ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Thursday, May 23, 2013

Boilerplate Symposium X B: Professor Radin Responds to Week II

RadinThis is the second part of the tenth in a series of posts reviewing Margaret Jane Radin's Boilerplate: The Fine Print, Vanishing Rights and the Rule of Law.

In today's posts, our author, Margeret Jane Radin, responds to her reviewers.  In the first half, she responded to the reviewers from last week.  In this second half, she responds to this week's reviewers.

But don't think that this is the end.  We have more reviews rolling in, and they will go up next week, so stay tuned.

Response to Brian Bix:

Thanks for your careful reading of my book, always a great pleasure for an author.

Brian.Bix-webYour caveat on democratic degradation is related to federal law, and specifically to the Court's super-hyper-expansion of the FAA,  and (no doubt) the failure of Congress to amend the FAA to rein this in. At the federal level there are other examples to describe as democratic degradation: when an enacted rights regime (such as user rights under copyright law) is not undermined by legislative activity (or failure to act) but rather can be summarily overruled by the expedient of dropping boilerplate on recipients.

 But contract is primarily a creature of state law, and so is tort. Democratic degradation is happening at the state level.  States should be able to void contracts that are unilaterally infinitely modifiable.  States should be able to use democratic processes to protect their consumers via class actions, etc. (What has become of federalism?)

It seems to me that what you call "the lesser side of American political life" --the fact that Congress is owned by special interest money--is indeed also a form of democratic degradation; for example, we now have 90% of the populace supporting legislation that one lucrative industry, though surrogates, can block.  This is a point where public choice theory describes the situation, and, as I said in chapter 3, public choice theory seems to be itself a form of democratic degradation.  I should have written more about this--and probably will.

Bar-GillResponse to Oren-Bar-Gill:

I do think that the oversimplified Chicago approach is still dominant, especially as taught to 1L's by lay economists.  Why else is it still so widely asserted that firms that deploy rights deletions must be passing on savings to consumers (rather than pocketing the money), that consumers must be or should rationally be choosing to have the money rather than the rights (rather than having no idea what the
rights are, etc) so there is an efficient  price/rights trade off?

Economists who are sophisticated as you suggest must know this depends on several empirical assumptions that cannot be true for all markets, as well as (I hope they would also know) the contestable normative assumptions that all rights are tradeable in nature and that property rules can be turned into liability rules by firms at will.  FWIW, I have argued this out primarily in chapter 6, and of course would be delighted if a more sophisticated economist such as yourself would elaborate and refine this argument. (I do wish my friend Prof. Ben-Shahar in his review had chosen to mention said chapter when choosing to restate this blanket argument.) The empirical assumptions have to do with (in each market) the level of competition and the level of information asymmetry as well as whether the firm must charge the same price to all consumers and whether there is at least a well-informed subgroup that can establish demand for all. (Note, for example, that the firm is not charging the same price to all consumers in situations where some consumers can call up and get a better deal after the fact--such as reversal of bank charges-- while others are not in a position to be able to do that.)

So yes, I am sympathetic to a more nuanced economic analysis and empirical approach, including availability/access to information online through sources other than the fine print itself. (See chapter 10 which Schwarcz.Daniel.798-webcould provide some rudimentary ideas.) I wish I had written more about open ended unilateral modification, too.  At least, I hope this particular 100,000 words has laid some groundwork for further research and thought.

Response to Daniel Schwarcz:

I agree with most of what you say.  I am very much concerned with erasure of (certain) legal rights, because of impact on democratic ordering, the rule of law, and equality before the law. The hyper-expansion of the FAA is a special (though very important) case, and maybe Congress will amend the FAA to rein it in (though I am not holding my breath).  See my similar comments in reply to Brian Bix.

If you develop a products liability approach to boilerplate which can avoid the pitfalls that worried me in chapter 11, I am sure I will endorse it.  It has the virtue of picking up on the economists' insistence that the fine print is part of the product.

KrawiecResponse to Kim Krawiec, Parts I and II:

I appreciated your comments on democratic degradation, which I cited in chapter 3.  Contract is part of the legal infrastructure necessary for markets, and I do support markets.  You may have more faith than I do that these particular markets are not plagued by severe information asymmetry which nullifies assumptions of efficient processes.  Faith is what it is, since this is an empirical question for each market, and we don't have data to support the faith.

The "take-it-or-leave-it nature of boilerplate" DOES sometimes "harm consumers as a group," even if they have individually "agreed" to rights deletion, if the rights are market-inalienable (see chapter 9); and if consent looks dubious then we might prefer to risk error on the side of market-inalienability if we are unsure, especially in the presence of mass-market deployment.

The ubiquitous overreaching liability waiver poses the question whether individuals, one by one, can waive background rights that are constitutive for civil society, but not salient for individuals.  Yes, in the absence of some New Zealand-like solution, I place a high regard on the tort system.  (So no, I don't argue for "a substantive regulation," at least not exclusively.) If we are all free to harm each other, and everybody must take care to avoid being harmed by everybody else, we are back in the state of nature. The firm is almost always best cost avoider, and should be the risk-bearer.  Firms shouldn't be able to shunt their risk to recipients, and insurers should not be able to force firms to do so.

If you want to say that this will necessarily increase the price of goods and services, then you are making blanket empirical assumptions about competition and information, so please see above.

[Posted, on Margaret Jane Radin's behalf, by JT]

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