The No Reading Problem in Consumer Contract Law

59 Pages Posted: 19 Oct 2013 Last revised: 21 Nov 2013

Ian Ayres

Yale University - Yale Law School; Yale University - Yale School of Management

Alan Schwartz

Yale Law School

Date Written: October 17, 2013

Abstract

Instead of attempting to promote informed consumer assent through quixotic attempts to have consumers read ever-expanding disclosures, this Article argues that consumer protection law should focus on “term optimism” – situations in which consumers expect more favorable terms than they actually receive. We propose a system under which mass market sellers are required periodically to engage in a process of “term substantiation” through which sellers would learn whether their consumers held accurate beliefs about the terms of their agreement. Terms that meet or exceed the median consumer’s expectation would be enforceable even if buried or only available on request. But sellers could enforce unexpected, unfavorable terms only if they are disclosed in a “warning box” that has a government-provided standard border. To prevent overuse of the box, sellers would need (i) to exclude terms from the box that meet or exceed consumer expectations and (ii) to order terms in the box in descending order of consumer importance. Such a system of term substantiation coupled with targeted warnings about unexpected terms jettisons as unworkable the duty to read ideal. It instead economizes on consumer scarce attention by increasing the salience of those terms that are most likely to inhibit informed consent. Term substantiation lets the representative consumer determine what sellers disclose and thus democratizes the content of form contracts.

We report on the results of an original term substantiation field experiment documenting user expectations concerning unread Facebook EULA provisions. Consistent with our analysis, we find that users can correctly evaluate many of these provisions. Importantly, we find that term optimism exists: there are a few unexpectedly, unfavorable terms that, under our proposal, would be presumptively unenforceable unless subject to heightened disclosure.

Suggested Citation

Ayres, Ian and Schwartz, Alan, The No Reading Problem in Consumer Contract Law (October 17, 2013). Stanford Law Review, Forthcoming; Yale Law School, Public Law Research Paper No. 314; Yale Law & Economics Research Paper No. 483. Available at SSRN: https://ssrn.com/abstract=2341840

Ian Ayres (Contact Author)

Yale University - Yale Law School ( email )

P.O. Box 208215
New Haven, CT 06520-8215
United States
203-432-7101 (Phone)
203-432-2592 (Fax)

Yale University - Yale School of Management

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

Alan Schwartz

Yale Law School ( email )

P.O. Box 208215
New Haven, CT 06520-8215
United States
203-432-4030 (Phone)
203-432-8260 (Fax)

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