0

Imagine US citizen X has its US home broadband contracted with US corporation FastNet LLC.

One day FastNet LLC cuts the service stating that "Citizen X has violated ours terms and conditions". Citizen X is very surprised and unaware of any wrongdoing from his side so asks for an explanation/double check his case. FastNet replies that it is "at its sole discretion to provide or terminate the service".

Does Citizen X have the right to know what particular term and condition has she allegedly violated?

Is FastNet obliged to show evidence of Citizen X wrongdoing to terminate its service or Citizen X "presumption of innocence" is not applicable to private contracts?

*Interested in a US law interpretation but a general theoretical point of view also useful.

7
  • 2
    This question, about whether it's against the presumption of innocence to require people on public transport to produce a ticket, might be relevant. There's also a question about the right to silence in civil cases. Basically, presumption of innocence only applies to criminal trials.
    – Stuart F
    Dec 5, 2023 at 12:16
  • 1
    'FastNet replies that it is "at its sole discretion to provide or terminate the service".' Then this should be part of the contract or TOS. If that's the case, the quote means that they can terminate the service for any or no reason and there is likely nothing the customer can do.
    – Roland
    Dec 5, 2023 at 12:21
  • 2
    Note that the Stack Overflow network TOS contain a very similar clause and they can terminate your access anytime if they believe they have a valid reason.
    – Roland
    Dec 5, 2023 at 12:25
  • But then, FastNet could discriminate Citizen X for any unconstitutional reason (e.g. Citizen X being black) and Citizen X has no recourse. Actually, Citizen X doesn't even know he is being terminated because of his race as FastNet doesn't even provide any evidence or reason to terminate the service. I am surprised it is "lawful".
    – User981636
    Dec 5, 2023 at 12:27
  • 1
    @user3507584 Masterpiece Cakeshop v. Colorado is a recent US Supreme Court ruling that essentially gives businesses an absolute right to discriminate against potential customers for any reason. It's an absolutely idiotic and unjust ruling, but there you go. Dec 5, 2023 at 16:58

4 Answers 4

3

Does Citizen X have the right to know what particular term and condition has she allegedly violated?

If the Terms of Service allow it to terminate service without cause (which it usually would), then no.

Is FastNet obliged to show evidence of Citizen X wrongdoing to terminate its service

No.

or Citizen X "presumption of innocence" is not applicable to private contracts?

In court, the person alleging a breach of contract has to prove that this happened by a preponderance of the evidence. But, no proof is necessary if FastNet is merely exercising its solely discretionary right under the contract which may be taken even without a breach of the contract or terms of service.

3

If termination is truly discretionary

If the contract truly gives a provider "sole discretion" to terminate (many contracts do), then the reason they give for termination is not even necessary, but they may provide one in order to provide some explanation to the former customer. There is no contractual or legal obligation to explain a cancellation that is truly within the discretion of one of the parties.

If termination by the provider must be based on a customer breach

Evidence would only be relevant if the customer were to bring a breach of contract claim against the provider and the contract conditions the provider's right to terminate on a breach by the customer. If that's the case, the litigation will be focused on whether the customer breached or not.

The overall burden in a civil suit is on the plaintiff to prove their case on a balance of probabilities. There is also a burden on anyone alleging a fact to lead evidence about that fact.

Technically, the burden would be on the customer to prove on a balance of probabilities that the provider terminated without a right to terminate, and would argue that they (the customer) did not breach any term that would give the provider the right to terminate. But the provider would have a practical, evidentiary burden, to introduce some evidence that the customer did breach a term that gave rise to the provider's right to terminate.

2

It’s complicated

Contract Law

This PWC report from March 2023 provides a good summary of the law in , and Federally. It is focused on energy infrastructure but the commercial contract law is pretty universal.

NSW courts have generally held that an obligation for parties to act in good faith can be implied in all commercial contracts. On the other hand, Victorian courts have rejected the notion that good faith should be indiscriminately implied to override any express provisions of power. However, Victorian courts have not completely overruled the need for good faith in certain commercial situations, especially where balance of power heavily favours one party.

The Full Federal Court in Virk Pty Ltd (in liq) v YUM! Restaurants Australia Pty Ltd [2017] FCAFC 190 identified good faith in terms of conduct that can be deemed to be in bad faith. It specified that conduct that is:

  • capricious
  • dishonest
  • unconscionable
  • arbitrary
  • the product of a motive which was antithetical to the object of the contractual power

will be in bad faith.

