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]