Andrea Boyack Article: The Shape of Consumer Contracts

Andrea J. Boyack of Washburn has written The Shape of Consumer Contracts, Denver Law Review (2023 Forthcoming). Here is the abstract:

Modern consumer contracts are the bane of contract law and theory. Freedom of contract justifications are premised on party autonomy and transactional efficiency, but theories justifying contract enforcement fail to explain why the law should treat company crafted terms as presumptively binding on consumers. Consumer protection advocates point out that lower thresholds for manifesting assent endorsed by the recent Restatement of the Law of Consumer Contracts may result in consumers being bound to terms of which they were reasonably unaware. Other scholars point out that mere knowledge of company terms and conditions does almost nothing to protect consumers in any case because consumers are powerless to shape those terms. Indeed, in the face of negotiation impotency, it is inefficient and illogical for consumers to read, understand, and analyze a company’s boilerplate terms even when these are made available. Attempting to fit traditional contract rules to the modern consumer contract context results in a body of contract law that combines fantastical notions of assent with increasing government policing of ostensibly private contract terms.

There is a better way. This Article advocates for a novel approach to consumer contract law, one that that avoids pitting fairness against efficiency. A more tailored contract baseline for consumer contracts starts by recognizing the distinct shape of the modern company consumer relationship. Traditional contract law is premised on a “horizontal” relationship shape formed between parties who can each provide some contractual input. Consumers, however, lack the ability to provide direct contractual input for the majority of their many transactional relationships. Online terms and conditions are created by and for companies; consumers simply acquiesce to them as a cost of doing business. The company consumer relationship is a hierarchical, “vertical” shape. Applying traditional contract law to vertical relationships inhibits multi party inputs and erodes contract legitimacy. In the context of a vertical relationship, the legal baseline must look outside the unilaterally controlled boilerplate to determine the parties’ contract content.

A better tailored approach to consumer contracts would treat a consumer’s choice to do business with a company as legally distinct from assent to that company’s online terms. Consumers choose transactional relationships, not online terms. Furthermore, the market provides inadequate variety among various companies’ boilerplate terms.

Contract law can provide a two step pathway for consumers to shape the terms of their contracts. First, the law must disentangle choice of a transaction and a commitment to be bound to boilerplate terms. Then, although the law can deem consumer assent to terms necessary for the transaction’s infrastructure (constructive terms), it must find boilerplate terms that exist solely to reduce consumers’ default legal rights (destructive terms) legally ineffective. Tort law’s liability allocation defaults, contract law’s basic principles, and our legal system’s dispute resolution process should persist notwithstanding mere boilerplate to the contrary. Consent to the transaction divorced from assent to destructive terms would prevent controlling parties in vertical relationships from dictating private governing rules. Existing default legal rights are a better approximation of consumer contracting preferences.

This Article sets out theoretical justifications for altering the legal baseline for consumer contracts empowering consumer-preferred inputs.. Part I examines how efficiency, choice, and market theories of contract obligation reveal the importance of party input and how these theories diverge from modern consumer contracting reality. Part II highlights the link between contract legitimacy and party ability to help shape terms and shows how the legal baseline that facilitates party input in the context of horizontal relationships operates to inhibit party input in the context of vertical relationships. Part III sets out the basic framework for a new legal approach to consumer contracts that would (1) separate consent to a transactional relationship from assent to particular terms and (2) preserve indirect consumer inputs through strengthening default legal rights.

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