Disney’s latest U-turn and what we can learn from it
Disney has recently agreed that the wrongful death lawsuit being pursued by the husband of a woman who died after suffering a severe allergic reaction at a restaurant in a Disney Resort should now be heard in court rather than by arbitration.
Disney had argued that a clause in the terms of use for its Disney + service, which the claimant agreed to, specifies that users agree to settle any disputes with Disney via arbitration and that the claimant accepted these terms again when using his Disney account to buy tickets for the theme park.
However, following severe backlash in the media, Disney has changed its position. Disney say this is due to the unique circumstances of the dispute and, as such, the matter should be heard in court.
Would this have played out differently in England?
It is not unusual for businesses to have clauses in their contracts that require arbitration to be used as a prescribed form of dispute resolution if a dispute arises.
Arbitration involves the dispute being determined by a neutral third party and its key advantage is confidentiality (in comparison to a public court hearing).
Were this case to have been brought in England, the circumstances would be slightly different to the U.S, as civil court cases are generally not heard by a jury and are only heard by a judge.
Additionally, Disney would have to challenge the protection for consumers provided by UK statutory law.
Under the Consumer Rights Act 2015, an unfair term in a consumer contract will not be binding or enforceable.
A term is unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer.
A court would have to determine, in light of the above, whether it is fair that, by agreeing to an arbitration clause when signing up to a Disney + service and/or buying tickets to a theme park, means that any dispute with Disney should be resolved through arbitration.
This case serves as an important reminder to exercise caution when drafting any consumer-facing terms and conditions to avoid the risk of challenge and being labelled in a dispute with a consumer.
What if the claimant had been a business?
In the UK, business-to-business contracts are treated differently by the court and, generally, businesses are free to enter into whatever contracts that they agree between themselves.
So, arguably, had a business agreed to a contract with Disney that included the requirement for all disputes with Disney to be dealt with by arbitration, it may be enforceable.
However, there are still limits for how far businesses can go when drafting their contract terms which, if exceeded, could lead to disputes surrounding enforceability arising further down the line.
Under the Unfair Contract Terms Act 1977, where a party is dealing on the other party’s standard terms and conditions, there are restrictions on the types of exclusions and limitations that a party can include and seek to rely on.
Exclusion and limitation of liability clauses will be subject to the test of reasonableness, where the court will consider factors such as (amongst other things):
- the strength of the bargaining positions of the parties relative to each other;
- whether the party received an inducement to agree to the term;
- whether the party knew or ought reasonably to have known of the existence and the extent of the term;
- whether it was reasonable at the time of the contract to expect that compliance with that condition would be practicable; and
- whether the goods being supplied were manufactured, processed or adapted to the special order of the party.
For example, a big business (like Disney) would be in a stronger bargaining position in comparison to one of its suppliers. As a matter of good practice, it would be expected for the bigger business to draw the other contracting party’s attention specifically to particularly onerous terms, e.g. by putting the term in red, underlined and/or in bold.
Hiding onerous exclusion terms within terms and conditions could create difficulties when it comes to trying to enforce the term.
Be the Disney hero, not the Disney villain
The court of public opinion certainly passed its judgement on Disney’s approach to a tragic situation, and it is unclear whether the court would have allowed Disney to deal with the case by arbitration had it not altered its position.
However, the case serves as a useful reminder to businesses about the fairness and enforceability of its terms when contracting with consumers and/or when dealing with other businesses.
If you any questions or concerns about your terms and conditions or if you have any other concerns about potential business disputes, please contact Georgia Barber at [email protected] or George Festing at [email protected].