Section 12.1 is being amended to clarify that Unauthorized Transactions and Other Errors do not include Disputes, Claims, Chargebacks, and Reversals.

In addition, you agree that PayPal is authorized to handle Disputes, Claims, Chargebacks, and Reversals as set forth in the User Agreement, and that no determination made by PayPal or a card issuer with respect to a Dispute, Claim, Chargeback or Reversal will be considered an Unauthorized Transaction or Other Error. Routine inquiries about your Account balance or the status of a pending transfer into or out of your Account are not considered Unauthorized Transactions or Other Errors unless you expressly notify us of an Unauthorized Transaction or Other Error in connection with the transfer.

Requests for information for tax or other recordkeeping purposes and requests for duplicate documentation also are not deemed to be Unauthorized Transactions or Other Errors.

• Disputes with PayPal.

Section 14 is being amended to update the provisions governing how disputes between you and PayPal are resolved.  With limited exception, this section requires you and PayPal to submit claims to binding and final arbitration, unless you opt out of the Agreement to Arbitrate by December 1, 2012.  The amended Section 14 states:

You and PayPal agree that any claim or dispute at law or equity that has arisen or may arise between us will be resolved in accordance with the provisions set forth in this Section (Section 14: Disputes with PayPal). Please read this Section carefully.  It affects your rights and will impact how claims you and we have against each other are resolved.

14.1 Contact PayPal First

. If a dispute arises between you and PayPal, our goal is to learn about and address your concerns and, if we are unable to do so to your satisfaction, to provide you with a neutral and cost effective means of resolving the dispute quickly. Disputes between you and PayPal regarding the PayPal Services may be reported to Customer Service online through the PayPal Help Center at any time, or by calling (402) 935-2050 from 6 AM to midnight, Central Time.

14.2 Applicable Law.  You agree that the laws of the State of Delaware, without regard to principles of conflict of laws, will govern this User Agreement and any claim or dispute that has arisen or may arise between you and PayPal, except as otherwise stated in this User Agreement.

14.3 Agreement to Arbitrate.  You and PayPal each agree that any and all disputes or claims that have arisen or may arise between you and PayPal shall be resolved exclusively through final and binding arbitration, rather than in court, except that you may assert claims in small claims court, if your claims qualify.  The Federal Arbitration Act governs the interpretation and enforcement of this Agreement to Arbitrate.

1. Prohibition of Class and Representative Actions and Non-Individualized Relief.YOU AND PAYPAL AGREE THAT EACH OF US MAY BRING CLAIMS AGAINST THE OTHER ONLY ON AN INDIVIDUAL BASIS AND NOT AS A PLAINTIFF OR CLASS MEMBER IN ANY PURPORTED CLASS OR REPRESENTATIVE ACTION OR PROCEEDING.  UNLESS BOTH YOU AND PAYPAL AGREE OTHERWISE, THE ARBITRATOR MAY NOT CONSOLIDATE OR JOIN MORE THAN ONE PERSON’S OR PARTY’S CLAIMS AND MAY NOT OTHERWISE PRESIDE OVER ANY FORM OF A CONSOLIDATED, REPRESENTATIVE, OR CLASS PROCEEDING.  ALSO, THE ARBITRATOR MAY AWARD RELIEF (INCLUDING MONETARY, INJUNCTIVE, AND DECLARATORY RELIEF) ONLY IN FAVOR OF THE INDIVIDUAL PARTY SEEKING RELIEF AND ONLY TO THE EXTENT NECESSARY TO PROVIDE RELIEF NECESSITATED BY THAT PARTY’S INDIVIDUAL CLAIM(S).  ANY RELIEF AWARDED CANNOT AFFECT OTHER PAYPAL USERS.
2. Arbitration Procedures.  Arbitration is more informal than a lawsuit in court. Arbitration uses a neutral arbitrator instead of a judge or jury, and court review of an arbitration award is very limited. However, an arbitrator can award the same damages and relief on an individual basis that a court can award to an individual. An arbitrator also must follow the terms of this User Agreement as a court would.
   The arbitration will be conducted by the American Arbitration Association (“AAA”) under its rules and procedures, including the AAA’s Supplementary Procedures for Consumer-Related Disputes (as applicable), as modified by this Agreement to Arbitrate.  The AAA’s rules are available at www.adr.org.  A form for initiating arbitration proceedings is available on the AAA’s website at http://www.adr.org.The arbitration shall be held in the county in which you reside or at another mutually agreed location.  If the value of the relief sought is $10,000 or less, you or PayPal may elect to have the arbitration conducted by telephone or based solely on written submissions, which election shall be binding on you and PayPal subject to the arbitrator’s discretion to require an in-person hearing, if the circumstances warrant. Attendance at an in-person hearing may be made by telephone by you and/or PayPal, unless the arbitrator requires otherwise.

   The arbitrator will decide the substance of all claims in accordance with the laws of the State of Delaware, including recognized principles of equity, and will honor all claims of privilege recognized by law.  The arbitrator shall not be bound by rulings in prior arbitrations involving different PayPal users, but is bound by rulings in prior arbitrations involving the same PayPal user to the extent required by applicable law.  The arbitrator’s award shall be final and binding, and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.

