On the Surprising Use of Unenforceable Contract Terms: Evidence from the Residential Rental Market
Harvard John M. Olin Center for Law, Economics, and Business, Discussion Paper No. 61, 2015
93 Pages Posted: 25 May 2016 Last revised: 29 Jun 2016
Date Written: May 22, 2016
This paper explores the prevalence of unenforceable terms in consumer contracts. Taking the residential rental market in the Greater Boston Area as a test case, the study analyzes a sample of 70 leases in terms of Massachusetts Landlord and Tenant Law. The paper’s findings reveal that landlords frequently use legally dubious — as well as clearly invalid — provisions in their contracts. Building on psychological insights and on a survey-based study of 279 tenants, the paper suggests that such clauses may significantly affect tenants’ decisions and behavior. In particular, when a problem or a dispute with the landlord arises, tenants are likely to perceive the terms in the lease contract as enforceable and forgo valid legal rights and claims. In light of this evidence, the paper discusses preliminary policy prescriptions.
Keywords: contracts, residential law, housing law, empirical legal research
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