Xbox Live terms of use rule out lawsuits

Microsoft updates user agreement to require binding arbitration, limit its liability to no more than the cost of one month of service, about $5.


The new Xbox Live dashboard isn't the only change to the service Microsoft is rolling out this month. The company has also updated its Xbox Live terms of use to prevent customers from suing the company for any reason and to severely limit its liability in any dispute.

XBLA now stands for
XBLA now stands for "Xbox Loves Arbitrating."

Among the most notable changes is a binding arbitration clause. In the case of any dispute where informal negotiations have failed, the Xbox Live terms of use now require customers to submit to binding arbitration. As such, Xbox Live users must give up their right to take Microsoft to court or be part of a class action (although small claims court is still an acceptable recourse). Microsoft also included a separate clause specifically forbidding class action suits and a severability provision such that if a court finds any part of the agreement illegal or unenforceable, all remaining clauses will remain in effect.

Finally, Xbox Live users must also agree to limit Microsoft's liability in any dispute to about $5 for Xbox Live Gold members or absolutely nothing for Xbox Live Silver users.

According to the agreement, "You can recover from us for all successful claims only direct damages up to a total amount equal to your Service fee for one month. You cannot recover any other damages, including consequential, special, indirect, incidental, or punitive damages and lost profits."

If purchased as an annual subscription, the Xbox Live Gold service fee for one month would be $5. Xbox Live Silver is a free service and has no fee. While the agreement specifically states that liability limit applies to the service, loss of data, viruses, breach of contract, misrepresentation, omission, and negligence, it later states that, "Nothing in these terms will exclude or restrict liability for death or personal injury arising from our negligence, fraud, gross negligence, or willful intent."

While the wording is different, the new Xbox Live terms of use are similar to changes Sony made to the PlayStation Network terms of service in September. Those revisions were made to prevent class-action suits, a number of which were filed against the company following the massive PSN data breach, in which hackers gained access to personal information of an estimated 77 million Sony customers.

[UPDATE]: Microsoft responded to GameSpot's request for comment as follows:

"We can confirm that the Xbox Live Terms of Use have been updated with a clause stipulating that in the event of a dispute, US customers and Microsoft agree to informal negotiation and then to binding arbitration if the issue cannot be resolved informally.

Changes to the Terms of Use are designed to ensure that our customers have an easy way to file a dispute without requiring formal legal action. They may now bring a dispute to our attention by filling out a simple Notice of Dispute form found at and mailing in documentation in support of their claim. We will then work to resolve the dispute to their satisfaction within 60 days. Any customer unsatisfied with the outcome of this informal process may easily initiate arbitration with the American Arbitration Association.

Customers may also choose to bring their claims in their local small claims court if they meet the normal jurisdictional requirements.

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