Facts: A father has said he may need to sell his car and two motorbikes after his daughter ran up a £4,000 bill playing 'free' games on his iPad. Lee Neale, 43, had his bank account frozen when Lily, 8, bought in-app extras while playing on the tablet using the password she had seen him entering when downloading items. Now he can't get a refund from Apple.

Issue:

1. Whether or not there was a valid contract between Apple and this father? 2. Whether or not the transaction contract was valid? 3. Whether or not Apple has a right to refuse the refund?

Law:

Article 9 Capacity; Contract through Agent
In entering into a contract, the parties shall have the appropriate capacities for civil rights and civil acts.

Article 16 Effectiveness of Offer, Offer through Electronic Message
An offer becomes effective when it reaches the offeree. When a contract is concluded by the exchange of electronic messages, if the recipient of an electronic message has designated a specific system to receive it, the time when the electronic message enters into such specific system is deemed its time of arrival; if no specific system has been designated, the time when the electronic message first enters into any of the recipient's systems is deemed its time of arrival.

Article 51 Unauthorized Disposal of Property through Contract
Where a piece of property belonging to another person was disposed of by a person without the power to do so, such contract is nevertheless valid once the person with the power to its disposal has ratified the contract, or if the person lacking the power to dispose of it when the contract was concluded has subsequently acquired such power.

Article 52 The contract shall be null and void under any of the following circumstances:
(1) A contract is concluded through the use of fraud or coercion by one party to damage the interests of the State;
(2) Malicious collusion is conducted to damage the interests of the State, a collective or a third party;
(3) An illegitimate purpose is concealed under the guise of legitimate acts;
(4) Damaging the public interests;
(5) Violating the compulsory provisions of laws and administrative regulations.

Article 53 Invalidity of Certain Exculpatory Provisions
The following exculpatory provisions in a contract are invalid:
(i) Excluding one party's liability for personal injury caused to the other party;
(ii) Excluding one party's liability for property loss caused to the other party by its intentional misconduct or gross negligence.

Article 58 The property acquired as a result of a contract shall be returned after the contract is confirmed to be null and void or has been revoked; where the property cannot be returned or the return is unnecessary, it shall be reimbursed at its estimated price.

Evaluation:

Issue1:

Apple offers users the iTunes service on its device, where users can download software, music books freely or with fees. In order to use this service, user has to create an account associated with his credit account first. On the terms and conditions, Apple points out that “Apple is the provider of the iTunes Service, which permits you to purchase or rent digital content ("iTunes Products") for end user use only under the terms and conditions set forth in this Agreement”. The Terms and conditions are imposed to read and it won’t continue until the user click “I Agree” when user creates a new account. So the terms and conditions were presented in a clear and reasonable way. This father’s act of clicking “I Agree” constitutes acceptance. No matter which party invited the offer, the offer was provided under the terms and conditions. This father accepted the terms and conditions provided by Apple when he decided to create a new account, which means he accepted the offer provided by Apple, or Apple accepted his offer. According to article 16, a valid contract was formed because the acceptance reached the offeree. In conclusion, there was a valid contract between this father and Apple.

Issue2：

On the terms and conditions, “You acknowledge that the license to each Apple Product that you obtain through the Mac App Store or App Store is a binding agreement between you and iTunes. You acknowledge that: once you acquire a Third-Party Product from iTunes, you are entering into a binding agreement directly with the Publisher of that Third-Party Product governing your use of that Third-Party Product; and iTunes is not a party to the license between you and the Publisher with respect to that Third-Party Product.” That claims clearly that the electronic transaction contract will be formed between the user and the third party and Apple doesn’t enter the contract.

The iTunes Store offers users online purchase service with 1-Click. On the iTunes Store Terms and Conditions, “1-Click is a convenient feature that allows you to make a purchase from the Services with a single click of your mouse or other input device. When 1-Click is activated, clicking or tapping the Buy button starts the download immediately and completes your transaction without any further steps”. Besides that, there is a term as follows, “You acknowledge that your electronic submissions constitute your agreement and intent to be bound by and to pay for such agreements and transactions.” Apparently, clicking Buy button means the user accept the offer provided by the software provider. According to article 16, clicking Buy button indicates a contract is formed between the user and the software provider.

