VOLUME 15 • CONSUMER PROTECTION
HOW TO USE THE RESTATEMENT OF CONSUMER CONTRACTS: A GUIDE FOR JUDGES
Ian Ayres & Gregory Klass1Ian Ayres, Oscar M. Ruebhausen Professor, Yale Law School; Gregory Klass Frederick J. Haas Chair in Law and Philosophy, Georgetown University Law Center. Mingyi Hua, Richard Peay, and Ronglu Sun provided excellent research assistance.
Many significant changes to contract law over the past hundred years have been driven by changes in the technology of contracting—the mechanisms people use (or try to use) to create or alter their legal relationships. Early in the twentieth century, cheap printing and mass markets paved the way for standard-form contractual writings and adding terms to noncontractual documents, such as purchase orders and parking receipts.
VOLUME 15 • CONSUMER PROTECTION
A COMPANION GUIDE TO THE RESTATEMENT OF CONSUMER CONTRACTS
Oren Bar-Gill, Omri Ben-Shahar, & Florencia Marotta-Wurgler2Bar-Gill is the William J. Friedman and Alicia Townsend Friedman Professor of Law and Economics at Harvard Law School. Ben-Shahar is the Leo and Eileen Herzel Distinguished Service Professor of Law at the University of Chicago Law School. Marotta-Wurgler is the Boxer Family Professor of Law at the New York Universirty School of Law.
In 2012, we were invited to serve as Reporters for a new and ambitious project of the American Law Institute (“ALI”) – a Restatement of Consumer Contracts. We were charged with the task of codifying the common law governing consumer contracts. This was a gutsy move by the ALI, entrusting a sacred doctrinal enterprise in the hands of outsiders to the ALI culture. We are scholars devoted to studying the effects of laws and whether they achieve their intended consequences. In our research on consumer protection, we studied which regulatory reforms work well, which are futile, and which do more harm than good. Our research harbored only modest ambitions in the study of what the law is.
VOLUME 15 • CONSUMER PROTECTION
CONSUMERS’ UNREASONABLE TEXTUAL EXPECTATIONS
David A. Hoffman3William A. Schnader Professor of Law, University of Pennsylvania Carey School of Law. I’m grateful to the organizers and participants at the Restatement of Consumer Contracts conference for comments.
The Restatement of Consumer Contracts, at § 4(d), states that “standard contract terms are interpreted in a manner that effectuates the reasonable expectations of the consumer.” As the Reporters note, this language derives from the Restatement (Second) of Contracts § 211, itself largely pulled from the insurance context. As § 211 was until recently thought to be nearly dead-letter, the Consumer Restatement’s interest in revitalizing the reasonable expectations rule (for interpretation and elsewhere in the document) is of particular interest. The Reporters offer a helpfully capacious definition of what consumers reasonably expect: A “totality of the circumstances,” test “in consideration of the ordinary behavior and perspective of consumers engaged in the type of transaction at issue and their interaction with the business, including the representations made to them, the typical purpose of such transactions, and the preservation of value of the nonstandard or core terms of the deal.” But it’s fair to worry that judges will be unable to reliably make this kind of holistic determination in individual cases, as they lack information about consumers’ ordinary practices. In this Essay, I summarize the available evidence of what consumers have in mind when they interpret contracts, and a methodological options judges have before them in making reasoned determinations. Contrary to advocates’ hopes, § 4(d)’s interpretation principle will be—even if adopted—unlikely to produce uniformly pro-consumer outcomes.
VOLUME 15 • CONSUMER PROTECTION
INFLECTION POINTS IN THE DRAFTING OF THE RESTATEMENT OF CONSUMER CONTRACTS: SALIENCE AND ITS ARC
Patricia A. McCoy4Liberty Mutual Insurance Professor, Boston College Law School. Professor McCoy was an Adviser to the Restatement of the Law, Consumer Contracts.
