The Role of Nonprofits in the Production of Boilerplate

Abstract

In the United States at least, nonprofits, and in particular trade associations, seem to play a substantial role in producing boilerplate contractual terms. There are at least four reasons to believe that it makes a difference whether boilerplate is produced by a nonprofit such as a trade association rather than a for-profit such as a law firm or a publisher of legal databases. First, because of their distinctive mandates, when making decisions some nonprofits take into account benefits and costs that for-profits treat as externalities. Second, some nonprofits are relatively well placed to stimulate demand for contracts by credibly assuring prospective users of their value. Third, some nonprofits can produce contracts of a given quality at a relatively low cost because they have superior ability to attract volunteers. Fourth, nonprofits may be able to produce contracts at a relatively low cost because they enjoy preferential tax treatment. Understanding the distinctive features of production of boilerplate by nonprofits constitutes an important step towards understanding its implications for social welfare. This understanding can in turn inform analyses of the role the state ought to play in formulating contractual terms and shed light on the question of whether state intervention ought to involve encouraging or discouraging the production of boilerplate by nonprofits. This analysis also sheds light on broader questions surrounding the role of nonprofits such as trade associations in a market economy.