So, what does that mean?

It means that if the contract gives power to someone to do something, they must exercise that power:

  • in good faith if it's under NSW law,
  • possibly in good faith if it's under Victorian law,
  • not in bad faith if it's under Commonwealth law.

This is all subject to the specific wording of the contract; a contract that gives someone a clear and unfettered power that explicitly excludes reasonableness and good faith, then they can exercise that power however they like. Similarly, one that explicitly requires reasonableness or good faith ... will require the power to be so executed. The implied situations used by the courts above are relevant only when the contract is ambiguous or incomplete; as they often are.

Consumer Law

Or, if it's a contract subject to the unfair contract terms provisions of the Australian Consumer Law, which came into force on 9 November 2023, so there's no case law to clarify them. Unless "citizen X" is able to negotiate the terms of their broadband contract, which would imply they were a major corporation, these provisions will apply because, for most of us, broadband contracts are take-it-or-leave-it.

Contract terms are unfair if they:

  • cause a significant imbalance in the rights and obligations of the parties under the contract
  • are not reasonably necessary to protect the legitimate interests of the party who gets an advantage from the term, and
  • would cause financial or other harm to the other party if enforced.

In deciding whether a term is unfair, a court can consider any matters it thinks relevant but it must consider the contract as a whole and whether the term is transparent.

The law sets out examples of terms that may be unfair, including:

  • terms that allow one party (but not the other) to avoid or limit their responsibilities under the contract
  • terms that allow one party (but not the other) to end the contract
  • terms that penalise one party (but not the other) for breaching or ending the contract
  • terms that allow one party (but not the other) to change the terms of the contract.

Something's fishy

One day FastNet LLC cuts the service stating that "Citizen X has violated ours terms and conditions".

Fine, it's probably not unfair to allow a broadband company to cut ties for violations of the terms and conditions; indeed, termination for cause is a longstanding tenant of contract law.

FastNet replies that it is "at its sole discretion to provide or terminate the service".

Fine.

If this is not a consumer or small business contract, then such a provision is fine, subject to any explicit or implied terms of good faith or reasonableness in its implementation. If it is subject to the unfair contract terms regime, providing the customer has a mirroring right to terminate on the same basis, this is OK.

But ... it can't be both! Either they terminated for cause, or they terminated for convenience: they can't have done both at the same time.

What it looks like is they have mistakenly believed they had cause, and when challenged, rather than saying "my bad", they have doubled down and stated a different reason for termination. That starts to look like bad faith, and that's unlawful.

What's next

All telcos in Australia have to have a complaint-handling system, so citizen X will need to follow that process. This will be structured but will not rely on strict rules of evidence or standards of proof; the idea is to find a mutually satisfactory outcome.

If the process fails or citizen X is unhappy with the outcome, their next step is to complain to the Telecommunications Industry Ombudsman, who will try to help.

Finally, you can sue to recover your losses or for an order to restore the service. Of course, for the dollar amounts involved, it's probably not worth it.

If you do go to court, you would be the plaintiff, and it would be your obligation to prove your allegation (that they terminated the service outside the contract terms) on the balance of probabilities, that is, more likely than not. So, each side would present their evidence, and, assuming there is at least some evidence to support the plaintiff's assertions, the judge would determine who they believe more.

1

Contracts with an undefined lifetime basically always have a notice period. This includes phone or broadband contracts, but also rental contracts and work contracts. It is legal and for some companies common (but IMHO very bad for their reputation) to cancel a contract, observing the notice period, without a reason. Art 355 OR requires a written justification for firing someone, but only applies to work contracts.

Cancelling a contract without observing the notice period (e.g. immediately) however requires serious reasons ("schwerwiegende Gründe"). In this case, a reason obviously needs to be given, or the terminating party will be liable for any damages (e.g. the higher cost of another contract).

A bit of a challenge is Art 404 OR, which allows the termination of service contracts (which a broadband contract arguably is) at any time without any reason. I'm not aware that phone companies apply that article to their contracts though, as they're normally not interested in customers that terminate their contracts without notice either.

1
  • "Contracts with an undefined lifetime basically always have a notice period." The nature of the service provided would matter, I would think. A phone or broadband or rental or work contract would have very different customary terms than, for example, an online multiplayer game or a social media site. A short or non-existent notice period would be especially common for something you are allowed to use for free.
    – ohwilleke
    Dec 5, 2023 at 15:41

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .