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only if you sell them. Free mods are not forbidden.
I can see this in a multiplayer competitive game, but single-player???
There are already mods...
Consider that the game is being shown off by streamers even tho such usage is also expressly forbidden in the same paragraph is mods are. Consider that Oblivion is already up as a category on all the big mod-sites. Bethesda hasn't taken action yet. Until they do I don't think we need to worry.
I addressed this issue with a team of full-time modders whom I suspect will considering modding Oblivion once they've played through it. After looking into the issue not a one of them was worried.
It's not even in the EULA that applies to Oblivion.
It actually does, and more. But that doesn't necessarily mean they will utilize those clauses. Everything so far points to them not taking action.