ContractsProf Blog

Steven Feldman Reviews Boilerplate

For those of you who cannot get enough input on Margaret Jane Radin's Boilerplate: The Fine Print, Vanishing Rights and the Rule of Law, we have yet another review.  This one is from friend of the blog Steven Feldman.  Links to other contributions from our online symposium on the book can be found here.  

In her book, Boilerplate:  The Fine Print, Vanishing Rights, and The Rule of Law, Professor Margaret Jane Radin suggests the expansion of tort law as the centerpiece remedy for what she terms abusive mass market contract boilerplate. (Radin, p. 216).  As a complement to existing contract remedies, she posits a new tort, i.e., “intentional deprivation of basic legal rights.” (Radin, pp. 198, 211, 216). According to Radin, this intentional tort would cover abusive boilerplate, i.e., “a firm that imposed severe remedy deletions of rights that are at least partially market-inalienable, under circumstances of non-consent and mass market distribution . . . .” (Radin, p. 211).This intentional tort would be a companion to another new tort reconceptualizing abusive boilerplate as a defective “product” under the law of product liability. (Radin, pp. 198, 222-23).

Radin’s proposal to use the tort law system to remedy boilerplate abuse has attracted support from respected academic commentators.  Professor Omri Ben-Shahar in his review of the book calls Radin’s suggestion a “welcome new framework” and “an immensely creative idea, surely to become a legacy of the book, and it deserves careful attention . . . .”  Omri Ben-Shahar, Regulation Through Boilerplate: An Apologia, ___ Mich. L. Rev. ___ (2013) (forthcoming) (available at the SSRN Electronic Library).  Because I believe that Radin’s suggested tort remedies contradict numerous legal principles, my critique will explain why the chances are minimal that any U.S jurisdiction would accept her proposals to make a tort out of a contract dispute.

Radin: Precedent exists for the creation of new torts by common law courts, such as the torts involving invasion of privacy.  (Radin, p. 198).

Response: Radin is correct that the torts involving invasion of privacy were judicially created. What Radin omits is that although some courts claim the common law authority to create new torts, they characteristically “tread cautiously” in this area, Rees v. Smith, 301 S.W.3d 467, 471 (Ark. 2009), as they balance numerous legal and substantive considerations,  Burns v. Neiman Marcus Group, Inc., 93 Cal. Rptr. 3d 130, 136 (Cal. Dist. App. 2009)(listing considerations). Thus, for example, courts considering a new tort must balance the need to meet society's changing needs against the prospect of boundless claims in an already crowded judicial system. Rees, 301 S.W.3d at 471. In another policy, courts “[w]ill decline to recognize a new cause of action if there are sufficient other avenues, short of creating a new cause of action, that serve to remedy the situation for a plaintiff.”  Id.

 Radin fails to point out that the usual outcome is “countless refusals” by judges to create new torts. Anita Bernstein, How To Make A New Tort: Three Paradoxes, 75 Tex. L. Rev. 1539, 1546 n.38 (1997)(citing decisions).   Indeed, some courts decline altogether to create new actions in tort. Their rationale is that legislatures have better institutional capability to balance the competing public policy considerations attendant with new forms of liability.  Murphy v. American Home Products Corp., 448 N.E.2d 86, 89-90 (N.Y. 1983); Accent Store Design, Inc. v. Marathon House, Inc., 674 A.2d 1223, 1226 (R.I. 1996)(“We have long held … that the creation of new causes of action is a legislative function.”).  Radin does not mention this split of authority and does not make a convincing case that existing contract remedies, such as contract invalidation based on unconscionability, are inadequate to address meritorious consumer claims.

Estimates are that ninety-nine percent of all contracts are standard form adhesion contracts. Wayne R. Barnes, Toward A Fairer Model of Consumer Consent To Standard Form Contracts: In Defense Of Restatement Section 211(3), 82 Wash. L. Rev. 227, 233 (2007).  Because Radin’s new torts would conceivably cover a high percentage of these standardized mass distribution contracts nationwide, courts should think twice before hampering the use of a business tool that “[i]s essential to the functioning of the economy.”  See 1-1 Corbin on Contracts § 1.4. (Rev. ed. 1993). A real possibility also exists that Radin’s proposals would incite boundless claims in an already crowded judicial system. Thus, it is highly unlikely that any court would approve Radin’s proposals for expansive new tort liability. Also improbable is whether any state legislature--with many dominated by conservative representatives--would expand consumer rights beyond existing consumer protection statutes.

Radin: A tort remedy for intentional deprivation of basic legal rights is a better conceptual fit than contract law to address boilerplate abuse. (Radin, pp. 198, 222, 248, 253 n.11)

Response: Radin barely acknowledges settled doctrine (see Radin, p. 209) that, as a matter of policy, the law disallows parties from using tort law to alter or avoid their contractual obligations. In re Consolidated Vista Hills Retaining Wall Litigation, 893 P.2d 438, 446 (N.M. 1995). “A contractual obligation, by itself, does not create a tort duty.” Jones v. Hyatt Ins. Agency, Inc., 741 A.2d 1099, 1106 (Md. 1999). The reasons stem from the substantive differences between tort and contract. Tort actions stem from the breach of duties imposed as a matter of public policy whereas contract actions stem from the breach of duties imposed by mutual consent. E.g., Goldstein v. Elk Lighting, Inc., 2013 WL 790765 at *3 (M.D. Pa. 2013). This standard preserves the “important” boundary between tort and contract. See Ashall Homes Ltd. v. ROK Entertainment Group Inc., 992 A.2d 1239, 1253 (Del. Ch. 2010); Deli v. University of Minnesota, 578 N.W.2d 779, 782 (Minn. Ct. App. 1998).

Radin also never discusses the established line of authority that the gist or gravamen of the cause of action is determinative for deciding whether the action lies in contract or tort. 1A C.J.S. Actions § 136 (2013). Put another way, the prevailing test for tort liability when the parties have a contract is whether the wrongdoer also breaches an independent duty to the injured party owed separately from the contract. Textron Fin. Corp. v. Nationwide Mut. Ins. Co., 684 N.E.2d 1261, 1270 (Ohio Ct. App. 1996). Thus, where the defendant has harmed the person or property of the plaintiff, but where these parties also have a contract, the contract must be collateral to support a tort liability. Goldstein, 2013 WL 790765 at *3.

With the proposed cause of action in tort for intentional deprivation of basic legal rights, the contract is not collateral. The supposed tort liability arises solely from the contractual relationship between the parties and the alleged duties breached are grounded in the contract itself. Id. at **3-4. Another important consequence of Radin’s aggressive merger of contract and tort is that the consumer suing in tort would be entitled to seek extensive relief not generally available under contract, namely, expanded consequential damages along with punitive and emotional distress damages. (See Radin, p. 206).  Courts should not allow plaintiffs to obtain such a windfall.  See also Kailin v. Armstrong, 643 N.W.2d 132, 144 n.19 (Wis. Ct.  App. 2002) (“If a [contracting party] is permitted to sue in tort when a transaction does not work out as expected, that party is in effect rewriting the agreement to obtain a benefit that was not part of the bargain.”). Granting plaintiffs greater common law rights and remedies against defendants is the exception, and not the rule, in the current conservative judicial climate.

Regarding the distinction between tort and contract, Radin merely comments that (1) she disagrees with the above standard, (2) several torts, such as fraud or misrepresentation, constitute an independent duty from the contract, (3) the line between tort and contract is not hard and fast, and (4) an abusive boilerplate contract  is only a “purported contract”  (even though no court subscribes to this last assertion) (Radin, pp. 9-11, 14-15, 197-209). While she has a point that a defendant’s tortious conduct may arise in contract cases, Radin’s proposed new tort of intentional deprivation of basic legal rights consistently disregards the fundamental principle that contracts, by themselves, do not create duties in tort.

Radin: Tort law has a developed infrastructure for dealing with mass torts whereas contract law has no such infrastructure for dealing with mass contracts. (Radin, p. 198)

Response: Radin overlooks that courts routinely certify class actions involving consumers claims on form contracts.   See, e.g., Sacred Heart Health Systems, Inc. v. Humana Military Healthcare, 601 F.3d 1159, 1171 (11th Cir. 2010) (“It is the form contract, executed under like conditions by all class members, that best facilitates class treatment”); Dupler v. Costco Wholesale Corp., 249 F.R.D. 29, 37 (E.D.N.Y.2008) (collecting cases for the proposition that class certification is typically appropriate in cases involving form contracts). Because contract law is just as adaptable as tort law in accommodating collective lawsuits, Radin’s critique is not persuasive.

Radin: Unfair boilerplate contracts qualify as a defective product under the law of product liability. (Radin, pp. 101, 198)

Response:  Under the law of product liability, a “product” is “tangible personal property distributed commercially for use or consumption.” Restatement (Third) of Torts: Products Liability, § 19(a) (1998).  A written contract does not meet this definition; it is only a document that memorializes an intangible, which is the agreement of the parties. Although a document delivers the information, the plaintiff's grievance in such case is with the content of the document, not with the tangible medium itself.  See id. at cmt. d.

Even if a contract with unfair boilerplate were a “product” for the above purposes, it is not “defective” as a basis for tort liability.  “A product is defective when, at the time of sale or distribution, it contains a manufacturing defect, is defective in design, or is defective because of inadequate instructions or warnings.”  Restatement (Third) of Torts: Prod. Liab. § 2 (1998). See also Birmingham v. Fodor's Travel Publications, Inc., 833 P.2d 70, 76, 79 (Haw. 1992)(no cause of action in product liability for defective ideas) . Abusive contract boilerplate is not defective under the Restatement definition.  Because Radin’s new tort cannot meet these important pre-requisites of product liability law—“product” and “defect”—her proposal must be found wanting.

Radin: Abusive boilerplate terms support the proposed intentional tort of deprivation of basic legal rights because they improperly deprive consumers of numerous rights granted by the polity, for example (1) waivers of the right to a jury trial with a substitution of mandatory arbitration, (Radin, pp. 16, 108, 131), and (2) imposition of overly inclusive exculpatory clauses for seller negligence.  (Radin, pp. xiv, 138-140, 184-85).  

Response: Radin is correct that many boilerplate contracts broadly favor the seller in the cited areas. On the first point, what Radin leaves out is that a contractual jury trial waiver must be knowing and voluntary; therefore, it is strictly construed. Debra T. Landis, Annot., Contractual jury trial waivers in federal civil cases, 92 A.L.R. Fed. 688 (1989). See also United States v. Cal. Mobile Home Park Mgmt. Co., 107 F.3d 1374, 1378 (9th Cir.1997)(noting the “strong presumption” against the waiver of this fundamental right).

Courts assessing these jury trial waivers focus on the conspicuousness of the provision, the parties' relative bargaining power, the sophistication of the party challenging the waiver, and whether the terms of the contract were negotiable. Martorella v. Deutsche Bank Nat. Trust Co., 2013 WL 1136444 at *2 (S.D. Fla. 2013)(citing decisions).  No single factor is conclusive and the court is not bound by the number of factors that have been satisfied. Rather, the court asks whether, in light of all the circumstances, is the waiver unconscionable, contrary to public policy, or simply unfair. Martorella,  2013 WL 1136444 at *2 (citing cases). Two circuits even hold that agreements to resolve disputes by bench trials are enforceable only if extra evidence of negotiation or consent supports that clause.  See National Equipment Rental, Ltd. v. Hendrix, 565 F.2d 255, 257-58 (2d Cir.1977); K.M.C. Co. v. Irving Trust Co., 757 F.2d 752, 755-57 (6th Cir.1985).  Based on the above guidelines, courts are not as unduly disposed toward approving contractual jury waivers as Radin would have the reader believe. (See Radin, pp. xiv, 131).

On the second point, Radin contends that broad exculpatory clauses for seller negligence should be outlawed unless consumers are given a choice to tradeoff rights for a lower price. (Radin, pp. 184-85). Radin fails to point out that contracts exonerating one party from acts of future negligence are disfavored and strictly construed against the benefiting party. Additionally, the courts say that clear, unambiguous, unmistakable, and conspicuous language is required to release a party from his or her future negligence. There must be “no doubt” that a reasonable person agreeing to an exculpatory clause actually understands what future claims he or she is waiving. Indeed, the word “negligence” must be clearly stated in a release of future negligence. E.g., Guthrie v. Hidden Valley Golf and Ski, Inc., --- S.W.3d ---, 2013 WL 2181247 at *4 (Mo. Ct. App. 2013); see also Aviation Eng'g Co. v. Bd. of Clark Cnty. Comm'rs, 794 P.2d 710, 712–13 (Nev.1990). Another important consideration in some jurisdictions is that “[e]ach party must be a free bargaining agent to the agreement so that the contract is not one of adhesion.”  Topp Copy Products, Inc. v. Singletary, 626 A.2d 98, 99 (Pa. 1993). As can be seen, the actual state of the law on exculpatory clauses differs materially from the law Radin depicts on the supposed inadequate judicial oversight of these provisions.

