Anti-social contracts: the contractual governance of virtual worlds.

AuthorFairfield, Joshua A.T.

Virtual worlds have seized the imaginations of millions of people who now live, work, and play together in these new environments. But all is not well. These online communities are ruled nearly exclusively by contract law, through end-user licence agreements, terms of service, and codes of conduct. Contracts are a critical means of helping two (or a few) people negotiate their preferences. But online communities are made up of enormous and shifting populations that have no rime or ability to negotiate agreements with every other community member. Relying on contracts alone thus threatens the investments and creativity that go into these communities.

This article seeks to demonstrate that contracts cannot, by their very nature, provide for all the legal needs of online communities. Public law needs to be developed to allow these communities to thrive. The author argues that common law, rather than legislation, can be most effective in this task. Courts can draw on existing and familiar areas of common law to provide the private-property, dignitary, and personal protections these communities need according to the specific behavioural norms their creators and users have fostered. The common law method, being iterative, incremental, and experimental, is well suited to modifying these areas where needed. It allows for the more immediate resolution of problems while also being sufficiently flexible to permit rules to be expanded or contained as required.

Les mondes virtuels se sont empares de l'imagination de millions de personnes, qui aujourd'hui vivent, travaillent et jouent ensemble dans ces nouveaux environnements. Mais tout n'est pas aussi rose qu'on pourrait le croire. En effet, ces communautes en ligne sont presque exclusivement regies par le droit des contrats, a travers des ententes de licences d'utilisateur final, des conditions d'utilisation et des codes de conduite. Les contrats sont des outils primordiaux pour permettre a deux (ou plusieurs) personnes de negocier leurs preferences. Or, les communautes en ligne ont une population importante et changeante, qui n'a ni le temps ni la capacite de negocier des ententes avec chacun des autres membres de la communaute. Dependre uniquement des contrats menace donc les investissements et les efforts creatifs qui nourrissent ces communautes virtuelles.

Cet article cherche a demontrer que les contrats ne peuvent, par leur nature meme, repondre a tous les besoins legaux des communautes en ligne. Un droit public doit etre developpe afin que ces communautes puissent continuer de prosperer. L'auteur soutient que la common law est a cet effet plus efficace que la legislation. Les tribunaux peuvent s'appuyer sur des domaines existants du droit pour fournir a ces communautes les protections de la propriete privee, dignitaires et personnelles qui leur sont necessaires, tout en respectant les normes comportementales que leurs createurs et leurs utilisateurs ont mises de l'avant. La methode de la common law, etant a la lois iterative, progressive et experimentale, convient tres bien pour modifier ces spheres la ou le besoin se fait sentir. Elle permet une resolution plus rapide des problemes, tout en etant aussi suffisamment flexible pour permettre aux regles d'etre etendues ou circonscrites au besoin.

Introduction I. The Anti-social Contract A. What are Virtual Worlds? B. Contracts and Virtual Worlds II. The Literature on Contractual Communities A. Online Contracts B. Subdivisions and Utopian Communities C. The Conversation About Virtual Worlds III. Contracts and the Common Law A. The Ecology of the Common Law B. Horizontal Rights in Virtual Worlds: The Serial-Negotiation Problem C. Vertical Rights in Virtual Worlds: Information Costs and the Stream of Commerce IV. Restoring the Social Contract A. The Advantages of Applying Familiar Law B. The Rules of the Game 1. Battery and Football 2. Virtual Rules of the Game 3. Norms and Contracts C. Clarity of Contract D. Common Law Advantages V. Challenges and Responses A. Market Solutions 1. Information Forcing 2. Communities as Network Goods 3. Adverse Selection 4. Incentives to Create B. The Proper Role of Contracts in Online Communities Conclusion Introduction

Can the social contract of a virtual world be made up entirely of private law contracts? This article concludes that it cannot.