All Reporters come to Restatement projects with priors, and that was no less true for the Restatement of the Law, Consumer Contracts (“RCK” or “Restatement”). One of the RCK’s Reporters, Omri Ben-Shahar, had coauthored an acclaimed book detailing disclosure’s failure to afford consumer protection. Another Reporter, Florencia Marotta-Wurgler, had conducted definitive research demonstrating that almost no consumers read the terms and conditions in online contracts. The Reporters were concerned about consumer harm, yet skeptical of disclosure as the appropriate regulatory tool.
VOLUME 15 • CONSUMER PROTECTION
NARROWING THE FRAME: CONSUMER INSURANCE POLICIES AND THE LIMITS OF THE RESTATEMENT OF CONSUMER CONTRACTS
Daniel Schwarcz5Fredrikson & Byron Professor of Law, University of Minnesota Law School.
Efforts to restate the law must contend with a fundamental framing challenge: Determining how broadly or narrowly to define the area of law to be addressed. This decision inevitably involves trade-offs. Narrow formulations may yield nuanced and precise rules, but risk diminishing the utility of the restatement and obscuring overarching themes and objectives. Conversely, broad formulations may provide a more comprehensive view of the law, but risk oversimplifying its nuances, conflating distinct lines of precedent, and overlooking critical details.
VOLUME 15 • CONSUMER PROTECTION
A DEMOCRATIC CONCEPTION OF CONSUMER CONTRACTS
Rebecca Stone6Professor, UCLA School of Law. Thanks to Jon Quong and participants at the ALI Sym- posium on the Restatement of Consumer Contracts for helpful comments. Thanks also to Raj Ashar and the editors of the Harvard Business Law Review for excellent editorial assistance.
I sketch and briefly evaluate two standard ways of conceptualizing the problem that is posed by consumer contracts and defend a third view, which is based on my democratic conception of contract. According to the first, the power asymmetry between sellers and consumers means that we should not view consumer contracts as genuine contracts but rather as illegitimate exercises of private law-making by sellers for their consumers. According to the second, which broadly aligns with the approach of the Restatement of Consumer Contracts, consumer contracts are genuine contracts but of a procedurally defective kind. On the view I defend, the essence of the problem is not the compromised assent of consumers, but rather the tendency of sellers to set terms without regard for consumers’ interests.
VOLUME 15 • CONSUMER PROTECTION
RESTATEMENT OF THE LAW, CONSUMER CONTRACTS AND THE “TOTALITY OF THE CIRCUMSTANCES”
Steve Weise7Partner, Proskauer Rose LLP; UCLA School of Law, Lecturer in Law; Member, Council of the American Law Institute; Member, Permanent Editorial Board for the Uniform Commercial Code.
The concept of using the “totality of the circumstances” plays a central role in the Restatement of the Law, Consumer Contracts (Restatement). The Restatement regularly uses this approach to evaluate the matters identified in the following paragraph. The Restatement uses a “totality of the circumstances” test to determine when a “feature of the parties’ conduct or communications” is “reasonable” (when required to be “reasonable” by the Restatement), and identify a consumer’s reasonable expectations in connection with the interpretation of a consumer contract.
VOLUME 15 • CONSUMER PROTECTION
THE PSYCHOLOGY OF MISLEADINGNESS: A STUDY AND A RESEARCH AGENDA
Tess Wilkinson-Ryan8Golkin Family Professor of Law, University of Pennsylvania Carey Law School. I am grateful to Oren Bar-Gill, Omri Ben-Shahar, and Florencia Marotta-Wurgler for hosting the symposium and for their feedback. I am also thankful to David Hoffman, Michael Morse, and Ben Sirolly for generous comments and discussions. Finally, I am indebted to Selma Halal and Cristina Bermudez for their excellent research assistance.
Traditional contract doctrine, at least as it exists in the casebooks, seems surprisingly indifferent to the problems of deception. Contract law has one big move to protect against deception: a strict liability approach to breach that grants expectation damages whether the promise was untruthful or just optimistic. Unlike showing fraud in tort, which includes an intent element, the uniform approach of contract doctrine is to hold fraudsters to their promises whether or not the injured party can prove a promise was a lie. But once we move past contract’s big move—the plaintiff-friendly protection of the expectation interest irrespective of deceptive intent—the indifference to deception can be a doctrinal gift to the would-be deceivers.