use of the paid-for service is treated? (I’m looking for a leading case citation: US law if there's a difference between US and the rest of the common law world).

There is a general Prescott v. Jones, 41 A. 352 (N.H. 1898), exemplified in insurance contracts, that

it is well settled that "a party cannot, by the wording of his offer, turn the absence of communication of acceptance into an acceptance, and compel the recipient of his offer to refuse it at the peril of being held to have accepted it"

There is a realm of "exceptions" with National Union Fire Insurance v. Ehrlich, where an insurance contract had ended and the company sent a renewal offer along with a bill (which was 2 months later rejected). The court ruled in favor of the company, citing Williston On Contracts:

Generally speaking an offeree has a right to make no reply to offers. But the relations between the parties may have been such as to have justified the offeror in expecting a reply. When property is sent to another though not ordered but under such circumstances that the latter knows that payment is expected, the silent acceptance of the property is in effect an assent to the offer of sale implied by the sending of the property.

See also Austin v. Burge, 137 S.W. 618 for renewal of a newspaper subscription. These kinds of cases fall outside of the scope of this question, for two reasons. First, they involve a customer using the service when they have no existing contractual right to do so, second, automatic renewals are commonplace and to be expected, whereas one party unilaterally changing a contract is not at all commonplace. In the situation covered by the question, the customer is still within the period of the existing contract.

Answer 1

What determines each parties' rights and obligations is the written agreement, at least during the one-year period that the contract indicates. During that year, any subsequent changes are not binding unless the parties explicitly agree to make it part of --or amendment to-- the initial contract.

Upon expiration of the contract, the party intending to make any changes has the equitable duty to clearly (and verifiably) inform the counterparty about the new conditions for these to be enforceable.

For instance, if the provider establishes any new conditions upon expiration of the contract, he should include a clause indicating that the customer's continued use of the services indicates customer's agreement with the new terms. Absent any such clause, the customer could prevail on a theory of implicit contract (that is, a contract as inferred from the parties' subsequent conduct) if the provider continues providing the service despite a lack of customer's acceptance of the new terms. (*)

In case of dispute arising from the new, controversial conditions under these circumstances of continued service, the terms of the initial contract might reinforce the counterparty's theory of implicit contract.

I don't have a case citation. I doubt there are binding precedents (aka authorities) dealing with that vagueness of conditions as in the hypothetical situation you describe. My rationale strictly derives from contract law.

Edited to add:

(*) By prevailing I only mean that the new clause would not be enforceable retroactively (even if the contract has expired). Other than that, the provider obviously is free to stop the service anytime upon expiration of the original contract if the customer does not indicate acceptance of the new terms and conditions.

Answer 2

I am interested in the case where the business sets forth a new term, and the customer is not interested. The customer might explicitly reject the new term; if he does not explicitly reject the term, and also does not explicitly accept it, does silence have the same effect as explicit rejection?

In contract law, silence does not constitute acceptance with some exceptions applicable to this question:

1. The offeror has told the offeree that silence will constitute acceptance.

2. The offeree gives the offeror the impression that silence will be considered an acceptance (National Union Fire Insurance Co. v. Ehrlich [1924]).

Most likely, the business will include in the agreement a clause about silence constituting acceptance from the very beginning — giving effect to exception 1 above.

In the unlikely scenario that such a clause is not included, then the fact that the customer continues to use the service after receiving updated agreement will most likely fall under the exception 2.

it is reasonable to assume that they are simply exercising their rights under the old contract, and have not implicitly accepted the new terms

Whilst that might seem reasonable in terms of common sense, it is not in line with common/contract law.