A company cannot change the terms of its contract with a customer -- for instance, the kind of Web contract used by AT&T in the iPhone activation -- simply by altering the text on the Web and then not advise the customer a US appeal court has ruled. The case stemmed from a suit by a customer against Talk America who was unaware of altered terms of service and charges.

Talk America acquired a long-distance phone service from AOL. It then changed the terms of service by posting a message on its Website which introduced new charges. When the plaintiff, Joe Douglas, found out years later that his contract had been changed, he sued, according to a story at The Register.

The US Court of Appeals for the Ninth Circuit found that Talk America could not change the contract without telling Douglas. They ruled that the contract was an agreement between two parties and that one party could not change it unilaterally. Consent is required.

"Even if Douglas had visited the website, he would have had no reason to look at the contract posted there," said the judgment, from Judges Kozinski, Gould and Callahan. "Parties to a contract have no obligation to check the terms on a periodic basis to learn whether they have been changed by the other side. Indeed, a party can't unilaterally change the terms of a contract; it must obtain the other party's consent before doing so."

"This is because a revised contract is merely an offer and does not bind the parties until it is accepted," according to the ruling. Moreover, the judges ruled that a customer wouldn't know when to check the site for possible changes without notification. "Without notice, an examination would be fairly cumbersome, as Douglas would have had to compare every word of the posted contract with his existing contract in order to detect whether it had changed," the judges said.

Talk America tried several defenses. They argued that the contract was on the same Website where Mr. Douglas paid his bills. They also argued that continued use of the service amounted to consent to the changes. The Appeals court rejected those arguments because the plaintiff was never officially notified.

Jon Fell, a partner in a UK law firm, said that law there is similar and would have produced the same results. "I'm not at all surprised by the ruling," he said. "Unilateral changes to a contract, particularly a consumer contract, will always struggle to stand up in court."

Customers on the Internet agree to terms of service, contracts, almost daily, as millions of Apple customers just did with their iPhone. The US Appeals Court ruling was a welcome affirmation of the contract process.