Radin: The persons who draw up and deploy offensive boilerplate are parties to the tort of intentional deprivation of basic legal rights and specifically intend adverse effects. (Radin, p. 215)

Response: Radin would automatically impute the supposed bad intent of the drafter of abusive boilerplate to the seller of goods or services who uses those boilerplate contracts. Radin does not appreciate that the alleged bad intent of the drafter and the seller using those forms is a factual question and that such persons do not necessarily act in concert. See Jordan v. Wilson, 5 So. 2d 442, 451 (Miss. Ct. App. 2008)(intent in law of torts is a question of fact). In many cases, the proof would undoubtedly show that the drafter, the seller, or both act in good faith as they seek to advance what are perceived to be valid business interests.   

In the end, Radin’s proposal to transform abusive mass market boilerplate contracts into a fount of tort liability in favor of the consumer is actually counterproductive. Her proposal can have adverse consequences for the same individuals that Radin strives mightily to protect. The expanded liability of sellers arising from Radin’s suggested reforms would only cause price increases to account for this added seller legal exposure, all to the detriment of consumers and to the general economy with a corresponding likely reduction in sales activity.  In Original Great American Chocolate Chip Cookie Co. v. River Valley Cookies, Ltd., 970 F.2d 273, 282 (7th Cir. 1992), the court observed:

The idea that favoring one side or the other in a class of contract disputes can redistribute wealth is one of the most persistent illusions of judicial power. It comes from failing to consider the full consequences of legal decisions. Courts deciding contract cases cannot durably shift the balance of advantages to the weaker side of the market; they can only make contracts more costly to that side in the future, because [the other side] will demand compensation for bearing onerous terms.

For all the above reasons, I respectfully contend that Radin’s radical expansion of tort law into the realm of contract is without merit.

[Posted, on Steven Feldman's behalf, by JT]

 

Dean Irma S. Russell, A Review of A Manual of Style for Contract Drafting

Irma S. Russell is Dean and Professor of Law at the University of Montana School of Law.

Kenneth Adams’ recently released third edition of A Manual of Style for Contract Drafting, is a hefty volume. When I opened the package containing this manual my first thought was: “Wow, this is bigger than expected.  It looks really time consuming.”  At 455 pages, the book is closer to Fowler’s than Strunk & White. It is worth the time to read it.  In fact, once you start reading, it is hard to put down.  The writing is clear and concise, the tone is engaging, and the range of usage addressed is impressive.  

This book provides far more than drafting tips. This author has considered language in a deep way and gives thoughtful and sometimes provocative assessments of the usages he endorses.  His discussion of the language of belief, the language of intention, the language of recommendation and the distinctions among the categories is notable for its logic and even philosophical assessment as well as for its authority of declaring a particular usage superior to other constructions.  (Be sure to look for his treatment of "between" and "among" in reference to multiple parties.  This discussion may also apply to my last sentence before this parenthetical.)

The manual is useful for all lawyers who draft agreements, and most do of course.  Indeed few lawyers can separate themselves from contract drafting or the need for precise language.  A plea arrangement in the criminal context is as subject to the risk of ambiguity as a lease agreement.  A tort settlement is in as great a need of careful word choice as a corporate merger.  The trap for the casual drafter can involve malpractice claims as well as disappointed expectations of clients. 

The author’s introduction makes clear the work’s goal of providing precise and consistent language in contracts.  He endorses consistency “because differences in wording can result in unintended differences in meaning.”  He notes the necessity of a manual of style “because traditional contract language needs a thorough overhaul.”  This point underscores the need for the point-by-point treatment provided in the book.

The goals the author sets for this work are indeed as worthwhile (and as hard to achieve) in today’s world as in Fowler’s.  Creating documents with few opportunities for confusion means that the careful drafter will not need to see his words in court and the client will not need to roll the dice of litigation in arguing for his belief or assumptions about the intentions of the parties.

The book delivers on its promise to serve to help its user find "greater clarity and consistency in written usages."  Though modest in its succinct statement, this is an ambitious promise, and one that the book fulfills.  The principle of Occam's razor is at work here despite the heft of the volume.  Each discussion of a phrase or word is brief and to the point.  The length of the book results from the number and scope of the issues addressed rather than from any drawn out discussions.  More elegant contract language is the result of the guidance offered here. While Strunk & White is certainly shorter, it does not take on the range of issues Adams reaches, and I am convinced both revered authors would approve of this manual of style.  

Opening this book was a Pandora-type move for me, and now I am hooked on the author’s blog: Adams on Drafting.  You can access it here but I warn you now: You can’t read just one.  The risk for the reader opening either the book or the blog is getting caught up in the fascinating world of contract drafting.  Even after you find the answer to the specific question that sent you to the book, you may be unable to stop reading.  I’m heading back to the blog now to look for more on “between” and “among.”

[Posted, on Irma Russell's behalf, by JT]

Daniel Barnhizer Reviews Ken Adams' Manual of Style for Contract Drafting (3d ed.)

Daniel D. Barnhizer is Professor of Law & The Bradford Stone Faculty Scholar, Michigan State University College of Law. 

Kenneth Adams’ third edition to the Manual of Style for Contract Drafting[1] (“Contract Drafting”) delivers invaluable advice to any attorney or professional who drafts contracts or contract terms. The book is also highly suitable for law school classroom use in drafting classes, business school, or undergraduate business courses. This book has found a permanent place on my shelf among my go-to style manuals.

 

Introduction

 

Contract Drafting is a style manual that goes well beyond explicating basic contract conventions, admonishing attorneys to use “plain English” and avoid “legalese,” and providing lists of awkward or ambiguous words and phrases to excise from the drafting lexicon. Adams does all of these things effectively and efficiently, but Contract Drafting delivers on many more levels.

 

Audience

 

Like previous editions, this book will be useful across a wide range of applications. As Adams notes in the introduction:

This manual should be of use to readers in every contract ecosystem—a solo or small-firm general practitioner handling a broad range of contracts . . ., a contract-management professional responsible for negotiating contracts with customers; a big-law associate drafting mergers-and-acquisitions contracts; an in-house lawyer overhauling the company’s template sales contract; a paralegal reviewing confidentiality agreements a company is asked to sign; a judge trying to make sense of a confusing contract provision.[2]

In this list, Adams omits another important audience – law students. Contract Drafting is a nearly ideal tool for teaching a contract drafting course. As discussed below, the content of the manual goes beyond listing blackletter principles and providing tables of words and phrases to avoid. In this most recent edition of Contract Drafting, Adams carefully walks the reader through detailed explanations of his drafting principles while at the same time presenting an extraordinarily complete manual that teaches the inexperienced and informs the senior practitioner. Any professional – lawyer or non-lawyer – or law student who deals with contracts in any manner should keep this book near at hand.

 

Content

Contract Drafting is comprehensive and ambitious in scope. The range of topics covers the significant contract drafting issues likely to be encountered in appropriate length and detail. Importantly, the book recognizes that for many attorneys and professionals who will use this style manual, the principles of good contract drafting cannot be reduced to a short list of rules to which the struggling drafter may refer in order to turn a poorly written instrument into a thing of beauty. Rather, the text is a teaching text. Experienced drafters already familiar with good drafting techniques may use the book to help clarify difficult provisions and terms on an ad hoc basis.

But for the vast majority of users who still draft from samples passed through generations of law firm lawyers, the Adams’s Contract Drafting will only reach its full potential if they actually read the book. My students—and many practitioners, based on some of the clauses I have seen out in the wild—often have difficulty with drafting general release clauses, for example. Attempting to use the book for a quick check on how to draft a general release clause will be fruitless. Contract Drafting contains excellent advice that applies to the different phrases useful to drafting such a clause, such as use of common terms from such releases including “arising out of or relating to” and “from the beginning of time.”[3] But if a practitioner is facing a clause such as the one I inherited from one of my supervisors early in my career, these are merely helpful Band-Aids:

[Party B] discharges and acquits [Party A], their subsidiaries, affiliates, successors and any persons or entities taking through them, of and from any and all claims, liabilities, and choses in action of any kind whatsoever, whether known or unknown and whether asserted or not, arising out of or relating to the [current action] from the beginning of time to the date of these presents, including the [current action].

Reforming that riot of legalese and opacity requires not a Band-Aid but major surgery. To get to the point where the drafter can effectively spot the problems inherent in such provisions and efficiently rewrite the term without breaking the bank requires training and practice. Contract Drafting provides the basis for the training as long as the reader is willing to put in the time necessary to assimilate its lessons.

Taking a simple example from Chapter 1, “The Characteristics of Optimal Contract Language,” ¶¶ 1.42-1.54 address the need to “Limit the Use of Strings.”[4] A beginning drafter or even an experienced drafter who lacks systematic training in modern contract drafting and legal writing principles likely will not even be able to recognize “strings” – redundant series of synonymous terms such as “goods and chattels,” “sell, convey, assign, transfer, and deliver,” and “indemnify and hold harmless,” – much less know that they are in most cases unnecessary and potentially ambiguous.

Likewise, Chapter 3, “Categories of Contract Language,” does a masterful job of distinguishing between different types of contract language that inexperienced drafters will likely have not encountered. Just as Wesley Newcomb Hohfeld’s taxonomy of jural correlatives created real structure and meaning in theoretical and judicial analysis by systematically distinguishing legal relations such as rights and duties, privileges and no-rights, liabilities and powers, and immunities and disabilities,[5] in my experience many students and even experienced drafters fail to maintain distinctions between different types of contract language. Adams’s Chapter 3 walks the reader through each of the categories of contract language – Agreement, Performance, Obligation, Discretion, Prohibition, Policy, Conditions, Declarations, Belief, Intention, and Recommendation – and clarifies through rules and examples how and when each category is appropriately used.[6]  

Later chapters address more specific contracting issues that a drafter might refer to on a one-off basis. Chapter 6, for instance, deals with the proper use of defined terms. Chapters 8 and 9 address the commonly used terms “Reasonable Efforts,” “Material,” and “Material Adverse Change.” Chapter 10 explains proper techniques for referring to time in a contract. But even these more specific sections deserve the 30 minutes of attention it would take to read through each and assimilate Adams’s systematic and detailed treatment of their subjects so that the drafter will recognize the issues when they arise.[7]

Fortunately, despite that appreciating the full value of the book requires assimilating the text, Adams’s style is highly readable. Adams writing is explicative and does not merely set forth a list of rules with bare admonitions for the drafter. For example, in the section on limiting the use of redundant phrases, Adams advises the drafter against needlessly redundant language such as “goods and chattels,” or “sell, convey, assign, transfer, and deliver.”[8] But Adams also identifies the situations in which a drafter may legitimately choose to retain terms with subtly different meanings or accepted legal phrases. Importantly, Adams explains the arbitrary origins of such redundancies both in reference to medieval English practices that incorporated identical legal terms from English, French, and Latin and in connection with the “rhythmical appeal” of these terms. By explaining how such redundancies developed, Adams reemphasizes the rule in a manner that is memorable and provides comfort to an unsure contract drafter considering a departure from a form.[9]

Within each chapter, the organization is excellent and logically approaches the subject matter so that the reader may efficiently begin incorporating the principles of contract drafting immediately after encountering them. Adams also judiciously salts his explanations with clear and concise examples of both proper and problematic contract usages. Chapter 12, for example, dealing with syntactical ambiguity, provides series of permutations of contract terms in which modifiers and commas are moved within the term to effectively demonstrate the sources and resolution of ambiguities. And throughout the book Adams includes specific judicial decisions relating to the contract drafting at issue to demonstrate his principles and to impeach many traditional justifications for bad drafting practices.[10]

Finally, the “before,” “before with footnotes,” and “after” versions of a sample executive golden parachute contract in Appendices 1-A, 1-B, and 1-C clearly show the value of the book and the potential benefits of adopting Adams’s principles of contract drafting.[11] The “before” version is a dense, confusing, potentially ambiguous, and definitely unclear example of a typical termination agreement that is consistent with similar agreements I have seen in my own practice. The “before with footnotes” version in Appendix 1-B is worth its weight in gold as Adams systematically lists the individual shortcomings in the before contract. This version convicted me of several of my own contract drafting sins, and should clearly demonstrate to any reader the need for rigorous and consistent application of a manual of style for contract drafting. The final version—“after”—shows what the contract could look like if drafted according to the principles laid out in Contract Drafting. These three versions provide invaluable demonstrations of the benefits of the book and for students and colleagues make a convincing argument in favor of adopting and learning a style manual.

 

Using Contract Drafting

 

In developing this review, I considered several of the contract drafting issues that had come up in my own classes and past drafting practice. Adams’s treatment of each issue was correct and complete. Had I been addressing those concerns from scratch in the drafting stage, Adams’s treatment would have informed the beginning drafting student, the sales officer, and the transactional lawyer alike.

