Open Doors, Trap Doors, and the Law

Accordingly, the term open door will be used to refer to situations in which an individual can exercise, ex post, a right to rescind or withdraw from (and thus reverse) an ex ante commitment or decision. More specifically, within the realm of contract theory, this article focuses on implications for contract formation interpretation and the design of contractual default rules

Behavioral Science and Consumer Standard Form Contracts

No description supplie

A Fair Contracts Approval Mechanism: Reconciling Consumer Contracts and Conventional Contract Law

Consumer contracts diverge from the traditional paradigm of contract law in various conspicuous ways. They are pre-drafted by one party; they cannot be altered or negotiated; they are executed between unfamiliar contracting parties unequal in their market power and sophistication; they are offered frequently by agents who act on behalf of the seller; and promisees (i.e., consumers) do not read or understand them. Consumer contracts are thus useful in modern markets of mass production, but they cast doubt on some fundamental notions of contract law. To reframe the long-lasting debate over consumer contracts, this Article develops a superior legal regime whereby sellers can obtain certification of a form contract by an independent third-party. Such approval may be viewed as a quality certification, akin to a Good Housekeeping Seal of Approval, for standard form contracts. The many impediments to the design of such a project notwithstanding, its overall advantages are promising. The tension between the duty to read contracts and the common practice of signing consumer contracts without reading them will be better reconciled. The adverse consequences of asymmetric information possessed by typical sellers and consumers will be obviated. This regime will also minimize sellers\u27 ability to manipulate consumers\u27 bounded rationality, increase social welfare by reducing transaction costs, diminish socially undesirable litigation over standardized contracts, make a notable step towards minimizing the alleged anomaly that punitive damage awards create in consumer contract cases, and promote market participants\u27 autonomy by advancing trust between the contracting parties

Sneak in Contracts

Consumer contracts are a pervasive legal tool that governmany of our daily activities. Yet, consumer contracts areroutinely modified by businesses after customers accept them.Common modifications include, for example, a change in fees,alteration of a dispute resolution clause, or revision to the firm’sprivacy policy. In fact, unilateral modifications can affectvirtually every aspect of a contract.While the literature widely discusses the problem of ex anteconsent to consumer contracts, it does not adequately addressthe problem of ex post consent to unilateral modifications. Butthe practice of unilateral changes to consumer form contractscomes with significant detriments and social costs. Despitethese costs, there are no systematic empirical studies exploringthis phenomenon. This Article aims to fill this gap byempirically examining the frequency, mechanics, and degree oftransparency of unilateral change mechanisms in consumercontracts.This Article examines 500 sign-in-wrap contracts of the mostpopular websites in the United States that use such agreements.We find that the vast majority of consumer contracts in oursample are “sneak in” contracts—that is, they allow firms unilateral and broad discretion to covertly change consumers’rights and obligations after consumers accept them. Thisstudy’s findings raise concerns as to whether sneak in contractsare aligned with prominent core values and principles ofcontract law, such as consent, promise, reliance, consideration,freedom, choice, empowerment, and community. The study thuscalls for greater transparency in the law that governs themodification of consumer contracts

Ending the License to Exploit: Administrative Oversight of Consumer Contracts

Current approaches to consumer standard form contracts generally assume that aggrieved consumers can adequately detect and challenge exploitative terms and that vigilant courts can effectively scrutinize them. Some even believe that market forces and reputational constraints can deter firms from incorporating exploitative terms into their form contracts or dissuade them from actually relying on such terms. Criticizing these assumptions, this Article calls for a conceptual shift toward the problem of exploitative consumer contracts. This Article suggests supplementing the current means of addressing exploitation in consumer contracts with a dynamic preventive model of administrative oversight. Specifically, this Article proposes a professional system of public supervision over the content of consumer form contracts. This Article demonstrates how such a mechanism, if shrewdly designed, can cost-effectively tackle the widespread use of unfair, unconscionable, or legally invalid terms. Although not a panacea, the proposed regulatory regime has the promise of shifting the main burden of tackling exploitative boilerplate from the currently feeble and ineffective system of private enforcement to a sophisticated and robust scheme of administrative scrutiny

In Consumer Protection We Trust? Re-Thinking the Legal Framework for Country of Origin Cases

Markets are becoming more complicated in an ever faster changing world. New findings pertaining to human behavior and consumer markets constantly challenge traditional legal and policy assumptions. Social science offers a myriad of insights into the ways trust, identity, ideology, and preferences interact and impact one another. Against this background, the need to advance a nuanced legal framework is increasingly vital. Consumer law policy requires an interdisciplinary and holistic approach. Recent scholarship has acknowledged this need, proposing novel ways to enrich the academic discourse and develop consumer law policy. Along these lines, a growing body of literature examines how notions of identity and trust affect consumer behavior and how the law should respond to these phenomena. However, this body of literature is under-developed and under-theorized. This article bridges some of this gap, proposing a well-rounded agenda that adopts a multi-dimensional approach to country of origin cases. As we illustrate throughout the article, there is more in country of origin cases than initially meets the eye. Such cases require integrating behavioral, economic, and social developments, such as people’s search for identity markers. This, in turn, yields a superior legal analysis that is applicable to the development of consumer law more generally

E-Contract Doctrine 2.0: Standard Form Contracting in the Age of Online User Participation

The growing popularity of e-commerce transactions revives the perennial question of consumer contract law: should non-salient provisions of consumer standard form contracts be enforced? With the focus presently on an ex-ante analysis, scholars debate whether consumers can and should read standardized terms at the time of contracting. In today\u27s information age, such a focus might be misguided. The online realm furnishes various tools, so-called Web 2.0 applications, which encourage the flow of information from experienced to prospective consumers. This Article, therefore, reframes the analysis of online consumer contracts while taking into account this new flow of information. In doing so, we draw out several typical ways in which such information flows in the online realm, while addressing the role of search engines, blogs, message boards and social networks. The Article also accounts for the major challenges to the success of such information flow: the motivations of both information providers and receivers, and the accreditation of the data which might be compromised both unintentionally and maliciously. After applying the key law and economics and behavioral law and economics insights pertaining to consumer contracts to the new dynamic created by the online environment, we conclude that this online information flow will strengthen market forces\u27 ability to generate a fair and balanced contractual equilibrium. We accordingly provide new policy recommendations that are better tailored to deal with online consumer contracts and thus limit the need for legal intervention in the market for consumer contract terms

The Law of Standard Form Contracts: Misguided Intuitions and Suggestions for Reconstruction

No description supplie

Toxic Promises

Sellers often make manipulative and dishonest claims about their products and services. Such claims, which are more likely to be present in oral interactions, substantially influence consumers’ choices. We term these claims “toxic promises.” This Article argues that the law currently underestimates, and does not properly respond to, the social harms that toxic promises generate. Insights from behavioral ethics suggest that even ordinary, law-abiding sellers can frequently make such manipulative assertions. At the same time, contracting realities might lead consumers to rely heavily on these toxic promises. When consumers discover that they have been manipulated, it is often too late: precontractual oral representations are either dismissed by courts as puffery, qualified by sellers in the unread fine print, or extremely challenging to prove. Against this background, we call for tighter scrutiny of sellers’ oral promises. We propose a spectrum of ex ante measures that regulators can utilize to monitor firms’ sales personnel training. We also suggest various means to make firms liable for oral misrepresentations made by their employees. Next, we recommend that courts adopt new analytical frameworks to mitigate toxic oral promises and restrict the enforceability of merger and integration clauses that purport to disclaim them. In making these recommendations, we illustrate how a clever mix of ex ante prevention tools and ex post liability measures may yield a more honest and efficient market environment