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Sunday, November 24, 2013

Wrap Contracts Symposium: Response to Rustad, Zacks and Amato and Closing Thoughts

Wrap contracts

 I want to thank all the experts who participated in last week's  symposium on WRAP CONTRACTS:  FOUNDATIONS AND RAMIFICATIONS .  They raised a variety of issues and their insights were thoughtful, varied and very much appreciated.  I also want to thank Jeremy Telman for organizing the symposium and inviting the participants.

Today, I’d like to respond to the posts by Michael Rustad, Eric Zacks and Theresa Amato.  Eric Zacks emphasizes the effect that form has on users, namely that the form discourages users from reviewing terms.  Zack notes that contract form may be used to appeal to the adjudicator rather than simply to elicit desired conduct from the user and that forms that elicit express assent - such as “click” agreements - help the drafter by aiding “counterfactual analysis surrounding the ‘explicit assent’” issue.  In other words, drafters may use contract forms to manipulate adjudicator’s decisionmaking and not necessarily to get users to act a certain way.  (This is a topic with which Zachs is familiar, having just written a terrific article on the different ways that drafters use form and wording to manipulate adjudicators’ cognitive biases). 

Both Michael Rustad and Theresa Amato focus, not on form, but on the substance of wrap contracts – the rights deleting terms that contract form hides so well.  Amato comes up with an alternative term to wrap contracts – online asbestos – to highlight the not-immediately-visible damage caused by these terms.  As a consumer advocate and an expert on how to get messages to the general public, Amato understands the need to overcome the inertia of the masses by communicating the harms in a way that can drown out the siren call of the corporate marketing masters.  So yes, a stronger term may be required to jolt consumers out of their complacency although the real challenge will be getting heard and beating the marketing masters at their own game. 

Michael Rustad notes that my doctrinal solutions fall short of resolving the problem of predispute mandatory arbitration and anti-class action waivers.  He’s right, of course, although I think reconceptualizing unconscionability in the way I propose (by presuming unconscionability with certain terms unless alternative terms exist or the legislature expressly permits the term) would reduce the prevalence of undesirable terms including mandatory arbitration and class-action waivers.  Rustad, who has considerable expertise on this subject, mentions that many European countries are further along than we are in dealing with unfair terms.  Many of those jurisdictions, however, also have legislation which limits class actions, tort suits or damages awards.  In addition, they don’t have the same culture of litigation that we do in this country.  Wrap contracts have their legitimate uses, such as deterring opportunistic consumer behavior and enabling companies to assess and limit business risks. In order to succeed, any proposal barring contract terms or the enforceability of wrap contracts must also consider those legitimate uses. 

Wrap ContractsI believe there is a place for wrap contracts and boilerplate generally but their legitimate uses are currently outweighed by illegitimate abuses of powers.  Wrap contract doctrine has moved too far away from the primary objective of contract law – to enforce the reasonable expectations of the parties--  and my solutions were an attempt to move the train back on track.  My focus was on doctrinal solutions but the problems raised by wrap contracts are complex and my solutions do not foreclose or reject legislative ones. I’m a contracts prof, so my focus naturally will be on contract law solutions (if you have a hammer, everything looks like a nail, I guess).  Doctrinal responses have the advantage of flexibility and may be better adapted to dynamic environments than legislation which can be quickly outdated when it comes to technology or business practices borne in a global marketplace. 

Admittedly, when it comes to wrap contracts, doctrinal flexibility hasn’t really worked in favor of consumers, but that only makes it more important to keep trying to sway judicial opinion.  I know there are those who question whether judges read legal scholarship, but I know that there are many judges (and clerks) who do. The case law in this area has spiraled out of control so that it makes no sense to the average “reasonable person” and has opened the door to the use of wrap contracts that exploit consumer vulnerabilities.

My book was not intended as a clarion call to rid the world of all wrap contracts; rather, it was intended to point out how much damage wrap contracts have done, how much more they can do, and to provide suggestions on how to rein them in and use them in a socially beneficial manner. 

I’m grateful to have had the opportunity to hear the insightful comments of last week’s highly respected line-up of experts and to share my thoughts with blog readers. 

[Nancy Kim]

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