For example, my students often struggle with when and how to use “time is of the essence” clauses. The index contains an entry for “time is of the essence” clauses.[12] Adams’s substantive treatment begins with the basic rule: “time is of the essence clauses” are necessary in some contexts because “courts tend to hold that late performance isn’t grounds for termination unless the purpose of the contract or the circumstances surrounding it indicate that the parties intended for that to be the case.”[13] The remainder of the discussion on this issue addresses pitfalls relating to improper use of the clause. These include the inclusion of general statements that fail to link the clause to a specific performance for which time is truly essential, failure to identify the consequences of untimeliness, failure to recognize that the term may be inconsistent with other terms in the contract, and failure to recognize that some jurisdictions may refuse to enforce such clauses for trivial breaches after substantial performance. Finally, after exploring general usage and the pitfalls awaiting the unwary drafter, Adams provides an alternative drafting convention – with an example – that would deliver the precise meaning that most drafters would be seeking in using such clauses.[14]

 

Organization

 

The overall organization of the book is the only problematic area, albeit one that should be relatively innocuous to a regular user. In attempting to find treatments of particular contracting issues during my first read of the book, I found it frustrating to navigate different sections and the organization was not intuitive. Chapters 1 (“The Characteristics of Optimal Contract Language”), 3 (“Categories of Contract Language”), 4, (“Layout”), 7 (“Sources of Uncertainty in Contract Language”), 11 (“Ambiguity of the Part Versus the Whole”), 12 (“Syntactic Ambiguity”), and 16 (“Typography”) address what I consider “strategic” contract drafting issues that apply generally to the process of drafting the contract as a whole. Chapter 17 also likely fits in this category as it contains a short treatment of general writing principles applicable to drafting, although the material in this chapter seems better suited for inclusion in Chapter 1. 

Interspersed within those strategic treatments are chapters on various “tactical” issues. Chapters 2 and 5 respectively concern specific terms and elements of the front and back matter of the contract like identification of the parties, recitals, and signature blocks. As noted above, Chapters 8 and 9 discuss specific contract terms—“Reasonable Efforts” and “‘Material’ and ‘Material Adverse Change’” clauses. Chapter 13 provides a lengthy list of problematic usages in this regard, similar to that found in other style manuals such as chapters 11 and 12 of Bryan Garner’s well-known general legal style manual “The Redbook.”[15] Chapter 14 and Chapter 15 describe drafting provisions relating to numbers and formulas and drafting conventions.

The organization of the book will be a problem only for the reader who picks up the book looking for a single specific answer to a specific type of contract question. Those answers are there and the book will often be of assistance to such questions. But as noted above, the reader will benefit from the book far more after spending the time to read it cover to cover and assimilating the principles Adams explicates. Once the reader has familiarity with the structure and with the contents of the book, the organization issue will be de minimis.

 

Final Thoughts

 

Contract Drafting has nearly everything I could ask for in a style manual. Kenneth Adams’s coverage of the field is comprehensive. All of the substantive material is presented in a highly-readable form that teaches good drafting through rules followed by detailed explanations and examples. Indeed, a skilled contract drafting instructor could build an entire semester-long course out of this text and a small number of actual contracts or case studies. Preparation for this review alone gave me substantial food for thought and showed areas where my own drafting practices can be improved significantly. For the student, this is a perfect book.

It is also an extraordinarily useful book for the practitioner. The book can, however, only deliver its full potential if the practitioner recognizes the need for a short-term trade of otherwise billable hours (or free time) for long-term professional development. The short-term costs are not insubstantial—my initial reading of the book in preparation for this review took approximately twelve hours, although much of that was note taking. Afterwards, drafters will incur additional time and transaction costs in redrafting contracts previously seen as “good enough” because they cut and pasted terms that had “worked” or been tested in past contracts. It will take time to reach the point that the bank of new contract forms contains sufficient well-drafted terms and the principles from Contract Drafting become sufficiently second nature that the practitioner will begin to profit from the investment.

In the final analysis, though, the investment is not optional. The economics of the legal market are changing rapidly. As Richard Susskind’s The End of Lawyers suggests, the winners in the new legal marketplace will be those who can offer high-quality mass-produced services that look like “bespoke” or custom-made work.[16] Kenneth Adams himself has founded a contract assembly firm, Koncision Contract Automation, that uses computer algorithms to build contracts using the principles described in Contract Drafting based upon a detailed questionnaire that permits clients to develop sophisticated and high-quality contracts that address their needs at a mass-production level price schedule.[17] 

It is unlikely that contract and other document automation firms such as Koncision or form banks like LegalZoom.com will entirely replace contract drafting by individual practitioners or firms, but it is certain that clients will continue to demand more and better contracts for less. Lawyers engage in cut-and-paste contract drafting because it is fast and cheap (at least for them) on the front end. But as legal markets becomes more transparent, sophisticated consumers will notice the back-end costs associated with poorly-drafted contracts and be able to associate those costs with the lawyers, firms, and contracting practices that caused them. Contract drafting practitioners and other professionals who do not move beyond contract language and techniques of the last century will become non-competitive for drafting business in these new legal markets. Contract Drafting provides a great basis for developing modern contract drafting skills and practices.

[Posted, on Daniel Barnhizer's behalf, by JT]

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[1] Kenneth A. Adams, A Manual of Style for Contract Drafting (3d ed. 2013) [hereinafter “Contract Drafting”].

[2] Id. at xxix.

[3] Id. at 250, 280.

[4] Id. at 6.

[5] See Wesley Newcomb Hohfeld, Fundamental Legal Conceptions As Applied in Judicial Reasoning and Other Legal Essays (Walter Wheeler Cook, ed.) (1923).

[6] See Contract Drafting, supra note 1 at 37-98.

[7] Of all the chapters in Contract Drafting, only Chapter 13, “Selected Usages,” is specifically adapted for immediate and occasional reference. This section arranges common contract terms, such as “force and effect,” “incorporated by reference,” “mutatis mutandis,” and “provided that,” alphabetically for easy reference and provides detailed explanations regarding whether and how drafters should employ those terms. See id. at 247-360.

[8] Id. at 6.

[9] See id. at 6.

[10] See, e.g., Contract Drafting, supra, note 1, at 87 (Aspect Systems, Inc. v. Lam Research Corp., No. CV 06-1620-PHX-NVW, 2008 WL 2705154, at *9 (D. Ariz. June 26, 2008) (case law does not support the proposition that there is any difference in remedy for a “representation” in a contract than for a “warranty”)), 154 (listing cases addressing lexical ambiguity), and 246 (Telenor Mobile Communications AS v. Storm LLC, 587 F. Supp. 2d 594, 605-08 (S.D.N.Y. 2008) (syntactical ambiguity arising from lack of a serial comma)).

[11] Contract Drafting, supra, note 1, at 425-450.

[12] Id. at 474.

[13] Id. at 348.

[14] Contract Drafting, supra, note 1 at 348-49.

[15] Bryan A. Garner, The Redbook: A Manual of Legal Style 183 - 318 (2d ed.) (2002).

[16] See generally Richard Susskind, The End of Lawyers? Rethinking the Nature of Legal Services (2008).

[17] See “Why Koncision?,” available at http://www.koncision.com/why-koncision/advantages/.

Cell phones, copyright and contracts

Ajit Pai, a commissioner of the Federal Communications Commission,wrote an interesting op-ed in yesterday's NYT.   He argues that consumers should be allowed to unlock their phone when they permissibly (i.e. not in breach of any contract) switch carriers. Some of you might be wondering - Huh?  Is that even illegal?  Don't I own my phone?  You're probably not alone.  As Pai notes, the Library of Congress decided that unlocking your phone violates the Digital Millenium Copyright Act of 1998.  (They basically removed an exception to the Act that permitted unlocking, as this article in the San Francisco Chronicle explains).  But, you might wonder, what does copyright have to do with what you can do with your cell phone?  A lot of people are wondering the same thing, but basically, software locks the cellphone to a specific network and the cell phone owner is a licensee of that software (and software is copyrightable).  Okay, now you understand what this has to do with copyright but what does this post have to do with contract?  Glad you asked.  Pai's op-ed argues, "Let's go back to the free market.  Let's allow contract law - not copyright or criminal law - to govern the relationship between consumers and wireless carriers."  It's interesting given that this blog has spent the last couple of weeks discussing the need for government intervention due to boilerplate - and yet, here's an example of government intervention into boilerplate that is not actually helpful to consumers.  Don't get me wrong - I'm not saying government intervention into boilerplate isn't a good thing sometimes (depends on what it is and how and why) - I just find it interesting that this example of government intervention is on an issue that protects businesses and hurts consumers.  Of course it shouldn't be surprising since lobbyists for carriers are way better organized and have more money and influence than consumer advocacy groups. And that gets to the heart of what's the matter with using contracts as the solution since the same dynamic is at play in the world of private ordering (see symposium on Boilerplate and the book itself, for more details).  Who knows what carriers might come up with in their contracts.  Would they try to "license" instead of sell their phones? In a perfect world, the free market might function, well, perfectly and private ordering would be the order of the day.  But we don't live in that world so an absolutist "no government intervention v. more government intervention" position doesn't work.

 

[Nancy Kim]

Nadvorney & Zalesne, Teaching to Every Student

Legal education is being transformed before our eyes.  In part, this transformation has been so gradual that it has gone unappreciated.  I routinely read critiques of legal education that seem to be based on the assumption that we all still teach like Professor Kingsfield.  I know of very few people who still use that sort of strict Socratic method.  Most doctrinal law teachers that I know teach through a mix of soft Socratic method, lecture, problems and discussion.  But a great deal of the curriculum at most law schools is now dedicated to skills training, externships, co-curricular activities (moot court competitions, trial advocacy, journals, etc.) and of course clinics.

In the face of blistering criticism of legal education, law schools have been striving to demonstrate a commitment to reform, often by bolstering, highlighting or simply re-packaging existing programs.  But to the extent that real change is occurring, it is often based on our intuitions about what ought to work for our students rather than on actual evidence of what works.  As Holmes tells Watson, “It is a capital mistake to theorize before one has data.  Insensibly one begins to twist facts to suit theories, instead of theories to suit facts.”  But the partnership that produced Teaching to Every Student: Explicitly Integrating Skills and Theory into the Contracts Class bridges the gap between theory and facts.  Deborah Zalesne is a contracts scholar at CUNY law and David Nadvorney is the director of academic support programs at CUNY.   They have worked together for years to make certain that their pedagogical strategies actually work for their students

Introducing new approaches to the legal curriculum involves teaching old dogs new tricks, because law schools have to work with the faculties they’ve got.  I consider myself a moderately old dog.  I cannot easily abandon my doctrinal/theoretical approach to focus in my doctrinal courses on skills training and bar preparation.  I need guidance to help me work on my approach. Nadvorney and Zalesne provide such guidance for contracts profs in Teaching to Every Student. The book is slim and affordable (under $30 on Amazon), and I think its approach is unique – or at least highly unusual – in that the authors insist on incorporating theoretical perspectives while also highlighting their very practical, skills-based approach to teaching first-year contracts.

Their approach to teaching contracts focuses on three areas of training: academic training, which includes everything from case briefing to exam preparation; legal reasoning, which includes the traditional skills set that enables students to learn how to issue spot and apply rules to unique factual situations; and theoretical perspectives, which encompasses learning theory, identifying and critiquing theoretical approaches, and integrating such approaches into advocacy. 

The book can be a wonderful supplement to any casebook (or whatever other materials one chooses to use).  It comes complete with in-depth sections on each of the three areas of training mentioned above, exercises, sample syllabi and some edited cases. 

Even if one chooses not to adopt the book, I recommend it to law professors interested in looking for new stimuli that will enable them to shake up their approaches to teaching

[JT]

Boilerplate Symposium Conclusion (for now): Peggy Radin Responds to Week Three

Although this is the last official post in the our online symposium on Margaret Jane Radin's Boilerplate: The Fine Print, Vanishing Rights and the Rule of Law, I have heard from a few scholars who would like to weigh in, so there will likely be a few more posts on Boilerplate appearing over the summer.

In today's post, our author, Margeret Jane Radin, responds to her reviewers from the third week of the Symposium

Response to Aditi Bagchi:

You are quite right to say that what I was trying to do in my book is bring to the fore what you label features (2) and (3): that boilerplate in effect forces consumers to give up important legal rights and that boilerplate effectively eliminates rights for large portions of the consumer population.  These features cause an inquiry into what we might label (4) in my intentions in the book:  there are background rights that are constitutive of civil society, or inherent in the social contract, and these are not within the purview of individuals to waive, one by one, even if they truly wish to, one by one.  In writing this book, I did feel it was necessary to rehearse the role of consent (the basis of justification for enforcement of contracts) in the context of how badly this rationale fits mass-market boilerplate deployment, akin to your feature (1).  Unfortunately, it appears that some readers seize on this as the book's main point, and are quick to say that this observation is old hat.  What is not old hat, at any rate, is what follows:  much that is called contract today should not be called contract, and should not be enforced as contract.

At least: We shouldn't be able to sell off certain rights, even if, as individuals, we want to.  (And it's quite possible that many of us, as individuals, want to, because we think we, as individuals, don't need them, and we don't, as individuals, find the needs of society as a whole to be salient for our decision making.)  We do need, now, to turn our attention to which rights these are, as indeed I believe you are saying.

