Will a termination by convenience clause always be honored by the court, if it is used in a manner that is completely unethical? Eg. can a company terminate an account that just bought an expensive subscription without refunding said subscription?

Edit: can someone actually tell me whether this runs afoul of a tenet of contract law?

  • 1
    A more full factual context is probably necessary to provide an accurate answer, and it is also necessary to know whose law to apply.
    – ohwilleke
    Jul 27 '21 at 8:15

Unadulterated contract law is brutal

Nor is it the same in every jurisdiction - I will focus on .

The central tenant of contract law is that the parties are free to agree anything that is legal irrespective of whether this leads to what may seem to be a harsh or unjust outcome to an outside observer (or the parties themselves). At common law, harsh and unjust terms are legal - only unconscionability attracts legal protection. However, see below.

The parties have an obligation to follow the terms of the contract in a way that gives effect to the purpose of the contract and to not act in bad faith - there is no obligation to act in good faith. Notwithstanding, a party that scrupulously follows the terms of a contract cannot be acting in bad faith - they are doing what they agreed to do.

That said, most “termination for convenience” clauses are, by their nature, discretionary. Where a party has a discretionary power under a contract they must exercise it reasonably. This doesn’t mean that they can’t exercise the power if it causes damage to the other party but, if it does, then that is a factor in whether the action was reasonable.

If the action was reasonable then only rights and obligations up to the date of termination are enforceable at common law. So, in your circumstance the customer is not entitled to a refund.

However, ...

Many contracts are not made purely at common law and statute law has knocked some of the harsh edges off.

For example, this contract may be subject to Australian Consumer Law (ACL).

For the purposes of the ACL, a person is a 'consumer' if they acquire goods or services that are priced at less than $40,000. A person is also a 'consumer' if they acquire good or services that are priced at more than $40,000 but they are 'of a kind ordinarily acquired for personal, domestic or household use or consumption'.

If your “expensive subscription” is less than $40,000 then ACL applies and you are entitled to a refund for the services not provided.

Further, if the vendor engaged in “misleading or deceptive conduct” (irrespective of if you are a consumer) then the contract can be set aside and you get your money back.

If the contract is a “consumer contract” (which includes most “take it or leave it” contracts with individuals and small and medium enterprises) then a term is unlawful if it is unfair rather than unconscionable.

  • The example given ( signing an expensive contract and then immediately cancelling it) would appear to unconscionable, right?
    – MSalters
    Mar 30 '21 at 10:10

can a company terminate an account that just bought an expensive subscription without refunding said subscription?

No, that is very unlikely. Not only it would have to be allowed by the terms of the contract, but the clause itself might contravene consumer protection laws insofar as it has all the appearance of an unfair and deceptive practice.

can someone actually tell me whether this runs afoul of a tenet of contract law?

Contract law is premised on the covenant of good faith and fair dealing, and also on the principle that clauses are entered by the parties knowingly and willfully.

If the terms of the clause reasonably inform the customer about provider's arbitrariness, the contract itself meets the premise(s) of contract law. But, as said above, that agreement won't necessarily survive the enacted laws on consumer protection.

By contrast, if the customer is not duly informed, then the provider would incur breach of contract (and thus be in violation of contract law), fraud, unjust enrichment, and similar/related torts.

Will a termination by convenience clause always be honored by the court, if it is used in a manner that is completely unethical?

Hard to tell. Don't think that justice and the judiciary go hand-in-hand.

Much of the court system is plagued by blatant, corrupt judges. For instance, a defrauded customer might file suit and undergo intensive litigation only to be lectured by some debauched judge similar to how this narcofelon does from the bench:

The State loves [...] anybody who's powerful. Okay? And it doesn't say that anywhere in our Constitution. But if you're not in those groups, the[n] you just kind of have to [...] stay out of the way.

It is reasonable for people without litigation experience to conjecture that courts enforce laws and "serve justice". That is what we are systematically told to believe. But in reality there is a notorious lack of integrity among many, many judges. Laws are one thing, but what those judges do in actual court disputes are a very different thing. Therefore, a markedly unfair, one-sided clause will only make it easier for the judge to side with the party the judge calculates is more profitable to favor.

  • Who keeps downvoting answers without even trying to articulate his pretext therefor? Nov 29 '20 at 9:42
  • The quote starting "The State loves [...] anybody who's powerful." (which IV has used many times) is not relevant to this question or this answer, and so i have downvoted. Nov 29 '20 at 18:39
  • @DavidSiegel It is unfortunate that you are allegedly unable to grasp the relevance to the post. The OP asked whether a court would honor something that is used in a completely unethical way. My answer provides a real and verifiable example of how a court blatantly can and singlehandedly does suppress all considerations of ethics and of law. But thanks for coming forward. Nov 29 '20 at 19:52
  • I assure you that it is not alleged: I did not and do not see relevance. The question had to do with whether a particular sort of contract provision would be honored, even if used in an unethical way (which the question did not specify). The quote the quote refers to an apparently unethical comment by a judge, but has nothing to do with how a contract clause would be interpreted in particular circumstances, or what the law is. Also, this is the first time I have downvoted one of your answers this year, so I am not the person who "keeps" doing so. Nov 29 '20 at 20:04
  • @DavidSiegel A judge's blatant and unethical comment is indicative of that judge's propensity to ignore legal and ethical considerations when deciding how to interpret, and whether to enforce, a contract provision or a law. When a legal dispute is so compromised by judicial idiosyncrasy, the terms of clauses and of laws become meaningless. The OP needs to be aware of an unfortunate reality which, for fear of being marginalized, very few attorneys will openly admit. Nov 29 '20 at 20:23

It's not possible to have a contract with a termination at convenience clause. A contract requires consideration from both parties. If one party can terminate the arrangement at any time, then they don't have any obligations towards you, so it's not a contract. It's just you giving money to the company as a gift, and the company might do something in return.

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