Contracts, Crime, and Individual Rights

Just before Thanksgiving, a federal jury here in LA convicted a Missouri woman of three misdemeanor charges of computer fraud for her involvement in creating a phony account on MySpace to trick a teenager, who later committed suicide.

Some people think that this case sets a bad precedent - that contractual fraud is different from more direct modalities of crime, and should not be subject to more than civil adjudication, damages, injunctions and so on - not a conviction for a crime. I disagree. Of course, criminal statutes should not be invoked to deal with mere disagreements about the terms of a contract, or with cases in which the injured party can sue and be adequately compensated through a civil verdict. But there are also cases where this is not possible - where the injured party cannot sue (in this case because she is dead,) where the contract clause protects third parties (such as fellow customers of the same service) and thus creates obstacles to recovery through civil damages (can you sue for violation of a contract between two other parties?) - and then criminal law can be and should be invoked.

What about a claim that the defendant did not understand the contract, or maybe did not even read it? In a free market, a contract evaluation service could provide legal advice on the meaning of a contract on a commercial basis. When millions of people sign identical contracts - as is the case with MySpace - the contract would only need to be evaluated once by the provider of the legal evaluation service, and so in a competitive market the cost of the service would be small enough to be worth buying even for users of cheap, or even otherwise free contractual services. I am not a lawyer, but I suppose that even with current regulations such legal evaluation services will emerge if contracts are enforced, and criminal responsibility is assigned when this is contextually appropriate. In the meantime, the jury in the case did the right thing by reducing the charges to misdemeanors instead of felonies.

Service providers, from MySpace to stock exchanges, do the right thing by making the use of their services conditional on compliance with terms that protect their customers from predation by other customers. And the government is right to invoke criminal law against those who deliberately or recklessly disregard those provisions, when third parties, who rely on those provisions of the service provider's contract to protect them, are harmed by the actions of those predators.