You mention my copyright example: the purpose of rights that exist for the benefit of society as a whole is destroyed when individuals (in the millions) can waive them one by one.  The example I like to invoke is the right to be free of negligent harm inflicted by others.   As long as we believe that negligent harm-causing behavior is at least somewhat deterred by legal liability, tort law--even if flawed at present, and unless we replace it with some other legal regime--has to fill this role.  Service providers are the best party to hold responsibile for preventing harm to their customers:  they can investigate their employees, maintain their equipment, keep the premises sanitary, etc, etc, and their customers cannot.  If each of us has to be endlessly on guard against being harmed by others with whom we come into contact, we are back in the state of nature.

Response to Jean Braucher:

As a powerful and learned voice in consumer protection legislation, you should, or I certainly hope you will, expand what you have written here into a book that can be both helpful for contracts scholars and teachers and a much wider audience.  I certainly agree that contracts teachers should make consumer regulation known to students; and they should also make it known that boilerplate doesn't fit into the offer/acceptance/consideration paradigm.

In writing Boilerplate, I was trying to gather together many strands of thought and argument about it, so as to provide a platform from which further thought could commence.  As I mentioned in another of these replies, I had to go through the idea of consent (promises, agreement) because that is the basis of contract justification; that is what is supposed to justify enforcing these things.  And courts do enforce them; as contracts.  Unfortunately, some readers may think I am over-preoccupied with consent.  But rather I am preoccupied with the tragedy that deletion of important rights is routinely being enforced against citizens in the name of contract.  So, before making other suggestions, I tried to detach these things from the honorary title of contract. 

I would be great if the FTC would declare many of the clauses to be unfair methods of doing business (especially wholesale remedy avoidance or deletion).  It would be great if Dodd-Frank is not gutted, and if the CPFB manages to do away with arbitration clauses against financial consumers.  It would be great if the Supreme Court would not make it difficult for states to implement their consumer protection regulation. It would be great if insurance regulators would prevent insurers from forcing their insureds to shunt risk to the insureds' customers.  I think you are perhaps more hopeful than I am at this point, but I'd like to be more hopeful.  It's good to keep on fighting, and trying to gather support. (See the review by Theresa Amato.) 

Response to Charles Calleros:

I admire your sense of ethical obligation to educate both future lawyers and members of the general public about the features of citizenship.  Thank you.  I hope you will inspire us all.

 On the topic of reasonable expectations:  Although you clearly understand the problem caused by the normative/positive ambiguity, I am still very much concerned that many judges and other officials will just lapse into believing that the more something is prevalent the more we expect it, thus reinforcing "Everybody does it" as justification.  Whereas, of course, the more something unjust is being done, the worse is the injustice in society. 

Your solution to the "Everybody does it" justification would be comprehensive black listing of oppressive clauses on the European model.  I wish we could do this, but I'm a pragmatist, and I think we cannot (and it seems you agree).  So what might be possible for us?

You suggest that businesses should highlight potentially objectionable terms. Some businesses are already doing that. For example, there are now up-front solemn warnings about the presence of an arbitration clause. But I don't think that works either--consumers just sign or click "I agree" anyway--though we could use some empirical data on this.  And who gets to decide what is potentially objectionable?  Here you seem to come back to the idea of lying "outside the boundaries of what consumers should be held to reaonably expect," so we are back to the invitation to use the "Everybody does it" method of determing what is reasonably expectable.

Response to Peter Linzer:

Thank you for reminding us of the historical progression, and the great quote from Cardozo.  Indeed, as you say, courts, legislatures, and agencies should look not to the mechanics of contract but rather to the rights of the social system.

Indeed, in addition to fussing with the mechanics of contract, we should think more about the rights that cannot be disclaimed by individuals. There are some rights that cannot be disclaimed by individuals even with true consent:  what rights are those?  I contend that at least the right to viable legal remedy is one. 

Response to Cheryl Preston:  

I love the quote from Cole v. Goodwin! 

Is it a "stretch" to say that the democratic process has created protections that boilerplate deletes?  Copyright and class actions are examples where this is not a "stretch," I believe.  It is perhaps question-begging to say that after all, these are default rules; at least, I am trying to argue that they should not be, and that the judiciary could take some steps against too-easy waiver.

BUT it is certainly true that legislative bodies are "influenced" (i.e., bought)   "by the same business interests that control consumers by contract."  This is more true, I think, of federal than of state and local legislatures, perhaps because of the immense amount of money we allow to be spent in federal elections.  This is a sorry state for democracy.

The interesting thing about the copyright example is that the federal law was indeed written pretty much at the behest of the major business interests themselves.  So in this case it seems that what these interests "bought" was a coordination solution from which individual firms should be prevented from defecting.

To your last paragraph, I say "Hear, hear."  To your penultimate paragraph I say, let's support  Theresa Amato and her colleagues, and let's join the ALI and speak up.

Response to Guy Rub:

Thank you for engaging with me on the topic of market solutions.  I meant my chapter 10 to be suggestive, hoping it might be helpful to get thought about this going. I appreciate your having given this matter some of your time and thought, and I hope this will encourage others.

The prior posts can be found here: 

• Peter Alces on consent;
• Theresa Amato on proposed solutions to the problems posed by Boilerplate;
• Andrew Gold on the question of whether boilerplate is contractual;
• David Horton on mass arbitration and democratic degradation; 
• Ethan Leib on the fetishization of consent;
• Brian Bix on democratic degradation;
• Oren Bar-Gill on consent without reading;
• Daniel Schwarcz on a tort-based approach to standard form contracts;
• Kim Krawiec on contracts as disclosure, Part I and Part II;
• Margaret Jane Radin's responses, Part I and Part II;
• Aditi Bagchi on Boilerplate Waivers;
• Jean Braucher on the common law of contracts as residual law;
• Charles Calleros on the reasonable expectations of consumers;
• Peter Linzer, That Was No Contract, That Was My Lunch;
• Cheryl Preston on boilerplate and the role of courts; and
• Guy Rub on market solutions to the boilerplate problem

 Thanks to all of our participants.  

[JT]

Radin Meets Readers (and a Packed Audience) at Law & Society Annual Meeting

[Editor's note: We interrupt our Boilerplate Symposium to bring you this report from Shubhs Ghosh on another discussion of  Margaret Jane Radin's Boilerplate: The Fine Print, Vanishing Rights and the Rule of Law.

A panel of five contracts law scholars met to discuss Margaret Radin’s Boilerplate in front of an  audience of over thirty attendees at the annual Law & Society meeting in Boston on Saturday, June 1, 2013.  Tal Kastner of Princeton University did a great job moderating and raising a provocative discussion. Although scheduled to end at 6:15 pm, the attendees stayed until almost 7 pm.  What follows is a brief write-up of the discussion with my own comments interspersed.

The readers included Stewart Macaulay, David Campbell, Aditi Bagchi, Peter Benson, and Guy Rub, speaking in that order.  Stewart was positive about the book and began his comments with a reminder of the anti-lawsuit attitude given voice in tort reform. The restrictions on rights that occur through boilerplate, he suggested, is a further reflection of this attitude as boilerplate drafters limit remedies and rights of consumers and their access to courts.  As Stewart put it, advocates of court reform complain about money-chasing tort and class action attorneys but there is no mention of how much corporate lawyers make in drafting rights-limiting boilerplate clauses. Stewart ended his comments with skepticism about Radin’s proposals for top down reform from the legislature, whether federal or state.

David Campbell was more critical of the book, especially what he described as Radin’s idealized portrait of the contract bargain.  Not all terms are always deliberated by the parties, but nonetheless contract terms can be read into the contract by courts.  He was particularly skeptical that the solution lay outside contract.  Properly applied, doctrines like formation, unconscionability and other contract terms can limit the negative applications of boilerplate.  Unfortunately, some courts in the United States have not been enforcing the existing  law in a reasonable manner.

Aditi Bagchi emphasized Radin’s theme of democratic degradation, boilerplate’s role in limiting  key rights of citizenship through terms that remove rights of access to courts and compensation for injury. Although Aditi was less concerned with loss of procedural rights (such as class actions), she agreed that boilerplate terms should receive greater scrutiny when they involve limitations on compensation for personal injuries. Introducing the concept of a social wage, Aditi made the point that liberal society extols contractual freedom as part of a broader array of rights delineated in tort, property and other regimes.  What society deems to be waivable through contract rests on choices regarding what should be allocated through markets and what should be allocated through political processes. Boilerplate allows a shift of these choices without democratic deliberation.  The market de facto and de jure determines individual rights.

Peter Benson elaborated on some of the critical points raised by David Campbell.  Introducing a comparative perspective from Canada and the EU, where boilerplate terms are regulated, Peter emphasized doctrines within the United States that could also serve to limit the imposition of noxious terms through boilerplate. The challenge Peter posed is identifying a legal standard for what terms would be deemed noxious, or troublesome.  Commenting on Radin’s development of such standards subsequent to the publication of her book, Peter questioned whether such standards would be workable.  He described them as highly manipulable and indeterminate.

Guy Rub ended the formal comments with criticisms of Radin’s proposed market-based and state-based solutions. Disclosure-type solutions would not work even if disclosures were simplified and coded so that they could be readily digested. Consumers either would tune such information out or would be willing to trade off unfavorable terms for a lower price.  Similarly, any legislative solution would be subject to the same capture that gave rise to boilerplate.  Guy provided the example of federal legislation on arbitration as an example. Guy did suggest grass roots-like solutions involving activism through exposure of noxious terms through social media and blogs. Such activism could be more effective, he suggested, than top-down regulation.

The interactions continued with Peggy’s responses.  She took issue with some broad characterizations of her book, particularly her view of an idealized contract. Her concern is with overreaching by business entities in drafting terms that severely limit the rights of consumers.  As she pointed out, she never said that no rights can be waived or limited.  But some companies go too far in limiting their liability in the daycare and elder care contexts. Such noxious terms, she suggested, may have more to do with insurance companies than with the actual service providers.  Nonetheless, the market dynamics lead to a market failure that occurs through boilerplate terms that severely shift risks to consumers in market transactions. The world does not have to be that way.  Drawing a connection with her work on market inalienability, Peggy argued that boilerplate forces consumers to alienate fundamental attributes of citizenship through take it or leave it offers. Sympathetic to the comments on her proposed solutions, she tantalizingly suggested that a possible solution would be a return to an earlier common law of contract that existed before the law took a pro-business turn.  She appealed to an older generation of common law judges to offer a correction to this turn.  I wondered whether such judges actually exist anymore.

Discussion afterward was lively.  Tal Kastner emphasized points about democratic degradation and the decline of communication and deliberation.  Richard Lempert pointed out the betrayal of trust that occurs with boilerplate as consumers are invited to trust companies through the signing of boilerplate terms that are designed to “screw consumers.”  Richard suggested that government may be trustworthy than private businesses, contrary to contemporary rhetoric.  Amy Kastely raised a point about the drafting of the Restatement on Consumer Contracts that might exacerbate the problems with boilerplate. Robert Gordon questioned whether boilerplate should even be referred to as private ordering since it represented the imposition of terms by dominant players backed up by the sanctioning power of the state. Other points (which I could not attribute) were made about the regulatory approach to standard terms in the Netherlands and the possibilities of consumer activism to expose consumer-unfriendly terms that prominent companies impose through boilerplate.

The Author Meets Reader panel was a stimulating event.  My own thoughts are that in some instances boilerplate in contract is used to realign the rights of consumers without having to engage in the democratic process.  The consumer rights that companies may want to delimit could be imposed through legislation.  In many instances, such legislative efforts would fail.  Boilerplate provides a way to impose a change in underlying entitlements without having to engage the political process.  In such situations, there is a real threat to the democratic process as market processes dominate.

The discussion of private power, public power, and individual rights made me think of Shelly v. Kramer, the landmark case in which judicial enforcement of racially restrictive covenants were deemed to be state action for the purposes of the Equal Protection Clause. If boilerplate is substituting for legislation, then perhaps noxious terms should be the basis for a due process or other constitutional violation.  I raise this point to highlight the underlying issues as well as to pinpoint solutions.  No court would be likely to adopt such a broad reading of Shelly v Kramer, a case that has already been limited to its narrow facts. But where constitutional efforts invariably fail activism on the legislative and through market pressure serve as more effective alternatives.  Margaret Jane Radin’s Boilerplate is a great book about legal reform in a world where contracts and market processes have been used to displace democratic deliberation and legislation. 

[Posted, on Shubha Ghosh's behalf, by JT]

Boilerplate Symposium Part XVI: Guy Rub on Market Solutions to the Boilerplate Problem

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

Guy A. Rub is an Assistant Professor of Law at the Ohio State University Moritz College of Law.

Those who have not read Professor Radin’s book, Boilerplate, might be tempted to believe that they are fully familiar with the problem of boilerplate provisions in standard form agreements. While the problem of consumers who accept agreements they did not read is well documented, Radin’s masterpiece is so comprehensive, and analyzes the issues that boilerplate provisions raise so thoroughly, and in many instances from a novel angle, that it makes us stop and re-think about this reality and its implications. The reader is challenged to reconsider the effects of these standardize arrangements on our democratic process, our autonomy, and our legal system as a whole.

