The case of Abreu v. Slide Inc and Google Inc is a case about a virtual world with virtual pets and virtual objects that can be purchased with real money. The main issue discussed at this early hearing is the enforceability of arbitration clauses.

The case

Superpoke! Pets was an online game, available on Facebook, launched by Slide Inc in April 2008. The game allowed users to adopt a virtual pet, look after it and buy it virtual items. Pets then performed a series of tasks and earned coins that could be used to buy more items. The basic access to the game cost nothing but users could use their credit or debit card to purchase ‘gold’. This currency could be used to purchase the premium items. Users could also pay a monthly fee which gave them VIP access to the game.

In 2010 Google purchased Slide Inc and made a number of significant changes to the game. In particular users could no longer purchase items with gold and after a given date all gold in users’ accounts would disappear. No refund was available for the gold purchased. VIP subscriptions were also stopped and all users were granted VIP status indefinitely and for free. 

In 2011 Google decided to end the game. Disgruntled users filed a class action in the US for “elimination of users’ money goods and property.”

The arbitration clause

The action in the District Court of California was defended on the basis that the terms of use, which were agreed to by all users before playing the game, contained a dispute resolution cause. This clause provided that if informal negotiations were unsuccessful the matter is to be resolved exclusively by arbitration.

The plaintiff attempted to argue that the clause was unenforceable. To be unenforceable in the US the clause must be procedurally and substantively unconscionable. To be substantively unconscionable the term must be “so one sided as to shock the conscience.”

The plaintiff pointed to the fact that the arbitration procedure required by the clause forced them to pay a filing charge of $125 which they claimed was excessive. They also claimed that the absence of a provision entitling recovery of costs should they win and the requirement that they engage in informal negotiations was unconscionable. These arguments were rejected by the court. The plaintiff did argue that a term in the agreement that allowed Google to seek injunctive relief, but forced the users of the game to waive rights to seek such relief, should render the clause unenforceable. The court did not give an answer on this point instead finding that this part of the clause could be severed from the rest.

The outcome

The court upheld the clause and an order was granted compelling the parties to go to arbitration. 

This case highlights the importance of dispute resolutions clauses in contracts. Advice should be sought before drafting these particularly in the context of online terms of use. It is tempting for companies to draft these provisions to be one sided, particularly given that users are not in the habit of pouring over their provisions before clicking accept and playing the game. In the US the threshold to have such a clause declared unenforceable is high. However, in this case the arguments used by the plaintiff were weak. A clause which elects a dispute procedure which is stacked against the user may be found to be unenforceable in the future. 

In the UK the enforceability of a clause, like the one in dispute, would be considered under the Unfair Terms in Consumer Contracts Regulations 1999. The Regulations provide that a "contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer."

The question is what constitutes a significant imbalance?

Ramsey J considered this issue in Mylcrist Builders Limited v. Buck [2008].  In this case a builder’s standard terms of business included an arbitration clause which provided for arbitration in accordance with the Arbitration Act 1996. The Court found that the clause prevented the consumer from having access to a Court and therefore a way to enforce her legal rights. This caused a significant imbalance.

It was particularly unfair because the effect of the clause was not apparent to the consumer. This would suggest that the effect of such a clause must be properly explained to the consumer when they enter into the contract. Arbitration is a process which should be entered into with the consent of both parties. As such the consumer should understand the implications of it before agreeing to the process. The Court here thought that had Mrs Buck been aware of the term she would not have agreed to it. 

Moving away from the issue of arbitration the case is interesting for its subject matter. The case, or one like it, may answer questions about the legal status of virtual property. This is a point which is not entirely academic given that worldwide virtual goods were recently valued at around $3 billion. Games such as Farmville or Second Life are growing in popularity. This will not to be the last time virtual goods are considered by a court.