Legal Ignorance and Information-Forcing Rules

Abstract

People are often ignorant about the legal rules that govern the most common transactions in their lives. This article analyzes one common regulatory response to our widespread legal ignorance. A surprisingly broad range of legal rules have the ostensible purpose of inducing sophisticated parties to draft express contract language that will inform their contractual partners about the legal rules governing a particular transaction. However, this legal-information-forcing objective often remains unrealized because people routinely sign contracts without reading and understanding their terms. In theory, courts could design information-forcing rules that would be truly informative. But recognizing the potential futility of attempts to inform many contracting parties about complex legal rules, the article also explores several alternative justifications for doctrines that encourage sophisticated parties to draft express contract terms. Such terms could facilitate the activities of avid comparison shoppers. Comprehensive written terms also may promote ex post legal clarity and thereby reduce the costs of resolving disputes. Finally, a litany of exculpatory clauses effectively allows parties to contract out of the comparatively expensive legal system of dispute resolution in favor of a regime governed by informal social norms. The normative desirability of these rules is somewhat less clear, but my exploration of alternative justifications shows the conceptual poverty of current judicial and legislative reliance on the informative content of express contract terms.