One of the strengths of the book, and there are many of them, is that while it identifies and lucidly analyzes these problems it also acknowledges some of the advantages of mass-market standard form agreements and therefore includes a broad discussion of possible remedies to the identified problems.

One such suggested remedy is a market solution. Market solutions, if feasible, are in many respects superior to other solutions. First and foremost, they do not require a central decision making process, which turns out to be extremely hard in this context. Indeed, if market participants can effectively shop for efficient or fair contractual terms, then society probably does not need to make certain difficult decisions: for example, society might not need to decide whether consumer class actions are an effective mechanism to rein in large corporations (and therefore maybe the right to bring such claims should not be waivable) or mainly a vehicle for filing frivolous and expensive claims. Market solutions might also eliminate the need of a centralized entity to collect information on individuals’ preferences in a diverse world. Thus, if consumers effectively shop for better terms, society might not need to collectively decide the proper scope of a warranty; a question that might have different answers with respect to different products, different markets, and even different consumers.

Are market solutions feasible? Professor Radin, I believe, is somewhat skeptical and I am at least as pessimistic. It is well documented that consumers do not read standard form agreements and that regulatory schemes that are designed to give them the opportunity to read have little effect on their decision making process. See, e.g., Florencia Marotta-Wurgler, Will Increased Disclosure Help? Evaluating the Recommendations of the ALI’s “Principles of the Law of Software Contracts,” 78 U. Chi. L. Rev. 165 (2001). In a forthcoming article, Ian Ayres and Alan Schwartz suggest, inter alia, that reading might not be required as long as the contract does not include unexpected terms that are worse than the consumers’ expectation, and that a disclosure scheme should focus on these terms. While this might be true that consumers’ awareness of such terms might suffice, one might doubt whether, in most cases, consumers can reasonably be expected to read even a subset of simplified boilerplate terms.

Therefore, if we believe that no regulatory scheme can make a substantial number of consumers read even a subset of the boilerplate provisions, then other solutions must be explored to make consumers shop for contractual terms. Radin explores a few such solutions, including: watchdog groups, seals of approval, rating agencies, and automatic filtering. What is common to these solutions, or a combination of several of them, is that they require a third party to use some judgment to evaluate the desirability of the contractual terms. This is not an unusual way to make shopping decisions. Many of us use websites that rate laptops before we buy one and, at least in some cities, we look at the sanitation “grade cards” on the windows of restaurants before we chose where to eat (notwithstanding Dan Ho’s recent research on the problems in that scheme). It is important to appreciate that currently there are very few comparable systems with respect to boilerplate terms and, as explained below, I am skeptical if more will emerge in the future.

We need to first consider what should be the final product of this evaluation process by the third party evaluating entity. If we believe that consumers, rationally or not, do not bother to read contractual terms as they are too complex, then we should reasonably assume that after this evaluation process the third party must present the consumer with well-dissected and simple information. Indeed, consumers will probably not spend time reading a detailed report regarding the terms of the contract. Making a simplified report, which can be as simple as an A-B-C ranking, or even a binary decision to grant a seal of approval or not, requires the exercising of substantial discretion by the evaluating entity. This ranking process is not trivial. How should one rank an agreement that includes a Virginia choice of law provision and a broad warranty provision with limitations of consequential damages? How should the rating of such a contract be in comparison to a contract that has a choice of venue in Florida, a narrower warranty provision, and no limitations on remedies? How should the evaluating entity evaluate the inclusion of a mandatory arbitration provision? Doesn’t it depend on that entity’s perspective as to the desirability of consumer class actions? But didn’t we try to create a market scheme that avoids delegating these types of decisions from the consumers to a central entity?!

Indeed, it might have been ideal if we could have sketched a scheme in which the consumers drive the process of regulation boilerplate terms. However, the same seeds that lead to the problem in the first place—the consumers’ limited resources, limited rationality, and sometimes pure ignorance—might make such a solution impracticable. Thus, if we believe that the problem of unread boilerplate provisions is severe, other solutions, which are explored in Radin’s extensive book, e.g., regulation through tort law, should be seriously considered.  

[Posted, on Guy Rub's behalf, by JT]

Boilerplate Symposium Part XV: Cheryl Preston on Boilerplate and the Role of Courts

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

Cheryl Preston is the Edwin M Thomas Professor of Law at Brigham Young University's J. Reuben Clark Law School.

Professor Radin’s book is a monumental effort to bring together in one place various facets of the seemly intractable problem of non-negotiated standard term contracts and to offer creative insights at each step. This legal problem is not new: Judge Cowen in Cole v. Goodwin, 19 Wend. 251, 273-74 (N.Y. Sup. Ct. 1838), was adamant that a common carrier could not post a notice of its intent not to be liable at the station and claim that each passenger entering the train gave contractual consent to waiving liability. To hold otherwise would change the deal from “give me a due reward [cost of passage], and I will be accountable as a common carrier” to “‘give me the same reward,’ (for the carrier fixes it; it may be less, but it may also be more,) ‘and yet, I claim to throw all risk upon you, or such a degree of it as I please.’” The judicial mindset later changed, and by the early 1900s courts lined up with businesses in generally enforcing such terms. Nonetheless, early courts ran interference with unconscionability and equivalent doctrines. The evolution to multitudes of daily online contracts hidden behind links, without size limitations, signatures, or someone to explain terms, as well as the increasing reluctance of judges to interfere, requires new analysis such as that offered by Radin.

Once the problem is exposed, the more difficult endeavor is framing a feasible solution. By characterizing such contracts as a form of “democratic denigration,” Radin suggests that the fundamental remedy is for legislatures, acting as democratic representatives of the people, to draw limits around powerful economic actors’ ability to override the default rules of enlightened contract doctrine. Radin argues that boilerplate schemes make a “sham” of democratic governance because they take away entitlements given through the democratic process “after extended debate and fierce political struggle.” Democratic ordering “at least give[s] us a voice” because politicians can be voted out if people are unhappy with what they enact.

Returning to the polity for a solution is dubious for three reasons. First, outside of copyright and perhaps employment, it is something of a stretch to say that the democratic process has created protections that such contracts “delete.” The regulatory rules that exist are at best default, subject expressly to the right to contract around them. What we seem to have lost, rather, is a judiciary willing to maintain reasonable boundaries of the kind envisioned by Karl Llewellyn and other Realist scholars.

Second, most consumers seem utterly content to be bound to terms they would not read even if such terms were brought forcefully to their attention, could not understand if read, and could not appropriately evaluate as risks. But the same problem applies to voters. Until consumers are educated or fall victim to such a contract, they will not understand the problem enough to vote out politicians who do not protect them. An unorganized few cannot change elections any more than they can convince firms to change undesirable contract terms.

Third, current legislative bodies seem effectively “influenced” by the same business interests that control consumers by contract. Money buys lobbyists, makes campaign contributions, and spins information, just as it hires the lawyers who draft and defend these contracts and the programmers and marketers who decide how to hide them. In the current political climate, consumers’ ability to influence change with election votes seems more of a stretch than consumers’ ability to unite to demand fairness with economic votes.

While Radin leans toward tort law as a solution, in Chapter 10 she offers a range of interesting possibilities for giving consumers the knowledge to make intelligent choices in contracting. Her suggestions include rating agencies, seals of approval programs, and contract term filter technology. Given the irrationality of reading all form contracts, workable initiatives depend on some surrogate to synthesize contract content and create a basis of comparison that a consumer can digest and act upon in seconds. Without a government mandate, how can consumer power be marshaled to organize and fund such programs? What existing organization has the resources to educate consumers or issue legal standards with sufficient credibility? A Statement of Principles issued by the American Law Institute might be influential, but the painful process of birthing a timid Principles of the Law of Software Contracts, and a failed revision to Article 2, show that the same powers and influences compete in that arena as well.

Until social change is possible, the courts remain the best defense of those unable to evoke sufficient power and money on their own behalf. As law professors, we need to train students to value principles of fairness and balance. As legal scholars, we need to encourage judges and contract drafters to stop exploitation.

[Posted, on Cheryl Preston's behalf, by JT]

Boilerplate Symposium Part XIV: Peter Linzer, That Was No Contract: That Was My Lunch

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

Peter Linzer is a Professor of Law at the University of Houston Law Center.

Peggy Radin’s book, Boilerplate has got lots of people talking – and blogging, particularly about her argument that boilerplate contracts aren’t contracts at all, and shouldn’t be overseen by contract law.   Peggy was expanding on the theme of the apologists for adhesion who argue that the form contract is simply part of the product; you’d pay less, and we’d analyze the transaction very differently if you were buying a used or dented washer, so why shouldn’t we treat the washer with a disclaimer of merchantability the same way?   Peggy does a good job in undermining the idea that the benevolent sellers (they would say “licensors”) will share their savings with you by reducing the price, but the bigger objection is from those who are offended by the removal of form contracts from the contracts kingdom.  Yet that has been the process throughout the history of products liability, the very area Peggy is pointing to.

The usual starting point of products liability is Winterbottom v. Wright, an 1842 decision of the Court of Exchequer, in which a coachman who had been injured when a defective mail coach “broke down,” attempted to recover from Wright, who had contracted with the Postmaster-General (who had immunity) to supply the coach and keep it in good repair.  Lord Abinger, the Chief Baron, took considerable care to support his conclusion that no duties were owed that were not “public duties” or violations of the law of nuisance, unless they were created by contract. Since Winterbottom was not in privity of contract with Wright, Winterbottom had no claim against him for his injuries, though caused by Wright’s failure properly to perform his contractual duties.  For nearly seventy-five years, the courts chipped away at this notion that a manufacturer (or, as in Winterbottom’s case, a maintenance contractor) had no tort duty to the ultimate user, until Cardozo, in Macpherson v. Buick Motor Co. destroyed the doctrine, with careful delineation of the caselaw, but really in three sentences: “We have put aside the notion that the duty to safeguard life and limb, when the consequences of negligence may be foreseen, grows out of contract and nothing else. We have put the source of the obligation where it ought to be.  We have put its source in the law.”

This worked well when negligence could be shown, but it didn’t help Bertha Chysky, a waitress who had been furnished as part of her lunch a piece of cake containing a nail that punctured her gum and cost her three teeth. She couldn’t prove negligence against the wholesale baker and sued for breach of warranty. The New York Court of Appeals, only seven years after Macpherson, and with Cardozo joining with the majority, reversed a verdict for her because “privity of contract does not exist between the seller and such third persons [like Bertha], and unless there be privity of contract there can be no implied warranty.”  Yet in the same era, in other states, courts were focusing on the nature of food to expand liability, until it became the widespread law that implied warranties were not limited to a contractual privity, and until Roger Traynor, in 1944, could use the fact that a Coke bottle contained “foodstuffs” to buttress his seminal opinion in Escola v. Coca-Cola Bottling Co., the well-spring of strict products liability. 

By focusing on the subject matter of the transaction rather than the formalities of contract or the assumption that tort is based on fault and wrong, Cardozo, Traynor and many other judges and writers were able to transform the issue to a question of who should bear the cost when a product injures a consumer, regardless of contract, regardless of fault.  Similarly, the courts, Congress and state legislatures should look, not at the mechanics of contract, but at the many factors relied upon by Professor Radin, to restrain the power of sellers to deprive consumers of rights that the social system has granted them and that form contracts attempt to take away.

 [Posted, on Peter Linzer's behalf, by JT]

Boilerplate Symposium Part XIII: Charles Calleros on the Reasonable Expectations of Consumers

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

Charles Calleros is a Professor of Law at Arizona State University's Sandra Day O'Connor College of Law.

Peggy Radin’s new book, Boilerplate, is welcome contribution to the literature precisely because it is sufficiently clearly and plainly written to be accessible to a broad spectrum of educated and intellectually curious readers.   It thusly helps to fulfill our obligation to educate not just future lawyers but also members of the general public, who can perform more effectively as consumers, business owners, and citizens if they are exposed to thoughtful presentations of the legal issues of the day, from civil liberties to contractual consent.

Professor Radin’s description of the increasing frequency of attenuated consent in adhesion contracts raises a significant questions:  Is World A (agreement), around which much of our first-year teaching is based, fast becoming the exception to the norm of World B (boilerplate), creating a disconnect between our laws and the realities of contracting. 

I still hold out hope for a world in which market or legal forces can advance meaningful assent, so – unlike Professor Lieb – I did not detect of “whiff of fetishizing of consent in Radin’s rendering.”  Moreover, although I agree with Professor Gold that “not knowing precisely what one has consented to is not a per se bar to consent,” truly voluntary and unconstrained consent of that nature ought to be exceedingly rare.

Of the broad array of possible remedies surveyed by Radin, in my view the most elegant would be market-driven sanctions for abusive clauses – such as loss of reputation and business stemming from negative consumer reviews disseminated on the web – and consumer self-help, such as actually holding up the line and reading the exculpatory clause on a short form and making a reasoned decision about whether to assent (as my wife did when she refused to enroll our child in an otherwise very attractive preschool when the two-page form included an extreme exculpatory and indemnification clause that the school refused to sever). To return to an earlier theme of educating the public about legal rights, our schools and other educational platforms (see, e.g., www.iCivics.org) should teach students in secondary school to be informed consumers and critical readers of forms, so that “holding up the line” is viewed as a responsible act (providing businesses with an incentive to efficiently inform consumers at a different point, so as to keep the line moving).

