Teaching Assistants: Andrea Boyack on Abuse of Contract, with a Dash of Eric Goldman

It is always a pleasure to be able to use this blog as an excuse to prod me to read things I really ought to read and to promote the work of the dedicated contracts scholars I have come to know through decades of engagement with the subject.  You can find Andrea Boyack's work, Abuse of Contract: Boilerplate Erasure of Consumer Counterparty Rights, on SSRN.  It is forthcoming in the Iowa Law Review, so congratulations, Andrea, on a wonderful placement.

Professor Boyack  (right) starts with a straightforward explanation of why certain boilerplate provisions are bad.  They are not necessary to the parties' transaction. Rather, they erase default rights that benefit consumers with the sole purpose of shifting the risk onto the parties least well-positioned to protect themselves against that risk.  Peggy Radin laid the groundwork for Professor Boyack's work with her pioneering book on Boilerplate, to which we devoted a symposium in 2013. 

Both the common law and the new Restatement of Consumer Contracts Law allow for the enforcement of such terms.  Scholars are divided about how commonly corporations abuse their bargaining power to strip consumers of their legal rights in truly alarming ways. Professor Boyack dives in with her own study of the online terms and conditions (the T&C Study) of 100 companies.  Her findings are sobering. Here's the money quote from page 3 of the article:

Evidence from the T&C Study shows that the overwhelming majority of consumer contracts contain multiple categories of abusive terms. The existing uniformity of boilerplate waivers undermines the theory that competition and reputation currently act as effective bulwarks  against abuse (3).

The T&C Study tracked four broad categories of "destructive" terms:

• dispute resolution mandates,
• liability waivers,
• limitations on damages, and
• pre-authorization of unilateral modifications (5).

In a more granulated, way, it also tracked eleven rights-deleting terms

1. mandatory arbitration,
2. waiver of a jury trial,
3. waiver of the ability to participate in a class action,
4. forum selection,
5. limited time periods to bring a claim,
6. disclaimer of representations,
7. waiver of implied warranties,
8. privacy waivers,
9. limitations on types of damages,
10. caps on the amount of damages, and
11. authorization for unilateral modifications of terms (7).

Professor Boyack's findings are not exactly surprising, but it is very useful to have the data collected, and there are all sorts of interesting wrinkles and nuances.  Overall, going back to the original four categories of "destructive" terms, over 80% of the contracts reviewed included provisions that fell into all four categories, with nearly all of the companies, limiting remedies and reallocating liability, and  each and every one reserving the right to unilaterally modify the terms of the agreement (21).

The relative uniformity of these terms bolsters the arguments of legal scholars who have claimed that consumers do not give meaningful consent to boilerplate terms.  "If all transactions come bundled with virtually the same substantive terms that shift costs and risks away from companies, consumers can do nothing but acquiesce to these reallocations" (24).  Similarly, if you are inclined to think that competition will force companies to abandon obnoxious boilerplate terms, the T&C Study provides no support for that position (28-29).  

The Article concludes that the current state of contracting offers insufficient legal protection of and insufficient market choices for consumers.  Boilerplate waivers, disclaimers, and limitations are imposed on consumers who acquiesce to those terms rather than choose them, because they have no choice in the matter. As a result, corporations are able to exploit their contracting hegemony to systematically deny consumers their legal rights. 

That may all seem like a bummer, so let's end on a happy note.  Professor Boyack includes in her appendices a great deal of the data she collected, and it is color-coded in soothing pastels, allowing for relaxed contemplation (33-42).  She also includes a sampling of destructive terms (43-51) so that you can read them aloud to your children instead of "Goodnight Moon" and they will beg you to stop so that you all can go to sleep.  Finally, there is a score sheet at the end, grading the companies, so you can appropriately calibrate your resentment (52-55).

Meanwhile, this just in: Eric Goldman (left) reports here on a North Carolina Supreme Court case allowing modification of terms of service without notice.  Here's the core holding:

When parties have mutually agreed to a unilateral change-of-terms provision, said provision “must be enforced as it is written,” subject to certain limitations. Contrary to plaintiff’s assertions, the traditional modification analysis which requires mutual assent and consideration does not apply to changes stemming from a valid unilateral change-of-terms provision in an existing contract.

There are two exceptions: the modifications must not fall outside of the "universe of terms" that the original agreement governs and they must me be made in good faith.