Standard Form Contracts

Standard Form Contracts are agreements that employ standardized, non-negotiated provisions, usually in preprinted forms. These are
sometimes referred to as boilerplate contracts, "contracts of adhesion," or "take it or leave it" contracts. The terms, often portrayed
in fine print, are drafted by or on behalf of one party to the transaction the party with superior bargaining power who routinely
engages in such transactions. With few exceptions, the terms are not negotiable by the consumer.
Standard form, business-to-consumer contracts fulfill an important efficiency role in the mass distribution of goods and services.
These contracts have the potential to reduce transaction costs by eliminating the need to negotiate the many details of a contract for
each instance a product is sold or a service is used. However, these contracts also have the ability to trick or abuse consumers because
of the unequal bargaining power between the parties. For example, where a standard form contract is entered into between an
ordinary consumer and the salesperson of a multinational corporation, the consumer typically is in no position to negotiate the
standard terms; indeed, the companys representative often does not have the authority to alter the terms, even if either side to the
transaction were capable of understanding all the terms in the fine print. These contracts are typically drafted by corporate lawyers far
away from where the underlying consumer and vendor transaction takes place.
The danger of accepting unfair or unconscionable terms is greatest where these artful drafters of such contracts present consumers
with attractive terms on the visible or shopped terms of most interest to consumers, such as price and quality, but then slip onesided terms benefiting the seller into the less visible, fine print clauses least likely to be read or understood by consumers. In many
cases, the consumer may not even see these contracts until the transaction has occured. In some cases, the seller knows and takes
advantage of the knowledge that consumers will not read or make decisions on these unfair terms.
The Problem with Standard Form Contracts
Many businesses use standard form contracts, pre-printed contracts filled with fine print, in transactions with individual consumers.
These contracts are usually "boilerplate," "take-it-or-leave it," non-negotiable contracts.
The problem presented by many of these contracts can be summed up as unequal bargaining power -- between the consumer and the
corporate entity that uses them.
Corporations use these contracts to have uniformity and efficiency by reducing the costs to them of negotiating with consumers on an
individual basis. Consumers sign these kinds of contracts routinely -- usually never reading, much less understanding, the fine print
they contain. And there is the rub.
The party with superior power -- the corporate entity that drafts the contract -- can use the fine print, coupled with the knowledge that
the consumer rarely, if ever, reads the terms, to take advantage of the unsuspecting consumer in the underlying transaction.
Consumers often make purchases based on price and quality, but there are a number of other factors in the fine print of these
transactions that merit consumer attention: These provisions may, and often do, work against consumer interests. Though some say
consumers can always walk with their feet or dollars and choose to not engage in these transactions, often the consumer, having not
read the fine print, is completely unaware of these provisions until the corporation tries to enforce them against the consumer. Worse,
often entire industries have contracts containing these unfair provisions, thereby leaving the consumer with no meaningful alternate
choice. Even worse, businesses often reserve for themselves the right to modify or change the terms of the contract, making
comparison shopping pointless if the contract or the prospective contract is always subject to change.
To add insult to injury, these contracts often contain forced arbitration, venue and/or choice-of- law provisions, so resolution of
disputes no longer even takes place in a public courtroom forum, but in a private, business-dominated industry of arbitrators, who are
neither required to follow the rule of law, nor are subject to its oversight. Contract law and a consumer's day in court has been
"privatized" to a process whose outcomes are often unknowable and unchallengeable.
Typical contract law is based on the idea of mutual commitment and assent to the terms of the DEAL . As a consequence, courts
impose a "duty to read" on the consumer and presume that the terms of the agreement signed have been agreed to between the parties
to the contract. Generally, courts are not inclined to find an equitable exception to imposing the terms of a contract that have been
agreed to between the business and individual consumer, who is considered irresponsible for not having read the contract.
Exceptions, in the form of successful defenses against a contract, such as fraud, duress, or unconscionability are few and far between.
But the modern-day reality with fine print in standard form contracts is that there is no mutuality of assent, and there is often no time
for or inclination by the consumer to read the terms, or even an ability to cross comparison shop those terms. And even if the
consumer did try to comparison shop, it wouldn't do much good if the sellers can always change their terms and insulate their
provisions from meaningful judicial review. This adds up to a fiction in the law of contracts and makes a mockery of the idea of
consumer freedom in a free market.

Some Solutions
Standard form contracts should be fair, accessible, and understandable for consumers.
For many decades, contract law has placed the obligation on the consumer to understand contract terms through a "duty to read" the
terms of the transaction. Unless courts find "fraud" or "duress," or the terms of the contract to be "unconscionable" most contracts are
enforced as written under the theory that the consumer has agreed to the terms.
For several decades now, government regulators also have used "disclosure" and even "more disclosure" as the primary tool of
monitoring business activities, under a theory that if businesses tell consumers in their fine print, businesses can do as they please, and
consumers can read for themselves if they agree or not to the terms of any transaction, and choose to enter or walk away from the
deal. But unfair and deceptive policies and practices, some would say fraud, can be and are buried in the fine print.
Many scholars argue that it is not rational for consumers to read the fine print, or for courts to expect them to. Others point out that in
the United States, nearly 100 million people simply cannot read, or cannot read past a fourth grade level, much less all the legalese
jargon in fine print. Others contend that even those able to read do not, as it is not rational to spend time reading the fine print, and
even those able to read and understand, still may not make rational decisions given the format or presentation of the factors in the
materials and the consumer's own biases in decision-making.
The following are some potential solutions or partial solutions to begin to address some of the problems with the use of fine print
standard form contracts, though reasonable people may disagree with one or more of the suggestions or their efficacy.

First: Contracts should be transparent and accessible. This means, at bare minimum, that standard form contracts must be disclosed
prior to the consumer transaction; if a consumer will not read it, perhaps a third party, such as the press or a consumer advocacy
organization, will read it for its fairness and be able to compare it to other sellers' contracts in the industry;

Second: Disclosures should be clear and simple, not pages upon pages of illegible and incomprehensible fine print; they must be easy
to read and understand; businesses should endeavor to do this themselves, and if they don't, legislators and regulators at the state or
federal level should require it;

Third: The public and private sectors should test these disclosures in real life situations to make sure consumers can understand the
terms in a timely manner before the point of sale;

Fourth: Consumers need to pay attention to the contents of contracts, to prevent against fraud and deception, and to demand
accessible, fair contracts;

Fifth: Regulators responsible for regulating industries in which standard form business-to-consumer contracts are used must require
copies of the contracts used in the industries they regulate to be submitted to the governement agencies and be easily obtainable from
government databases, if not from the industries themselves;

Sixth: Regulators must do more to remove unfair and deceptive practices in business-to-consumer standard form contracts. More
disclosure alone of bad practices is not a sufficient answer to the problem, though better disclosure may be a step toward eliminating
harmful provisions and practices;

Seventh: Certain provisions should be banned from contracts or not enforced by the courts, including the seller's unilateral
modification of terms, forced arbitration and waiver of the right to a jury trial; a fair contract symbol could be used to distinguish
contracts devoid of these provisions at a glance, such as other symbols of good form, societal benefit or fair practices;

Eighth: The private and public sectors need to teach consumers how to understand the importance of fair contract terms, and to
pursue empirical research about the effect of terms and disclosures;

Ninth: The media needs to report about businesses that are doing the right thing by consumers by making their contracts accessible
and fair;

Finally, Courts should consider changing the presumption of enforceability of harmful terms not knowingly agreed to but buried in
the fine print in standard form contracts between business and individual consumers.