But, what of contexts in which objectionable clauses are buried in many pages of fine print, dissuading a rational consumer from expending the time and effort to engage in a critical reading, such as when deciding to click “I agree” on a web page without actually reading the terms?

Here, I am intrigued by the possibility of applying the reasonable expectations doctrine to all consumer adhesion contracts in which it would be unrealistic to expect the consumer to wade through a document to discover and understand terms to which the consumer likely would object if they were brought to her attention.  See, e.g., Harrington v. Pulte Home Corp. 211 Ariz. 241, 119 P.3d 1044 (Ct. App. 2005) (applying this doctrine outside of the insurance context, although finding the doctrine was not satisfied by the facts). 

True, the doctrine would need to be tweaked so that it did not validate highly objectionable clauses simply because consumers have come to expect oppressive corporate behavior and have resigned themselves to the futility of finding or understanding unfair terms.  Rather than allowing widespread corporate abuses to define the baseline, consumers should be empowered to expect that adhesive terms in lengthy standard forms will fall within a range that is judged to be objectively reasonable.  To firmly establish this baseline, I am drawn to the European model of an administrative agency defining types of clauses that are flatly or presumptively invalid, and to empowering the agency with private attorney general capacity to enforce the norms, even when individual claims are small, although I concede that our legal system is highly unlikely to embrace these mechanisms.

With respect to contract terms that do not fall within a limited list of flatly prohibited clauses, a robust reasonable expectations theory could further and more flexibly exclude terms that are buried in boilerplate and lie outside the boundaries of what consumers should be held to reasonably expect, thus providing an incentive to businesses to highlight and plainly express potentially objectionable terms so as to secure actual assent, perhaps evidenced by separate initialing or signature.  For example, on a website that links to terms so lengthy that most consumers are dissuaded from surveying them for objectionable terms, the doctrine would incentivize a business to highlight potentially objectionable terms at the beginning of any reference to the agreement, thus alerting a consumer immediately to the nature and location of clauses that warrant exploration.  If sales suffer as a result, businesses may be forced to moderate their terms so that consumers are willing to give actual consent to terms brought to the fore.     

[Posted, on Charles Calleros' behalf, by JT]

 

Boilerplate Symposium Part XII: Jean Braucher on the Common Law of Contracts as Residual Law

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

Jean Braucher is the Roger C. Henderson Professor of Law at the University of Arizona.

Peggy Radin in Boilerplate gives a rich, comprehensive account of contract law and theory as applied to standard form terms. For anyone inclined to focus on the common law of contract as the primary way to think about the problem of nasty form terms, this book is an obvious go-to source.

My critique may seem odd for a contracts blog, but here goes:  I don’t think the common law of contracts is the right place to focus when thinking about unfair deals, except as a history lesson to understand the origins of regulation that is now more rigorous.  Emphasis on the common law tends to put a “freedom of contract” ideological spin on problems that are already regulated otherwise and in more effective ways, based on more sophisticated theory.  Radin includes perspectives other than those of standard contract theory, so my objection is a subtle one about emphasis.

We live in the age of the regulatory state and administrative agencies. The theory and practice of this type of regulation are now at the core of the law governing contracts, with judge-made common law playing a minor, residual role. Most important types of contracts are regulated by more than common law. Radin devotes her last chapter to regulatory solutions to overreaching in boilerplate, so she has certainly not missed that regulation matters, but she gives primacy of place to the common law of contracts and its theory. Contracts scholars often do this, but we need to change if we are to theorize about current reality and not give law students the misimpression that the common law provides a nearly complete system of law for contracts, only touched up around the edges with a little regulation.  In the 21^st century, and after an economic collapse brought on by mass exploitation by contracts, we should be spending less time on offer and acceptance or even unconscionability and more on the vast existing statutory and administrative regulation of the substance of contracts.

Consumer contracts illustrate well the point that statutes, often administratively applied, dominate the law applied to contracts. In her discussion of boilerplate, Radin features many consumer contract examples—Part I of the book is headed “Boilerplate, Consumers’ Rights, and the Rule of Law.” Consumer contracts are governed by thousands of federal, state, and local consumer protection statutes that provide stronger remedies than those of the common law.  Some statutes are very specific and others use general standards. When consumers’ lawyers draft complaints, they put common law causes of action at the end, after statutory theories; statutory remedies often could be better implemented (judges sometimes undermine them), but they are already way better than those of contract law. Public enforcement is also more powerful. When the Federal Trade Commission and state attorneys general bring enforcement actions against unfairness and deception, they don’t have to worry about arbitration and forum clauses or class action prohibitions.  They aren’t parties to the contract.

So, when thinking about problematic consumer contracts today, two key points bear emphasis:  (1) the common law of contracts is typically not the best or first resort for protection of consumers and is therefore residual law, and (2) the Dodd-Frank Act recently gave consumer protection law a huge shot in the arm by creating a new regulatory power to address exploitation of consumer misperceptions in credit contracts. Consumer misperceptions are not limited to form terms but also come into play with salient terms such as price (a point also made by Oren Bar-Gill in his comment for this symposium).

Dodd-Frank created the Consumer Financial Protection Bureau (CFPB) and gave it broad power to regulate not just unfair and deceptive acts and practices (as federal and state statutory law has long done for many consumer contracts) but also abusive consumer credit contracts. (And, by the way, as Radin notes at the end of her book, CFPB also is required to study mandatory pre-dispute arbitration and has power to decide whether it serves consumer interests and regulate if not.)

The powerful behavioral economics theory for the CFPB’s anti-abuse power is likely to suffuse consumer law over time.  For a fuller discussion, see my paper Form and Substance in Consumer Financial Protection. This theory, backed up by extensive research by many empirical scholars, is that consumers not only make systematic misperceptions, but also that businesses are forced by competition for investors to study and exploit the patterns of these misperceptions to maximize their returns. Regulation is thus essential both to free businesses from a race to the bottom so that they can be straightforward with their consumer customers and to empower vulnerable consumers to get deals they understand.

The CFPB does not use common law methodology. It addresses exploitative practices through the responsive regulation tool of examination of financial institutions, backed up by enforcement actions.  CFPB examiners now pour through the records of financial institutions and consumer complaints for evidence that consumers don’t understand credit products with complex tricks and traps. The power to regulate abusive practices is not limited to those set in boilerplate; it also applies even if the exploitation is in plain sight but consumers do not understand their credit products, including how they will use them.  When we think about abuses in consumer contracts, we should start with the theory underlying the CFPB’s new power, not with stale ideas about consent or choice.

Contracts teachers as well as law reformers, such as the American Law Institute in its newly-launched Restatement Third of the Law of Consumer Contracts, should not forget that consumer protection law is the central and most powerful part of the law governing consumer contracts.  ALI’s project description shows that it understands that consumer law is heavily statutory and administrative, but the question remains whether ALI will embrace our vast, popular statutory and administrative law of consumer protection or inaccurately try to treat it as incidental to the common law.

Similar points to these concerning consumer contracts could of course be made about the regulation of many other types of contract. The general point is that the law of contracts is much broader than contract law, and the common law is not the primary way to address overreaching in contracts, whether in boilerplate or not. Radin ends in agreement with this policy direction, but her focus on theory underlying common law rather than the theory of regulation makes the analytical journey more difficult than it needs to be.  Contract theory needs updating to embrace regulatory theory as part of its core and not as an afterthought or add-on.

Some acknowledgments:  Nearly everything worth saying about consumer contracts was said long ago, and much of the above is inspired by earlier work of others. In 1933, based on lectures given in 1928-29, Karl Llewellyn wrote in The Case Law System in America (in German, only published in English in 1989; see at 67-68 for the discussion in the English translation) that case law is inadequate to address the enormous problem of consumer protection.  See also Arthur Leff, Unconscionability and the Crowd—Consumers and the Common Law Tradition, 31 U. Pitt L. Rev. 349 (1970) (arguing that common law litigation will not root out unfairness and that administrative regulation is necessary to deal effectively with consumer contracts), and Stewart Macaulay, Bambi Meets Gozilla: Reflections on Contract Scholarship and Teaching vs. State Unfair and Deceptive Trade Practices and Consumer Protection Statutes, 26 Hous. L. Rev. 575 (1989) (noting that consumer protection regulation is more powerful than contract law in providing remedies and that contracts teaching should introduce that key point).

[Posted, on Jean Braucher's behalf, by JT]

Boilerplate Symposium Part XI: Aditi Bagchi on Boilerplate Waivers

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

Aditi Bagchi is an Associate Professor at the Fordham University School of Law.

Professor Radin’s Boilerplate is a pragmatist repudiation of an important social and legal phenomenon.   That practice has a number of features:  (1) waivers of rights and liability contained in boilerplate are often unknown to the individuals who grant those waivers (2) consumers need to waive common law and statutory rights in order to purchase a wide range of goods and services, many of which are regarded as essential to ordinary American life (3) the waivers in boilerplate govern so many contractual relationships that some rights otherwise granted by law are effectively eliminated for large portions of the consumer population.

Much of the literature on boilerplate focuses on the first feature of boilerplate, above.  Radin has an argument about normative degradation and the poor quality of consent to boilerplate.  But I think the most important contribution of the book is to highlight features (2) and (3).

The fact that consumers need to waive many rights, including the right to compensation for harm incurred by the negligence of others and the right to pursue legal remedies in courts or by way of class actions, is not important because it renders their consent ineffective.  (I would argue it does not.)  The fact of necessity is important because it explains feature (3) and suggests that the mass “rights deletion” that Radin observes does not necessarily reflect consumers’ collective preferences.

Whether consumers prefer contracts with or without boilerplate, i.e., whether they are prepared to pay to preserve some rights now usually waived in consumer contracts, depends on the decision mechanism by which that preference is expressed.  Because many rights that private individuals have against one another are default rights that individuals are free to alienate, we effectively use the market to sort consumer preferences.  The result is that individual consumers decide whether, on the margin, the value they might derive from a legal right is worth the money they save from giving it up, or whether it is worth the value of the good or service to which that waiver is attached. 

The deep question that Radin raises in her discussion of democratic degradation is whether markets are indeed the right way to decide the scope of some legal rights.  Especially where the frequency or distribution of a right in society has important cumulative effects on legal culture or social practice, we might wish to remove certain rights from the marketplace and decide through collectivized decision-making (i.e., legislative action or inaction) the scope of rights that govern certain private interactions.  One of her most compelling examples is the case of copyrights that individuals frequently waive.  She persuasively observes that we may have a collective interest in the wide diffusion of copyrights that is underserved by the separate decisions of millions of individuals to waive their copyrights at a small price.

More generally, we need to think about what proportion of our private rights (rights held against other private individuals) should depend on our market power.   The idea of a “social wage” refers to the proportion of our material resources that depends on our status as citizens -- as opposed to our market wage, which is the proportion of our income that turns on our performance in the marketplace.  Countries differ in their social wage level.  For example, countries with national health care or generous unemployment benefits make your material situation somewhat less dependent on your labor market position than in countries without public health care or generous unemployment benefits.  The United States has a low social wage as compared to other developed countries of comparable wealth.  We probably also have a “low private rights” regime, inasmuch as individuals vary (more than elsewhere) in their ability to preserve legal rights depending on their ability to pay for them.   I imagine that whether this outcome is acceptable turns significantly on the particular right at issue.   For example, we might reject a regime under which service providers exercise greater caution to avoid bodily injury when dealing with some consumers than with others.  Yet we might be comfortable with a regime in which some proportion of the population relies primarily on arbitration for redress.  We can thank Radin for highlighting these important social choices.

[Posted, on Aditi Bagchi's behalf, by JT]

Boilerplate Symposium: Week 3

For those who missed it, over the last two weeks we posted nine mini reviews of Margaret Jane Radin's Boilerplate: The Fine Print, Vanishing Rights and the Rule of Law as well as Professor Radin's resposnes to those reviews.  

The prior posts can be found here: 

• Peter Alces on consent;
• Theresa Amato on proposed solutions to the problems posed by Boilerplate;
• Andrew Gold on the question of whether boilerplate is contractual;
• David Horton on mass arbitration and democratic degradation; 
• Ethan Leib on the fetishization of consent;
• Brian Bix on democratic degradation;
• Oren Bar-Gill on consent without reading;
• Daniel Schwarcz on a tort-based approach to standard form contracts;
• Kim Krawiec on contracts as disclosure, Part I and Part II; and
• Margaret Jane Radin's responsesm, Part I and Part II

This week, we will feature posts from the following contracts scholars:

Aditi Bagchi teaches Contracts and Labor Law at the Fordham University School of Law, where she is an Associate Professor. Her writing in contract theory challenges classical views of contractual obligation. For example she questions its promissory foundation (Separating Contract and Promise, Promises and Permissions in Contract) and its fully voluntary character (Promises and Permissions in Contract, Normative Triangulation in Contract Interpretation). She has argued that contract may be multilateral and dynamic (Parallel Contract) and has examined considerations of distributive justice in the formation, interpretation, and enforcement of contract (Distributive Injustice and Private Law, Managing Moral Risk: the Case of Contract, Distributive Justice and Contract). She has explored these issues with respect to employment and consumer contracts in particular (The Myth of Equality in the Employment Relation, Unequal Promises, Unions and the Duty of Good Faith in Employment Contracts). Professor Bagchi also has a related interest in the comparative political economy of contract, labor, and corporate law (The Political Economy of Contract Regulation, Varieties of Employee Ownership, The Political Economy of Merger Regulation). For a full list of her publications and current projects, se her Research page.

