Cengage Advantage Books: Business Law Today, The Essentials 11th Edition by Roger LeRoy Miller

Exercise 1

ADAPTING THE LAW TO THE ONLINE ENVIRONMENT
When Do Changes in Social Media Terms of Service Constitute a Breach of Contract
Hundreds of millions of individuals use some form of social media. To do so, they must agree to certain terms of service.
The Terms of Service Are a Contract
Any time you use social media on the Internet or download an app for your mobile device, you must accept the associated terms of service. To be sure, users generally do not read these terms. They just click on "accept" and start using the social media platform or the app. Nonetheless, by clicking the "accept" button, each user is entering into a contract.
An Example: Instagram Changes Its Terms of Service
In 2012, to the consternation of many users, Instagram changed its terms of service to give it the right to transfer and otherwise use user content on the site, apparently without compensation to users. The new terms also limited users' ability to bring class-action lawsuits against Instagram, limited the damages they could recover to $100, and required arbitration of any disputes.
Lucy Funes, an Instagram user in California, filed a class-action lawsuit on behalf of herself and other users, claiming breach of contract and breach of the covenant of good faith and fair dealing that a contract implies. Although Instagram subsequently modified the language that appeared to give it the right to use users' photos without compensation, it retained other controversial terms. They included the mandatory arbitration clause and a provision allowing it to place ads in conjunction with user content.
Instagram Seeks Dismissal of the Lawsuit
While Funes contended that Instagram had breached its contract by changing its terms of service, Instagram argued that Funes could not claim breach of contract. For one thing, she-and other users-had thirty days' notice before the new terms of service took effect. Because Funes continued to use her account after that thirty-day period, Instagram maintained that, in effect, she had agreed to the new terms. The courts ultimately agreed with Instagram and dismissed the lawsuit.
Instagram Changes Its Policies
For several years, Instagram has been using its revised terms of service agreement. As mentioned, it abandoned some of its previous changes and denied any intention to sell user content. In the terms of service, Instagram continues to state that it does "not claim ownership of any content user's post on or through the service."
Nonetheless, the terms state clearly that each user "hereby grants to Instagram a non-exclusive, fully paid and royalty-free, transferable, sublicensable, worldwide license to use content that the user posts." That means that Instagram can reassign the rights or relicense the work to any other party for free or for a fee. The user-anyone who posts on Instagram-need not be compensated or even given notice.
Critical Thinking
Instagram's current terms of service state, "We may not always identify paid services, sponsored content, or commercial communications as such." Is it ethical for Instagram to post advertisements without identifying them as advertisements Discuss.