3. Costs of Arbitration.Payment of all filing, administration, and arbitrator fees will be governed by the AAA’s rules, unless otherwise stated in this Agreement to Arbitrate.  If the value of the relief sought is $10,000 or less, at your request, PayPal will pay all filling, administration, and arbitrator fees associated with the arbitration.  Any request for payment of fees by PayPal should be submitted by mail to the AAA along with your Demand for Arbitration and PayPal will make arrangements to pay all necessary fees directly to the AAA.  If the value of the relief sought is more than $10,000 and you are able to demonstrate that the costs of arbitration will be prohibitive as compared to the costs of litigation, PayPal will pay as much of the filing, administration, and arbitrator fees as the arbitrator deems necessary to prevent the arbitration from being cost-prohibitive.  In the event the arbitrator determines the claim(s) you assert in the arbitration to be frivolous, you agree to reimburse PayPal for all fees associated with the arbitration paid by PayPal on your behalf that you otherwise would be obligated to pay under the AAA’s rules.
4. Severability.With the exception of any of the provisions in subsection (a) of this Agreement to Arbitrate (“Prohibition of Class and Representative Actions and Non-Individualized Relief”), if a court decides that any part of this Agreement to Arbitrate is invalid or unenforceable, the other parts of this Agreement to Arbitrate shall still apply. If a court decides that any of the provisions in subsection (a) of this Agreement to Arbitrate (“Prohibition of Class and Representative Actions and Non-Individualized Relief”) is invalid or unenforceable, then the entirety of this Agreement to Arbitrate shall be null and void.  The remainder of the User Agreement, including all other provisions of Section 14 (Disputes with PayPal), will continue to apply.
5. Opt-Out Procedure.You can choose to reject this Agreement to Arbitrate (“opt out”) by mailing us a written opt-out notice (“Opt-Out Notice”).  For new PayPal users, the Opt-Out Notice must be postmarked no later than 30 Days after the date you accept the User Agreement for the first time.  If you are already a current PayPal user and previously accepted the User Agreement prior to the introduction of this Agreement to Arbitrate, the Opt-Out Notice must be postmarked no later than December 1, 2012. You must mail the Opt-Out Notice to PayPal, Inc., Attn: Litigation Department, 2211 North First Street, San Jose, CA 95131.The Opt-Out Notice must state that you do not agree to this Agreement to Arbitrate and must include your name, address, phone number, and the email address(es) used to log in to the PayPal account(s) to which the opt-out applies. You must sign the Opt-Out Notice for it to be effective. This procedure is the only way you can opt out of the Agreement to Arbitrate. If you opt out of the Agreement to Arbitrate, all other parts of the User Agreement, including all other provisions of Section 14 (Disputes with PayPal), will continue to apply.  Opting out of this Agreement to Arbitrate has no effect on any previous, other, or future arbitration agreements that you may have with us.
6. Future Changes to the Agreement to Arbitrate.Notwithstanding any provision in the User Agreement to the contrary, you and we agree that if we make any change to this Agreement to Arbitrate (other than a change to any notice address or website link provided herein) in the future, that change shall not apply to any claim that was filed in a legal proceeding against PayPal prior to the effective date of the change. Moreover, if we seek to terminate the Agreement to Arbitrate as included in the User Agreement, any such termination shall not be effective until 30 days after the version of the User Agreement not containing the Agreement to Arbitrate is posted to http://www.paypal.com, and shall not be effective as to any claim that was filed in a legal proceeding against PayPal prior to the effective date of termination.

• Release of PayPal.

Section 14.8 is being amended to state:

If you have a dispute with one or more Users, you release PayPal (and our parent, our affiliates, and our and their respective officers, directors, agents, joint ventures, employees and suppliers) from any and all Claims, demands and damages (actual and consequential) of every kind and nature, known and unknown, arising out of or in any way connected with such disputes. In entering into this release you expressly waive any protections (whether statutory or otherwise – e.g., California Civil Code § 1542) that would otherwise limit the coverage of this release to include only those claims which you may know or suspect to exist in your favor at the time of agreeing to this release.

• Reporting complaints to State Agencies.

Section 14.9 (State Agencies) is being updated to state that if you are a California resident, you may report complaints to the California Department of Financial Institutions at its toll-free telephone number, 1-800-622-0620, by e-mail at consumer.complaint@dfi.ca.gov, or by mail at Department of Financial Institutions, Consumer Services, 1810 13th Street, Sacramento, CA 95811.

• Indemnification, Release of PayPal, Limitations of Liability and Warranty Disclaimer.

These sections (formerly Sections 14.7, 14.9, 15.1, and 15.2) have been amended to include PayPal’s Affiliates, which are companies that are direct or indirect subsidiaries of PayPal, Inc. or eBay Inc. or are otherwise related to PayPal through common ownership or control, and their and PayPal’s parent’s respective officers, directors, agents, joint ventures, employees and suppliers as covered parties under those sections.

• Limitations of Liability.

Section 15.1 is being amended to add that in addition to the limitations already stated under that provision, to the extent permitted by applicable law, PayPal is not liable, and you agree not to hold PayPal responsible for any damages or losses (including, but not limited to, loss of money, goodwill, or reputation, profits, or other intangible losses or any special, indirect, or consequential damages) resulting directly or indirectly from: (1) Your use of or your inability to use PayPal’s sites and services; (2) delays or disruptions in PayPal’s sites and services; (3) viruses or other malicious software obtained by accessing PayPal’s sites or services or any site or service linked to PayPal’s sites or services; (4) glitches, bugs, errors, or inaccuracies of any kind in PayPal’s sites or services or in the information and graphics obtained from them; (5) the content, actions, or inactions of third parties; (6) a suspension or other action taken with respect to your Account; (7) your need to modify practices, content, or behavior, or your loss of or inability to do business, as a result of changes to this User Agreement or PayPal’s policies.

• Discontinuation of APIs.

Section 15.4 (License Grant) is being amended to state that PayPal may change or discontinue any APIs upon notice to you.