In this case, the little girl cost 4000 pounds through 1-Click service in several apps. However, the girl, who was a party of the electronic transaction contract, was only 8 years old. Obviously, purchase in iTunes Store was not appropriate for her intelligence and age. According to article 9 and article 52 (5), the party without capacity for civil right and civil act cannot enter the contract. So the contracts concluded by this little girl were invalid. In the other hand, the girl’s father didn’t allow his daughter to use the account to pay in iTunes Store. In other words, the little girl didn’t have the authorization to dispose her father’s property. According to article 51, this kind of contract was not valid unless the person with the power to its disposal has ratified the contract. Based on these two points, the contract between the little girl and the software provider was invalid.

Issue3：

On the terms and conditions, Apple points out clearly that “This iTunes Service is only available for individuals aged 13 years or older”. We have made the judgment that there was a valid contract between Apple and this father. It’s clear that Apple has informed this father that iTunes service is not available for children like his daughter and this father accepted it. However, he neglected this remind and allowed his daughter to use his account.

In the exculpatory provisions, Apple points out” YOU EXPRESSLY AGREE THAT YOUR USE OF, OR INABILITY TO USE, THE ITUNES SERVICE IS AT YOUR SOLE RISK”. On the terms and conditions, “You are solely responsible for maintaining the confidentiality and security of your Account and for all activities that occur on or through your Account, and you agree to immediately notify Apple of any security breach of your Account. Apple shall not be responsible for any losses arising out of the unauthorized use of your Account.” It is clear that Apple will not be responsible for loss caused by breach of user’s account. It’s this father’s duty to keep his password and he should shoulder the main responsibility to let her daughter away from iTunes service.

According to article 53, we know that the exculpatory provision is invalid when Apple has gross negligence. Apple, as an online service provider, had no responsibility to ensure that there was no security problem in this father’s account. In addition, from the picture we can see that the descriptions of games have claimed clearly that there is in-app purchase. And in-app purchases can be turned off altogether in the IOS device settings. So apple didn’t have gross negligence and the little girl’s father should be responsible for reading the descriptions provided by the software providers carefully and managing his device reasonably.

We have mentioned that the transaction contract was invalid. So both party should return the property and make sure neither side will gain profit or suffer loss in the procedure of return. However, the content of transaction was service which cannot be returned. According to article 58, this father shall also return the estimated money to Apple and the software provider. Apple would suffer loss and the little girl would gain profit if Apple accepted the refund with no compensation. Besides that, this father didn’t fulfill his obligation to take care of his account. Therefore, Apple has the right to refuse the refund.

In this case, this father authorized his daughter to use this account, who was under 13 years old. Because of negligence, he didn’t read the description of the software carefully and didn’t turn off the in-app purchase. The little girl consumed a lot of service which cannot be returned. In conclusion, the loss of this father was not Apple’s fault. Although this father suffered great loss, it’s not fair for Apple and the software provider to refund because the little girl has enjoyed its service. Based on these two points, Apple has the right to refuse the refund.

Outcome:

First, Apple and this father constituted a valid contract about the use of iTunes service under the terms and conditions provided by Apple. But in the process of use, this father didn’t fulfill his obligation to keep his account secure and keep her daughter away from iTunes store. So this father had negligence and fault.

Apple provided effective measure to turn off in-app purchase and there is in-app purchase warning at a striking position. It is the father’s duty to manage his own device and read product instruction carefully. Apple didn’t have gross negligence and fault in this case. So this father should undertake the responsibility for the misuse of his account.

Because the transaction contract was invalid between the little girl and the software provider, both sides should return what they gain. But the service the girl purchased cannot be returned. So this father cannot get refund from Apple if he does not compensate Apple at the same time.

To conclude, there was a valid contract between Apple and this father; the transaction contract was invalid; Apple has a right to refuse the refund.