Virtual worlds are the next generation of the internet: three-dimensional social environments that combine top-of-the-line videogame graphics with latest-generation social-networking technology. Millions of people spend significant portions of their lives playing and working in virtual worlds. Virtual-world inhabitants build multimillion-dollar buildings, run businesses, treat medical ailments, learn foreign languages, and spend large amounts of time interacting with friends and family. As a result, these online communities need all of the normal background, default legal rules that regular communities need. So far that need has gone unmet.

The corporations that create virtual worlds use contracts, called End User Licence Agreements ("EULAs"), to govern the day-to-day interactions of millions of people around the world. These EULAs supplant much of the default law that real-world communities rely on. For example, the drafters of virtual-world EULAs attempt to create pseudoproperty systems (or to eliminate private property altogether within virtual worlds), pseudotort systems, and even pseudoconstitutional and pseudocriminal systems out of a patchwork quilt of contracts.

But using contracts to create background rules is often not possible, and where possible, it is usually not practical. After all, a contract only binds someone who signs it, and thus is by nature not a background rule. (1) Therefore, contracts are often not the best tool for creating default rules for large and shifting populations. Since contracts are currently the most important source of law governing the lives of virtual-world inhabitants, an examination of the limits of contracts makes a serious contribution to that area of study.

This article uses the lens of virtual worlds to reexamine the place of contract law within the larger framework of the common law. Contracts often no longer work hand in hand with other areas of the law; increasingly, contracts supplant those other areas entirely. Contracts can usefully tweak background rules to increase the satisfaction of the contracting parties. But where contracts supplant default rules, or prevent the development of such rules, communities are likely to suffer. Thus, this article not only examines the nature of these community-governing contracts that affect millions--and soon billions--of people in virtual worlds globally, it also reveals something more broadly applicable about how contracts fit into the overall scheme of the law.

Property and tort systems are good examples of the kind of background, default rules that communities need but that contracts cannot cheaply provide. Protection of private property and protection of personal and dignitary interests are so critical to online communities that cases surrounding these issues have already begun to appear, even though the technology is new. These areas of law are also critical to the proper functioning of contracts themselves. For example, protection of private property is a necessary predicate to contracts conveying property interests. Similarly, contracts cannot be enforced unless contracting parties are protected from force and fraud by the law of torts. Thus, the twin examples of property and tort law will appear at numerous points in the analysis.

Different countries have already responded to the need for law in virtual worlds in different ways. The United States relies on private law contract to govern behaviour in virtual communities. (2) By comparison, South Korea vigorously uses its criminal laws to enforce norms. (3) Chinese courts have used a theory of labour in ruling that a game service provider must return virtual property to the player who has worked to obtain it. (4) At some risk of overgeneralization, one can characterize the Continental approach as favouring public legislation, rather than free-market contract, to supply rules for online activity. (5)

This article focuses on the first of the above approaches, analyzing the contracts that govern virtual worlds from the perspective of U.S. common law. This focus on U.S. law is by necessity. (6) Many of the most successful virtual worlds are hosted in the United States. (7) The contracts that govern these worlds contain choice-of-law provisions that select U.S. law. (8) Thus, the U.S. legal system currently has the wide majority of common law cases relating to virtual worlds.

But it is my hope that this discussion will be useful for judges and attorneys across common law jurisdictions, especially Canada, the United Kingdom, and Australia, which have all experienced and contributed to the explosive growth of virtual-world participation. (9) These jurisdictions share much of the Common law framework discussed below, but have not yet seen large-scale contract litigation on conflicts arising in virtual worlds. (10) Part III, in which I will discuss contract law's place within the framework of the common law, especially ought to find fertile ground across common law jurisdictions.

Finally, many of the problems presented in this article will resonate with civil lawyers. Civil law systems are uniquely situated to resolve some of the issues discussed below, (11) but in resolving others, they may experience greater difficulties than those in the common law world. (12) For civil lawyers, this article therefore may serve as a comparative touch point, first to determine the strengths and weaknesses of the common law approach, and second to identify points of interface between the two systems.

The article will proceed as follows. Part I will introduce the phenomenon of virtual worlds and the contracts that...

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