Will Increased Disclosure Help? Evaluating the Recommendations of the ALI's 'Principles of the Law of Software Contracts'

Abstract

The aim of the American Law Institute’s new “Principles of the Law of Software Contracts” is to improve online contracting practices. Instead of regulating terms directly to reduce the possibility of unfair or biased terms, the Principles emphasize increased contract disclosure to encourage readership and comparison shopping. In this Article, I test whether increasing disclosure in the proposed manner is likely to increase readership in the setting of end user license agreements (EULAs) of software sold online. I follow the clickstreams of 47,399 households to 81 Internet software retailers and find that EULAs are approximately 0.36 percent more likely to be viewed when they are presented as clickwraps that explicitly require assent, as suggested by the Principles, than when they are presented as browsewraps. The results indicate that mandating disclosure will not by itself change readership or contracting practices to a meaningful degree. I briefly review other approaches to reform that may be more effective but come with their own limitations.

Keywords: standard form contracts, consumer contracts, disclosure, consumer protection, software

JEL Classification: K12