Consumer Protections Against Unconscionable Clauses: American Doctrines, Italian Law
18 Pages Posted: 28 Sep 2017 Last revised: 22 Oct 2017
Date Written: September 27, 2017
Conventional wisdom holds that with the laws protecting consumers against unconscionable provisions in their contractual relationships with professionals, the European Legislator intended to level the playing field between parties to a contract. This article intends to show that the European Legislator's intent was actually to resolve the problem of an inefficient "race to the bottom," based on the fact that consumers do not read every clause in a contract. Rather, consumers tend to pay attention to only a few, and companies take advantage of that lack of attention by including unconscionable clauses, and consequently offering the goods at a lower price. The final result: unconscionable clauses and low prices. Among the solutions proposed in American case law, the theory of "reasonable expectations" (under which the clause that the consumer would have reasonably anticipated is substituted for the original, provided that reasonable expectations can change once sufficient information is obtained), the theory known as "penalty default rules," (regulatory provisions that introduce penalty default rules for the professional, who would therefore choose to insert a new clause, thereby properly informing the consumer) and the theory of "efficient clauses" (identifying the criterion of assessing how to maintain clauses that maximize the benefits for the parties), are the most common and do not hold that unconscionable clauses are a consequence of different bargaining power between parties.
Keywords: Unconscionable Clauses; Penalty Default Rules; Reasonable Expectations; Market for Lemons; Efficient Clauses; Law and Economics
JEL Classification: K12
Suggested Citation: Suggested Citation