iPhone 3G Illustrates What A Real Contract Looks Like
Date : 07 25 2008 Category : Business
TechdirtI spent most of my day last Friday acquiring an iPhone 3G. It was a long and tedious process involving several hours of waiting, a visit to the Apple Store, and two visits to AT&T. Part of the reason it took so long is that Apple wasn't willing to let me have the phone until I'd signed up for a 2-year contract with AT&T. Mike has previously discussed the pros and cons of cell phone subsidies, and the associated carrier lock-in. Whatever you think of that debate, the iPhone story is a good example of what a real contract looks like. I was required to sign up for an AT&T service plan and sign an AT&T service agreement before I was allowed to leave the Apple Store with my iPhone. I knew exactly what I was getting into, and had the option to decline before completing the transaction. I think there's little doubt that the courts would enforce the contract's terms if I tried to renege on my commitment.
Now compare that to the shrink-wrap "contracts" that retail software developers keep trying to foist on people who buy their products. When you buy a software product at Best Buy, the cashier almost never informs you about the license agreement, much less require you to read and sign it. In many cases, it's not even possible to open the box and read the agreement until after you've completed the transaction. One of the key differences here is that Apple spent valuable employee time informing me of the contract, giving me time to read it, and requiring me to sign it. This is annoying for Apple, but enforcing some minimum requirements for contract formation also serves an important function: ensuring that firms only resort to using formal contracts when they have a pretty good reason. Forming, complying with, and enforcing contracts consumes resources, so we don't want people forming contracts too lightly. It also ensures that the contracts actually get read, something Apple has had trouble with in the past. The software industry, in contrast, tries to get all the benefits of legally-enforceable contracts without shouldering any of the costs. That approach isn't fair to consumers or to taxpayers.
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