Signing Without Reading
Marciano, Alain and Ramello, Giovanni Battista (eds.), Encyclopedia of Law and Economics: Basic Areas of Law, Springer, Forthcoming
10 Pages Posted: 6 Sep 2016 Last revised: 16 Sep 2016
Date Written: April 23, 2015
Most people sign standard term contracts without reading them. This gives drafters an incentive to insert one-sided, inefficient terms. This problem can be solved directly by giving the drafter a duty to draft efficient terms, or indirectly by giving the signer a duty to read (which may remove the incentive to insert one-sided terms if a sufficient number of signers do read the contract). The problem can also be solved in a more draconian way by holding all standard terms unenforceable, irrespective of whether they are efficient or one-sided. Finally, the problem can be solved through hybrid instruments – for instance, American common law gives the signer a duty to read but intervenes when terms are unconscionable.
In this short chapter (written for a forthcoming book of Marciano and Ramello, eds.), I argue that a duty to draft efficient terms is the superior instrument. Doctrinally, this means that unread contracts are best seen as agreements to delegate the drafting task to the party that can do so at least costs, as is the case under German law. Because rational parties will never give one of them a wildcard to insert inefficient terms, standard terms should be enforced only to the extent they are efficient. Moreover, economic logic dictates that it should be upon the drafter to prove that the terms are efficient, rather than upon the signer to prove that they are inefficient.
Keywords: Standard terms, unconscionability, duty to read
JEL Classification: K12
Suggested Citation: Suggested Citation