Jean Braucher is the Roger C. Henderson Professor of Law at the University of Arizona’s James E. Rogers College of Law (Tucson), where she has taught since 1998. Prior to joining the faculty at the University of Arizona, Professor Braucher served as the Gustavus H. Wald Research Professor of Law at the University of Cincinnati College of Law. She has also served as a visiting professor of law at Cornell Law School, University of Texas School of Law and Boston College Law School.  Since 2007, Professor Braucher has served as the Distinguished Scholar and Chair of the Wisconsin Contracts Project of the Institute for Legal Studies at the University of Wisconsin Law School. The Project is dedicated to a socio-legal approach to contract law and to revising the Contracts casebook by Stewart Macaulay et al., which Professor Braucher has joined as an author.  Prof. Braucher specializes in bankruptcy, contracts and commercial law. 

Charles Calleros is a Professor of Law at Arizona State University's Sandra Day O'Connor College of Law.  Professor Calleros’ research interests include international and comparative contract law; international conflict of laws; the intersection of free speech with race and gender discrimination; and various issues regarding legal education. At ASU, he teaches Contracts, International Contracts, Civil Rights Legislation, and Legal Method and Writing. At the Universite Paris Descartes, he annually teaches short courses in Common Law Legal Method, Comparative and International Contracts, and International Conflict of Laws.  Professor Calleros is a member of the American Law Institute.  In addition to earning several teaching awards over the years, he received the ABA’s Spirit of Excellence Award in 2011 and received an award in 2010 from the Arizona State Bar Committee on Minorities and Women in the law for his work in mentoring programs and outreach to youth in the community. Prior to joining the College faculty in 1981, he clerked for Circuit Judge Procter Hug Jr., of the U.S. Court of Appeals. Professor Calleros is past-President of Region XIV of the Hispanic National Bar Association.

Peter Linzer is a Professor of Law at the University of Houston Law Center, where he has taught since 1984.  Before going into teaching, Professor Linzer practiced law both as a Wall Street lawyer and as an Assistant Corporation Counsel for the City of New York. Professor Linzer is a member of the American Law Institute.  Professor Linzer has served as the Chair of the Contracts Section of the Association of American Law Schools and is a Board Certified civil appellate specialist. He served for nearly a decade on the Pattern Jury Charge Committee of the State Bar of Texas. His principal academic subjects include Contracts; Constitutional Law; Equal Protection; First Amendment; International Contracting; Transactional Clinic; Contract Negotiation and Drafting; Introduction to American Law (for foreign LL. M. candidates); and Torts. Working with experienced practitioners, he pioneered a transactional course in international contracting that sees students negotiate and draft documents in simulated international deals.  A list of his publications can be found here.

Cheryl Preston is the Edwin M Thomas Professor of Law at Brigham Young University's J. Reuben Clark Law School, where she has taught since 1989.  Professor Preston is a nationally recognized expert in Internet contracts, the contract infancy doctrine, legal protections for minors, and Internet regulation. Professor Preston also publishes on the relationship of law and popular culture images, law and religion, and feminist legal theory. She produced an educational DVD, entitled Fashioning Women in Law. Her DVD won the prestigious Chris Award at the 2003 Columbus International Film Festival.  Prior to joining BYU's faculty, Professor Preston served as a law clerk to the Honorable Monroe G. McKay, United States Court of Appeals for the Tenth Circuit and was in private practice for ten years.  A list of her publications can be found here.

Guy A. Rub is an Assistant Professor at the Ohio State University Moritz College of Law.  Professor Rub is an expert in the intersection between intellectual property law and economic theory. Prior to joining Moritz, he was practicing at Munger, Tolles & Olson LLP in Los Angeles.  Professor Rub has studied law on three continents. He completed his studies as an SJD candidate and received an LL.M. degree from the University of Michigan Law School; a master's degree in Law & Economics from the University of Madrid; a European Master in Law and Economics from the Erasmus University in Rotterdam, Netherlands; and a LL.B. degree from Tel-Aviv University. He was a law clerk to the Hon. Rina S. Meshel of the Tel-Aviv Appellate Court.  His recent article, Contracting Around Copyright: the Uneasy Case for Unbundling Rights in Creative Works, was published in the University of Chicago Law Review.  A list of his publiactions can be found here.

Thanks to all of our contributors.  We look forward to an exciting finale to our symposium!

[JT]

Boilerplate Symposium X B: Professor Radin Responds to Week II

This 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.

Your 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.

Response 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 could 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.

Response 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]

Boilerplate Symposium X A: Professor Radin Responds to Week I

This is the first 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.

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.

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

Professor Radin is the Henry King Ransom Professor of Law at the University of Michigan Law School.  She teaches courses about contracts and patents, as well as those dealing with property theory, the interaction between property and contracts, and the evolution of property and contracts in the digital era. In addition to Boilerplate, she has also written two books exploring the problems of propertization:Contested Commodities (Harvard University Press, 1996) and Reinterpreting Property (University of Chicago Press, 1993), and coauthored a casebook, Internet Commerce: The Emerging Legal Framework, Second Edition (Foundation Press, 2005). Professor Radin has taught at the University of Southern California, Stanford University, Harvard University, University of California, Berkeley (Boalt Hall), and New York University. In 2006-2007, she was the inaugural Microsoft Fellow in Law and Public Affairs at Princeton University. In 2008, she became a fellow of the American Academy of Arts and Sciences. 

Here are her responses to the first week's posts:

Response to Peter Alces:

In response to your (rhetorical?) question, "But once we acknowledge the death of consent, how much more new is there to say about boilerplate?," please see the review posted here [next week] by Aditi Bagchi.  There is plenty more to say about what types of rights are not mere default rules, for example.  And if consent has become merely a "term of art," that has deep consequences for the justification of contractual ordering; please see my reply to Andrew Gold [below].

I don't say, of course, that all form contracts are World B contracts.  I do use World B as a shorthand, an archetype, for one end of a continuum.   I think --hope--Chapter 9 makes that clear:  I argue for three parameters, all of which are to be understood as continua. I don't disagree that we need more data (actual empirical facts about boilerplate occurrences and the markets in which they occur, rather than blanket arm-chair economic pronouncements).  I think there may be a trend in that direction and I hope I have encouraged it.

I did not deny that it is often rational for consumers not to read the boilerplate (though perhaps "rational" is not quite the right word to describe why it is understandable, explainable, etc). Much of the boilerplate in the mass-market deployments I focus on is not an individual-by-individual matter and cannot be evaluated that way; indeed, that is a primary factor that tends to take some instances of mass-market boilerplate out of the realm of contract.

 

Response to Theresa Amato:

It is a pleasure to have a well-reasoned and passionate call to action.  I hope many will be called.  Thank you for alerting us to the problems with even obtaining copies of contracts deployed by nursing homes and by some employers.  Likewise, I hope you and other activists will eventually find a way to ascertain whether insurance companies are requiring massive disclaimers as a condition of insurability, especially in certain industries.

I agree with much of what you say, particularly about the inapplicability of "duty to read" doctrine under contemporary boilerplate conditions (and that goes, too, for "reasonably communicated" or "reasonable opportunity to read," etc).  I do support focusing on an "upstream approach" for certain kinds of boilerplate; boilerplate that deletes basic remedies afforded by civil society in particular should not be treated as a pure default rule fully waivable on an individual-by-individual basis.

 

 

Response to Andrew Gold:  

Thank you for recognizing the ambiguity in "expectation," and the mischief it causes.

Contract theory supposes exchange of promises, or agreement,  Consent is already a conceptual step away from either of these alternative core conceptualizations, because it does not foreground the reciprocity inherent in contract theory.  Barnett's consent theory is more radical than he lets on, because it erases this basis of reciprocity.

Coming to "consent" to unknown terms, Barnett argues that the acceptance scenario represented by the sealed envelope hypo is conceptually possible, but he admits that that has little bearing on whether people who click "I agree" are actually doing that.  Thank you for saying more clearly that what we mean by clicking "I agree" is not known, and unlikely to have a general answer.

Contract theory is important because it is the justification for the state to enforce certain agreements by forcibly divesting one party of an entitlement and vesting it in someone else.  On a deeper level, contract theory is important because, in the standard liberal story justifying the state, the state is necessary in order to implement and maintain a system of contract to enhance freedom of persons by means of making private ordering possible ( i.e., freedom of contract).  So, I am actually a conservative about freedom of contract.

There's
a deep question, in my view, regarding how far a practice can deviate from the assumed parameters of its justificatory theory before we must consider it unjustified.  I am working in this question, which is a question of "fit" between ideal theory and nonideal practice. Meanwhile, we know that fully informed consent (itself an idealization, not something that happens in real life) fits the contract theory justification, whereas sheer ignorance (at least you and I agree) does not.  The contested terrain is between these poles. How far can an allegedly "contractual" practice deviate from the consent/exchange of promises/agreement concepts undergirding the theory before such practice must be held unjustified, that is to use that theory as the basis to divest entitlements through state coercion must be held unjustified?

I am not sure that question can be classified as conceptual, and I don't think it can be classified as empirical, but I'm sure it's the question we need to answer when it comes to money-now-terms-later, or, indeed, clicking "I agree" (or signing something) when the recipient has no viable opportunity to do otherwise, when the recipient does not understand the terms, when the deleted rights should not be subject to relinquishment by individuals, etc. (See also reply [in the next post] to Kim Krawiec.)

 

Response to David Horton:

Elegantly put, and thank you.

 

 Response to Ethan Leib: 

Thank you for the list of ideas I offer.  This is just what a review should do (in addition to raising questions and suggesting avenues for further research, of course).

Since consent is the core value concept of contract theory--or at least derived closely from the core concepts of exchange (promises or agreement), I don't think consent can be "fetishized."  (Focusing on feet might be "fetish" if we believe the core value is partnership as a whole,  but then partnerships as a whole can't be "fetishized."  "Commodity fetishism'" for example, was supposed to suggest that overvaluing commodities and turning too many aspects of life into commodities is a distortion of what is valuable in humanity, but if we then insist in valuing humanity, that is not "fetishizing" humanity.)

The problem I think you allude to, however, is a real one: To what extent does a justification for a practice have to fit (accurately describe) instances of the practice? Or to put the question the other way, To what extent may a practice allegedly justified by a theory deviate from the theory before we should regard it as unjustified?  (See my reply to Andrew Gold.) I don't have a general theory to address this problem of "fit."  There might be many practices that are imperfectly related to the theory (firm-to-firm negotiated deals that are incompletely specified, for example) that on balance are still justifiable under contract theory.  I think that mass-market boilerplate of certain varieties is outside the purview of the purported justification under contract.  I'll try to say more in later work about the grey area that imperfectly fits the ideal but nevertheless can be considered "close enough,"  but meanwhile, I think we can say that certain kinds of boilerplate are not "close enough" without dragging the entire practice of contracting into question.

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

Boilerplate Symposium IX A: Kim Krawiec on Contracts as Disclosure, Part I

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

Kimberly D. Krawiec is the Kathrine Robinson Everett Professor of Law at the Duke University School of Law.  

Thanks to Jeremy for inviting me to review Peggy Radin’s new book, Boilerplate.  Peggy’s work on contested commodities has hugely influenced my thinking about taboo trades, and I suspect that her work on boilerplate will prove similarly influential, so I’m grateful for this opportunity for early engagement. 

Let me start by explaining my contention that disclosure is a helpful parallel through which to view Peggy’s theories on the shortcomings of boilerplate. 

First, as Peggy defines boilerplate, we are talking about take it or leave it contracts.  There is no dickering over terms, no negotiation: if the consumer doesn’t like the offered contract, then the only remedy is to refuse to purchase the packaged product that includes some good or service, along with the accompanying boilerplate. This “take it or leave it” nature of boilerplate does not necessarily harm consumers as a group, however, provided that they have agreed to give up those rights in exchange for a lower purchase price. 

