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Wag! is an app for dog sitting services. According to their terms, once you get acquainted with a pet care provider through Wag! platform, you cannot obtain for life pet care services from the dog sitter, off their platform. If you do, Wag! can charge your card a $1,000 referral fee and the same applies to the dog sitter.

EDIT

Note that the mentioned contract provision has no expiration. You are subject to $1,000 payment whenever during your lifetime you should happen to ask for a pet care service to someone met through Wag!. Is this legal?

The provision is akin to a non-compete clause where the dog sitter agrees not to start a separate business in competition against their employer. In that case $1,000 qualifies as a compensation for breaching the agreement. However dog sitters (like Uber drivers) are not Wag! employees, and by the way these clauses are not permissible in all jurisdictions. This is might be the reason they use the term 'referral fee', anyway, the fee is many times more the value of the referred pet-care services: imagine to pay $10,000 for a second hand car and $50,000 for someone helping finding the seller. It is reasonable to assume nobody would willingly accept to pay such a huge fee and the only reason to enter the contract is the misrepresentation of the associated costs.

All that given:

  1. How such a clause is to be construed (in a court)?

  2. If they charge customers credit cards with a $1,000 referral fee, what type of legal protection will they have?

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    I'm trying to understand what you're asking. Are you asking how a court would construe the contract, or whether a court would strike the provision? Are you asking whether a court would intervene and prevent Wag from charging $1000, or reverse the charge, in case of error? Are you asking what type of legal action Wag would file? Also note that the terms contain an arbitration clause which means that any disputes would likely be heard by an arbitrator, not a court. – L235 Sep 2 at 2:00
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    @L235 great point about the arbitration provision, but it’s clear OP is asking how Wag! could enforce that provision of the contract. So the answers to your questions, in order, are most likely: yes and yes. No and no. Yes. – A.fm. Sep 2 at 3:25
  • @L235: I think the plaintiffs could be their app users, when finding thier card $1,000 debited. Not a lawyer here, but I have never heard of such a referral fee. – antonio Sep 2 at 7:51
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    @antonio I'm not going to vote to close this question because I know that it would be a great question if you reworded the question (Hint: your question "I wonder how can this be legally ....." is subjective, try making the question more objective). – User37849012643 Sep 2 at 12:05
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    @StephanS: I tried – antonio Sep 6 at 22:04
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About the part where they say that will charge your payment method, when you terminate your relationship with the company, you should send registered mail withdrawing authorization to charge your credit card thereafter, and you should notify the credit card company that further charges are not authorized. This won't change your legal liability, it just changes whether they have to first prove that you are legally liable before collecting the money.

It is problematic that only the company has the right to terminate the contract, but you can treat that as a harmless omission of wording on their part. Surely they did not intend that you are perpetually bound to the terms of the contract and the obligations in section 11. Of course, you have to stop using their services in order to terminate the contract. Given the nature of their service, you can send a notice (registered mail again) to them informing them that you are terminating the contract and will not be using their services.

If then some time in the future you do hire a pet walker that you met through the service, they might come after you for the $1,000 (although, at their sole discretion, they can increase that amount to $20,000 or anything else, see section 2). If you have prevented them from charging your credit card, they would have to get a judgement against you, meaning they would have to go for arbitration. Or, if they did charge your credit card, then you would have to initiate the proceedings to get your money back. That is, unless you opted out of arbitration within 30 days of starting the relationship. Let's assume you did opt out.

The question would then be whether a perennial "no-compete" clause would be enforceable against you. Employees are often bound to no-compete agreements prohibiting them from doing the same work in the same area for a certain period of time. A lifelong no-compete agreement would be unenforceable, at least in court, but a 6-month no-compete clause could easily be. In Medix Staffing Solutions, Inc. v. Dumrauf, the court recites standard legal requirements of enforceable no-compete agreements, especially that they be "reasonable and necessary to protect a legitimate business interest of the employer". In such a case, the court would consider "the hardship caused to the employee, the effect upon the general public, and the scope of the restrictions", and the company would have to show that the "full extent of the restraint is necessary for protecting its interests". It is in principle possible that the court would find such a clause unenforceable (owing to it imposing a life-long obligation on you). This could be a new area of law: customer non-compete clauses. One other point about that clause is that it is just a penalty clause, which is unenforceable (calling it a "referral fee" doesn't change the fact that it is a penalty clause). It can't reasonably be interpreted as a liquidated damages clause (which is enforceable). $100 might be.

You might rely on the mercy of the court, hoping that they would find such a perma-ban clause to be "unconscionable" and unenforceable; in principle, the arbitrator could find the same thing. An alternative would be to accept the conditions in the contract, and never hire that dog-walker on your own.

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