Online contract terms and conditions unreadable, study finds

Web contracts are unreadable to many, a new study has found.

It's true - we don't know what we are letting ourselves in for when we tick a box online to confirm we understand terms and conditions.

A New Zealand study has confirmed standard or "sign-in" contracts for companies like Facebook, Airbnb and Uber are unreadable for the average consumer.

But despite needing a university degree to possibly comprehend them, courts are enforcing them.

There is no requirement to draft contracts in a readable way, says Victoria University's Dr Samuel Becher, but courts assume consumers can read them and generally enforce them.

Victoria University's Dr Samuel Becher says consumers require tertiary education to understand most online contracts. Photo / File

The researchers want legislators to require readable contracts because there is currently no strong incentive for companies to provide them.

Becher, Associate Professor at the School of Accounting and Commercial Law, and Dr Uri Benoliel, from Ramat Gan Law School in Israel, looked at standard or "sign-in" contracts that we accept when using social media, booking flights, opening bank accounts, joining a gym or renting a car.

They applied linguistic readability tests to the 500 most popular websites that use these contracts and found that on average reading the documents required a postgraduate level of education.

This was troubling, Becher told the Herald, when the recommended reading level for consumer material is Year 9 - 13 or 14-year-olds.

Commerce and Consumer Affairs Minister Kris Faafoi is also concerned, although he isn't rushing to legislate.

There may be measures beyond protections against unfair contract terms included in recent reforms to the Fair Trading Act. Those reforms are currently being evaluated.

"I am certainly keen to ensure consumers are protected so I will be looking closely at the findings and that is when we would consider whether other measures are needed," Faafoi told the Weekend Herald.

"I'm aware people are increasingly agreeing to online contracts so this is something that I will be keeping an eye on and I have asked officials to keep a watching brief."

Faafoi hoped businesses would recognise the need for people to be treated fairly but shining a light on particularly incomprehensible examples could prompt change, the minister said.

Facebook, Amazon, Uber, Airbnb, Google, Reddit, Twitter, Yahoo, eBay, Instagram, LinkedIn were among organisations whose contracts were examined.

Requests for comment made earlier this week to the first four companies mentioned went unanswered by publication time.

Consumer chief executive Sue Chetwin agrees with the researchers.

"Many standard form contracts are awful and the terms contained in some of them - such as gym contracts - are unfair."

Unless consumers on digital sites accept the terms they can't proceed.

"There is a real power imbalance there," Chetwin said.

"We get complaints when things go wrong and an astute consumer turns to the terms to find they can't understand them, have been ripped off, or they have signed up to something they didn't understand.

"Having said that, the Consumer Guarantees Act cannot be contracted out of, but some of these terms are outside of that."

The apparent lack of equality in those agreements prompted the study, Becher said.

"On one hand, consumers have a so-called legal duty to read contracts. On the other, firms are not required to draft readable contracts."

Many people thought common consumer contracts were unreadable.

"We wanted to check whether this is true. We therefore applied objective linguistic tools ...

"Our findings indicate that consumers cannot be expected to read their contracts.

"A contract is based on mutual assent, and consumers cannot truly assent to something they cannot read. We believe this is a very important insight for consumer law policy."