Abstract

http://ssrn.com/abstract=798308
 
 

Citations (8)



 


 



The Hidden Roles of Boilerplate and Standard Form Contracts: Strategic Imposition of Transaction Costs, Segmentation of Consumers and Anticompetitive Effects


David Gilo


Tel Aviv University - Buchmann Faculty of Law

Ariel Porat


Tel Aviv University; University of Chicago - Law School


Michigan Law Review, Vol. 104, March 2006

Abstract:     
Previous literature on boilerplate provisions focused on the asymmetric information between the supplier and consumers created by boilerplate language that includes harsh terms, which is aimed at extracting surplus from consumers without them being aware of it. This article focuses on other benefits the supplier can derive from the transaction costs that boilerplate language or other contractual terms create, most of which have been ignored by courts and legal writers. As the Article demonstrates, such transaction costs could have different impacts on different types of consumers, enabling, inter alia, screening out unwanted consumers, price discrimination, cartel stabilization and the studying of consumer preferences. On other occasions, the transaction costs are imposed in order to hide benefits granted to certain consumers. On yet other occasions the transaction costs are self-imposed by the supplier, in order to signal to buyers or to his competitors that negotiation of the contract would be very costly. There are also cases in which the transaction costs do create asymmetry of information between the supplier and his consumers, as in the classic discussions of boilerplate language, but the asymmetry is used as a cartel-facilitating tool, an anticompetitive signaling device, or a tool for creating the appearance of a fair contract, rather than to merely extract surplus from uninformed consumers.

One of this Article's conclusions is that the law's concern should not be only with harsh boilerplate terms, but also with beneficial boilerplate terms. At times, beneficial boilerplate terms extract surplus from uninformed consumers, exactly as harsh terms do, but by using a different technique. Another conclusion of the Article is that boilerplate language should be carefully reviewed even when no particular terms are hidden in it, neither beneficial nor harsh, because the boilerplate provisions could be used just for the sake of artificially complicating the transaction. The Article also points out that while it is conventionally thought that standard form contracts save transaction costs, in fact the supplier often may want to artificially impose transaction costs upon consumers for strategic reasons.

The Article also inquires whether the use of beneficial boilerplate terms is desirable from a social perspective, and if not, it asks how the law should discourage it.

Number of Pages in PDF File: 50

Keywords: standard form contracts, boilerplate, fine print, transaction costs, segmentation, consumers, cartels, competition, asymmetric information, ethnic discrimination, price discrimination, quantity discounts, tacit collusion, consumer segmentation

JEL Classification: D11, D43, D61, K12, K21, L41, L42, J71

Accepted Paper Series


Download This Paper

Date posted: September 12, 2005 ; Last revised: June 4, 2014

Suggested Citation

Gilo, David and Porat, Ariel, The Hidden Roles of Boilerplate and Standard Form Contracts: Strategic Imposition of Transaction Costs, Segmentation of Consumers and Anticompetitive Effects. Michigan Law Review, Vol. 104, March 2006. Available at SSRN: http://ssrn.com/abstract=798308

Contact Information

David Gilo
Tel Aviv University - Buchmann Faculty of Law ( email )
Ramat Aviv
Tel Aviv 69978, IL
Israel
+972-3-6406299 (Phone)
Ariel Porat (Contact Author)
Tel Aviv University ( email )
Ramat Aviv
Tel Aviv 69978, IL
Israel
972-3-6408283 (Phone)
972-3-6407260 (Fax)
HOME PAGE: http://www.law.tau.ac.il/Heb/?CategoryID=357&ArticleID=388
University of Chicago - Law School ( email )
1111 E. 60th St.
Chicago, IL 60637
United States
Feedback to SSRN


Paper statistics
Abstract Views: 2,609
Downloads: 305
Download Rank: 56,149
Citations:  8

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo3 in 0.407 seconds