In the present era, it seems like there are consumer contracts around every corner. Whether it’s the back of your cruise ticket or the annoying window that pops up when setting up a new social media account, it’s easy to ignore the fine print. With clickable ease we are able to bypass the dreary labor of reading longwinded agreements. And those of us who take the plunge, attempting to decipher the legalese, often give up part way through.
Who Reads Contracts?
That’s at least what Yannis Bakos, of Stern School of Business, and several other researchers found in their study. They also discovered something many of us know intuitively: two out of every thousand computer software consumers actually read the End User License Agreement (EULA), which is the standard contract for such transactions. The paper, entitled “Does Anyone Read the Fine Print? Consumer Attention to Standard Form Contracts” (2013), suggests that certain theories used to uphold the legitimacy of such contracts rest on shaky grounds. This is because there so few people who read agreements.
Duty to Read
Alas, as it stands, consumers are presumed to have read contracts once they are signed. This is known as the “duty to read doctrine” (very much like the “assumption of risk doctrine” in personal injury law). According to this legal principal, if a consumer signs a contract then it must be assumed that he or she consents to its terms. This doctrine has been used time and time again. For instance, as noted by Ian Ayres in his paper, “The No-Reading Problem in Consumer Contract Law” (2014), Lewis v. Great Western Railway found that “A person who signs a paper like this must know that he signs it for some purpose, and when he gives it to the Company must understand that it is to regulate the rights which it explains.” That was in 19th century Britain, but the basic argument still holds in US courts today.
One Possible Solution
Consumer advocates hope that fairer contract laws (or regulations) are one day instated. Ayres, for his part, suggests the implementation of a policy that requires recurring reviews during which corporations would have to determine whether the content of their agreements held up to the expectations of the average consumer. If sellers were to find out that a certain provision was broadly unknown to consumers, they would have to place the provision into a special “warning box.” Such a method could result in the highlighting of contractual obligations such as mandatory arbitration agreements, which according to the Consumer Financial Protection Bureau (CFPB), are barely known to exist by most consumers.
Get Rid of Arbitration Agreements
Of course, such provisions are egregious and should be banned according to a recently proposed rule by the CFPB – the same rule Congress is currently trying to preemptively strike down. If Congress fails, the regulation will take effect next year.
In the Mean Time
Until regulations are put in place to reduce negative outcomes associated with EULAs and other contracts, you (the consumer) should arm yourself against corporations. One way to protect yourself, as noted by the Attorney Howard Silver, is to read agreements. This may seem obvious, but it is also the only sure-fire way to guard against being misled.
Also, if you wish to complain about financial services you can do so via the CFPB website.
Finally, if you have been wrongfully injured or defrauded by a company and wish to seek compensation, you may want to consult an attorney who understands the complexities of contract law and advocates for consumers.
