Consumer Protections Against Unconscionable Clauses: American Doctrines, Italian Law

18 Pages Posted: 28 Sep 2017 Last revised: 22 Oct 2017

See all articles by Enrico Baffi

Enrico Baffi

Università degli Studi Guglielmo Marconi

Date Written: September 27, 2017

Abstract

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

Baffi, Enrico, Consumer Protections Against Unconscionable Clauses: American Doctrines, Italian Law (September 27, 2017). Available at SSRN: https://ssrn.com/abstract=3043692 or http://dx.doi.org/10.2139/ssrn.3043692

Enrico Baffi (Contact Author)

Università degli Studi Guglielmo Marconi ( email )

via Parigi 44
Italy

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