Abuse of Contract: Boilerplate Erasure of Consumer Counterparty Rights

Abstract

Contract law and the new Restatement of the Law of Consumer Contracts generally treats the entirety of the company’s boilerplate as presumptively binding. Entrusting the content of consumer contracts to companies creates a fertile legal habitat for abuse through boilerplate design.

There is no consensus on how widespread or severe abuse of contract is. Some consumer law scholars have warned of dangers inherent in granting companies unrestrained power to sneak waivers into their online terms, but others contend that market forces adequately constrain potential abuse. On the other hand, in the absence of adequate consumer knowledge and power, market competition might instead fuel the spread of abusive boilerplate provisions as companies compete to insulate themselves from costs. The new Restatement and several prominent scholars claim that existing protective judicial doctrines siphon off the worst abuses among adhesive contracts. They are willing to accept those abuses that slip through the cracks as the unavoidable cost of a functioning, modern economy.

The raging debate over how to best constrain contractual abuse relies mainly on speculation regarding the proliferation and extent of sneak-in waivers. This article provides some necessary missing data by examining the author’s study of 100 companies’ online terms and conditions (the T&C Study). The T&C Study tracked the extent to which the surveyed companies’ boilerplate purported to erase consumer default rights within four different categories, thereby helping to assess the effectiveness of existing market and judicial constraints on company overreach. Evidence from the T&C Study shows that the overwhelming majority of consumer contracts contain multiple categories of abusive terms. The existing uniformity of boilerplate waivers undermines the theory that competition and reputation currently act as effective bulwarks against abuse. After explaining and discussing the T&C Study and its results, this article suggests how such data can assist scholars and advocates in more effectively protecting and empowering consumers.

Keywords: be contract, consumer, boilerplate, contract of adhesion, arbitration agreement, mandatory arbitration, consumer contracts, consumer protection, liability waivers, damage caps, implied warranties, warranty disclaimers, choice of forum, dispute resolution clauses, unilateral modification