When Pay Pal invoked these sections in terminating the account of former user Infostream Group Inc., the company brought an action against Pay Pal alleging antitrust violations, breach of contract, fraud and unfair business practices claims. The court concluded that the Pay Pal terms could be found to be ambiguous, because the sexually oriented materials or services,” and, therefore, did not prohibit all such services.Infostream is the operator of two sites that “cater to adults looking for a non-traditional dating experience.” For a fee, Seeking facilitates “mutually beneficial relationships” between members who refer to themselves as either a “sugar daddy,” “sugar mommy” or “sugar baby.” Whats Your charges a fee to allow members to “buy and sell the opportunity of going out on a first date.” When Pay Pay moved to dismiss Infostream’s complaint, it was quick to point to media sources that have associated the Infostream sites with purveying sexual services (see Pay Pal memorandum in support of motion to dismiss, n. One of the cited articles included alleged accounts of sex-for-pay encounters arranged through the Seeking site by graduates seeking to pay off student loans. As to Pay Pal’s argument that it had reserved the right to terminate any account “at its sole discretion,” and “for any reason at any time,” the court found that the contract included, by implication, an implied covenant of good faith and fair dealing.
Adult services such as prostitution have followed their customers online, closely followed by law enforcement authorities.Whether a company — online or bricks-and-mortar — can choose with whom it will deal can be tricky business.In general, a company is free to pick its business partners.So it’s not surprising that service providers seek to protect themselves contractually from the potential legal and business consequences of being associated with purveyors of shady, unsavory, or downright illegal services. Claims of common law fraud were dismissed (also with leave to amend), because Infostream did not adequately allege that it had detrimentally relied upon Pay Pal’s representations to it during the parties’ negotiations prior to the account termination.Pay Pal, the preeminent online payment service, addresses the issue in its User Agreement and Acceptable Use Policy ( Just what falls into these prohibited categories can be the subject of dispute, however. But the court allowed Infostream’s breach of contract, breached of the implied covenant of good and fair dealing, and California state unfair competition law claims to stand, at least at this early stage of the litigation.
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