Sunday, April 6, 2008

Indemnity Clause in Internet Terms of Service

This is what I will be watching in this case . may seek costs and consequential damages from its posters, after their signing the Terms of Service.

1) The indemnity clause is condemned by the UCC if between unequal parties.

2) Contracts of adhesion with a disparate parties is unconscionable per se, according to the UCC.

3) The indemnity clause represents free corporate liability insurance provided to the offeror, by the offeree, without disclosure of this effect.

4) Let's say the offeree has $100,000 in assets. Let's say, I could buy such a corporate liability insurance policy covering $100,000 of liability for $1000 a year. Then, the offeror has received a liability insurance equal to the assets of the offeree, and has been unjustly enriched by $1000 a year. That unjust enrichment should be disgorged in a class action lawsuit to retrieve the value of all the corporate liability insurance provided for free. Because this is insurance, it does not require that the offeror tried to collect on the liability coverage.

5) The provision of insurance by an unlicensed, unregulated offeree breaks the insurance laws of the state. The contract indemnity clause promises to perform an illegal act, unregulated, unapproved insurance.

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