This leads to the second relevant insight from the disclosure comparison: there is a large literature regarding the extent to which disclosure can protect (and harm) even consumers who are ignorant of the disclosure, by impacting price. Third, and relatedly, there is a large literature regarding the conditions under which we cannot expect market prices to accurately reflect all of the available information about a product. Fourth, and finally, Peggy does not propose more or better disclosure as the solution to boilerplate, but instead proposes a substantive regulation of contract terms – what is often referred to within securities law as “merit regulation.” Merit regulation forms the basis of many state blue-sky laws, in contrast to federal securities law, which is historically disclosure based.  Thus, at least some of the debates between boilerplate “autonomists” and “apologists,” to borrow Omri Ben-Shahar's phrasing, have also been addressed in the numerous debates, dating back at least to the 1930’s, on merit-based versus disclosure-based securities regulation. 

Peggy’s contention (to oversimplify, as is so frequently necessary in Blog World) is that we cannot infer from the widespread persistence of a particular boilerplate term that consumers have chosen it through their willingness to buy the product/service + boilerplate bundle at a given price.  Instead, we must treat it as a case of potential market failure.  So, what might lead to this market failure?  I want to illustrate one possibility – and highlight some unanswered questions that I think Peggy and other boilerplate autonomists need to address – using the example of a fairly common exculpation clause used by tour group operators. 

If you’ve taken almost any type of organized tour or active vacation and bothered to read the liability waiver that you were almost certainly asked to sign, then you’ve seen an agreement similar to the one I’ve included at right limiting the tour company’s liability for their negligence involving pretty much everything from a bad hotel room to your death from falling into an active volcano.  Such waivers are ubiquitous, varying only slightly in their particulars. 

And I have signed one every year for over a decade.  Why?  Well, the simple answer is that I have no choice, given that I want to participate in organized adventure travel and all tour companies have a similar waiver.  But that’s too easy.  The real question, as Peggy acknowledges, is why, if this is a term that consumers value, a competing adventure tour company has not arisen to offer a similar tour experience without the offending boilerplate language, potentially at higher cost?  I’ll venture an answer in my next post.

[Posted, on Kim Krawiec's behalf, by JT]

Boilerplate Symposium VIII: Daniel Schwarcz on a Tort-Based Approach to Standard Form Contracts

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

Daniel Schwarcz is an Associate Professor of Law at the University of Minnesota School of Law.

One of the most provocative arguments in Margaret Jane Radin’s bold and compelling book, Boilerplate, is that legal evaluation of contracts of adhesion should employ tort principles rather than contract principles.   As Radin acknowledges, this is an idea that I have explored in the specific context of insurance policies.  In this guest post, I hope to discuss some of the similarities and differences between Radin’s proposed approach and my own.

In some important ways, Radin and I make similar arguments for moving to a tort-based approach to standard form contracts.   For instance, we both argue that the lack of meaningful assent to boilerplate means that standard contract law doctrines are often an awkward fit for evaluating boilerplate.  Thus, people who “consent” to contracts of adhesion do not generally have any expectations at all regarding the specific terms to which they adhere.  Many rules designed to police unreasonable terms in standard form contracts, such as the reasonable expectations doctrine, consequently become analytically confusing.  Similarly, the familiar (and insurance-super-charged) doctrine that ambiguities are interpreted against the drafter is an odd fit for contracts of adhesion, given that (i) the rule is principally meant to encourage clearer drafting, and (ii) less ambiguous drafting does not actually promote better understanding among most consumers, who do not read or understand boilerplate in the first place.  

From this starting point, though, Radin and I develop quite different ideas for how tort law could help police standard form contracts.  Radin ultimately endorses a new tort of “intentional deprivation of legal rights” that would focus on the extent to which boilerplate deprived individuals of “market-inalienable” rights. Radin says that she prefers this approach to one employing products liability law because the nature of the consumer harm caused by boilerplate is not physical.   But an intentional torts approach also allows Radin to directly target her primary complaint with boilerplate: that it often undermines various democratically-granted political and individual rights.  Because these “market inalienable” rights are relatively specific and limited – encompassing, for instance, the right to a jury trial or legal redress for an injury – they can easily be protected by declaring their deprivation through boilerplate to constitute an intentional tort.  By contrast, Radin tellingly admits that her approach would have little to say about insurance policies, for instance, presumably because they tend not to contain arbitration provisions, forum selection clauses, or other terms that implicate political or individual rights.

By contrast, I embrace a products liability approach to boilerplate because I am much less concerned than Radin about “the deprivation of legal rights,” and much more concerned about the potential inefficiencies of boilerplate.  To be sure, Radin fairly lays out the standard law-and-economics analysis of boilerplate, which emphasizes that it is really just a product feature that is subject to market forces.  Whether these forces are sufficient to deter exploitive terms depends on market-specific factors, such as the information known to consumers, the heuristics and biases consumers face, and the ability of firms to segment sophisticated and unsophisticated consumers.  As such, the strength of efficiency-based defenses of boilerplate “will vary from market to market.”

Although Radin lays out all of these points eloquently, she uses them sparingly to inform her proposed tort-based approach to boilerplate. By contrast, I embrace a products liability approach to boilerplate because products liability law is focused on the very same issues that determine the efficiency of boilerplate: that consumers are ignorant of product safety problems, systematically misperceive the likelihood of these problems, and can be substantially injured by them.  A products liability frame for evaluating boilerplate thus focuses courts (and regulators) on the right questions, in my view: whether particular terms are likely to (i) be subject to inadequate market pressures and (ii) cause substantial consumer harm.  From this perspective, insurance policies are actually prime candidates for judicial (and regulatory) scrutiny: insurance policy terms are actively hidden from consumers, consumers generally must purchase coverage as a pre-requisite for some other transaction, consumers as a group are likely to be over-optimistic about their risk of suffering a loss, and the terms of insurance policies are particularly important because they are the only product that a consumer actually purchases.

On the other hand, the deprivation of legal rights caused by boilerplate is much less troubling for me than it is for Radin.  As Radin acknowledges, legislatures are perfectly free to limit the capacity of parties to contract around particular rights, as they do, for instance, in the case of the implied warranty of habitability. When legislatures do allow for the contractual modification of rights, the democratic process seems to me to be perfectly respected.  This, for instance, seems to me to be a fair description of the right to a jury trial and the Federal Arbitration Act. Of course, it may be that courts misinterpret certain laws to allow for greater contractual modification of rights than the legislature intended. But this type of risk is less about boilerplate generally than specific contract terms, and therefore seems to be of limited use in crafting a generalizable tort-based approach to standard form contracts.

[Posted, on Daniel Schwarcz's behalf, by JT]

Boilerplate Symposium VII: Oren Bar-Gill on Consent Without Reading

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

Oren Bar-Gill is a Professor of Law and Co-Director of the Center for Law, Economics and Organization, New York University School of Law

Professor Radin’s book is an eloquent and powerful critique of the fine-term, boilerplate contracts that pervade modern life. Its breadth – in terms of the range of theoretical perspectives that it considers and the different legal policy responses that it discusses – is impressive. In this comment, I focus on the economic analysis of boilerplate. I suggest that Radin’s treatment of this particular perspective, while clearly very useful, is, in some respects, incomplete.

In her discussion of the economic analysis of boilerplate, Radin focuses on, and criticizes, a Chicago-school approach that minimizes any concern about boilerplate. But this is only one strand in the economic analysis of form contracts. There is another, perhaps more influential strand that readily acknowledges the challenges that boilerplate presents for market efficiency and for welfare maximization.

Radin emphasizes the importance of consent. Economists don't care about consent as such; they care only about the functional role that consent plays in achieving Pareto efficiency. But this functional role is key for the economist. And economists recognize that, for most consumers, reading the fine print is simply irrational. Meaningful consent that comes out of such reading is, therefore, a myth.

But perhaps there could be meaningful consent without reading. Perhaps consumers can learn about the important features of boilerplate through other means. This is where economists have been focusing their recent efforts. Reputation, as bolstered by ratings and reviews (that are becoming increasingly important with the expansion of the Internet and the rise of social networks), plays a key role here. We see more and more examples where sellers compete over fine-print terms – where the terms rise from the fine print to the billboards. Consider automobile warranties or, more recently, early-termination fees in cellphone contracts and late fees and currency conversion fees in credit card contracts.

Consent, even meaningful consent, without reading is possible. We cannot always count on it, however. The challenge is to identify those cases where consent, including consent without reading, is absent. That is where we should focus our regulatory efforts.

Along these lines, I note two aspects of consumer contracts that deserve, perhaps, more attention than Radin gives them. First is the increasingly prevalent problem of unilateral modification, by sellers, of consumer contracts (with or without a specific unilateral modification clause in the initial contract). When a pro-consumer contract or term can so easily be changed, the forces that can generate consent-without-reading are substantially weakened.

Second, Radin focuses, in large part, on legal terms. But non-legal terms, specifically prices and fees can be similarly hidden and misunderstood by consumers. Such terms can be as harmful to consumers as the right-divesting terms that attract most of Radin’s critical attention.

Radin’s book is a great achievement. Among its many contributions is a critical account of the economic analysis of boilerplate. While I agree with much of this criticism, I have tried, in this brief comment, to sketch a richer picture of the economic approach to consumer contracts. I suspect that Radin would be quite sympathetic to this more nuanced approach.

[Posted, on Oren Bar-Gill's behalf, by JT]

Boilerplate Symposium VI: Brian Bix on Democratic Degradation

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

Brian Bix is the Frederick W. Thomas Professor for the Interdisciplinary Study of Law and Language at the University of Minnesota Law School

(The following is adapted from a much longer review that will appear in the Tulsa Law Review.)

 In her important, timely, and provocative book,  Boilerplate:  The Fine Print, Vanishing Rights, and the Rule of Law, Margaret Jane Radin offers some scathing observations regarding the motivation and effects of the terms placed in consumer and employee contracts.  She argues that the current contracting practices make a mockery of consent, and undermine the rule of law.  Radin is clearly correct in her essential claim, that for many contracting parties freedom of contract is less an ideal than a sham, and that boilerplate provisions are being used by companies to circumvent substantive rights and remedies consumers, employees, and other contracting parties would otherwise have.       

There is one issue, however, on which I might want to offer a qualified dissent, or at least suggest a slight modification.  In Boilerplate, Radin expresses concerns about the “democratic degradation,” by which she means the way in which important legislatively created rights can be (enforceably) diminished or waived through contractual agreement. (pp. 33-51) Her argument is that businesses should not be able to undo through simple contractual provisions (especially provisions that are hidden, hard to understand, and hard to avoid) what has been passed through the popular, democratic law-making process. 

The difficulty with this argument is that the ability to modify or waive these rights is itself also the direct or indirect product of legislation.  The most obvious example is the Federal Arbitration Act (FAA), Pub. L. No. 68-401, 43 Stat. 883 (1925), codified as amended at 9 U.S.C. §§ 1-14, which has been the ground for enforcing the arbitration agreements Radin complains about that waive consumers’ and employees’ rights to litigate claims in court and to bring class action claims.  The ability of vendors to remove consumer’s rights has been enhanced substantially by the United States Supreme Court’s robust reading in recent years of the Federal Arbitration Act.  See, e.g., AT&T v. Concepcion, 131 S. Ct. 1740 (2011); Rent-A-Center, West, Inc. v. Jackson, 130 S. Ct. 2772 (2010); Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006).  (Of course, one might disagree with the reading of the FAA that the majority of the Supreme Court has given, but that is a separate issue.) 

Similarly, Congress and state legislatures certainly have the ability to make the right to litigate certain claims or to bring class actions non-waivable, and have occasionally done so.  For example, Congress has forbidden mandatory arbitration provisions in consumer credit agreements with members of the United States military. (See John Warner National Defense Authorization Act of 2007, Pub. L. No. 109-364, § 670(a), 120 Stat. 2083, codified at 10 U.S.C. §§ 987(e)(3), (f)(4).)  One can also find state laws that expressly restrict the ability of parties to waive procedural rights, at least for certain categories of transactions.  One example is the Illinois Franchise Act, where Section 4 states:  “Any provision in a franchise agreement that designates jurisdiction or venue in a forum outside of this State is void, provided that a franchise agreement may provide for arbitration in a forum outside of this State.”  815 ILCS 705/4.

Someone might object that the argument here is putting too much argumentative weight on the fact that federal or state legislatures have not acted to restrict the effect of contractual boilerplate, and that one should not make too much of legislative inaction.  However, the fact that state and federal legislatures have shown the ability and willingness to restrict the use of certain kinds of boilerplate means that the failure to do so in other circumstances is at least noteworthy.  Additionally, Congress has sometimes offered express permission to have certain types of claims resolved by arbitration or other forms of alternative dispute resolution.  For example, the Civil Rights Act of 1991 includes the following language: “Where appropriate and to the extent authorized by law, the use of alternative means of dispute resolution, including . . . arbitration, is encouraged to resolve disputes arising under [Title VII].”  Pub. L. No. 102-166, § 118, 105 Stat. at 1081.)

It is not democratic degradation, but the lesser side of American political life – the power of business interests, business lobbying, corporate money after Citizens United, etc. – that contributes significantly to the current contract law world in which rights disappear through boilerplate.  One need only watch the way that the Congress continues to hobble the Federal Consumer Finance Agency (there had once been talk of that agency acting against mandatory arbitration in consumer and employment agreements, but that now seems highly unlikely).  

[Posted, on Brian Bix's behafl, by JT]