Contracts, in their ideal form, are meant to represent terms voluntarily chosen by all parties involved. For the greater part, courts dutifully enforce the contract terms as expressed by the participating entities, even if fairness could be drawn into question in some cases. While upholding the principle of freedom of contract supports liberty and prosperity, it can be manipulatively twisted within the sphere of consumer transactions to justify the enforcement of company-authored, non-negotiable waivers of consumers’ legal rights.
In the digital age, we, as consumers, constantly engage with companies—browsing their websites, ordering services, and clicking on “I Accept.” In doing so, and in our shared desire to do business with them, courts often rule that we willingly waive our default rights. This logic extends to the point of finding that each time we buy, subscribe, borrow, or even just browse, we are waiving our legal rights—should the company so require. Accepting company boilerplate clauses has now become standard operating procedure for doing business.
An extensive majority of online boilerplate terms include waivers of the right to litigate claims in court, especially within the realm of class-action. Based on a 2021 research study of 100 standard forms, an overwhelming majority of companies (98%) habitually use their standard terms to limit their liability. This is usually done through clients relinquishing the warranties that are implied by regulation.
Interestingly, nearly all companies go on to restrict the kinds of damages that can be awarded to offended customers, typically capping recovery at a refund of amounts paid. Almost invariably, companies include a provision that authorizes them to unilaterally make future changes to the contract, with the customer’s assent granted in advance.
Consumer advocates have been pointing out for years that almost no one reads online terms. These boilerplate terms are often imposed unilaterally and are mischaracterized as the parties’ mutually agreed contract. These contracts are designed to support voluntary choices that should represent win-win transactions. However, companies, always the drafting parties, possess the unilateral power to dictate applicable legal rules, ultimately bending contract law principles to their will.
Companies often assert that their standard online boilerplate forms must be treated as contracts, threatening that rejecting this status could potentially cascade into chaos in the world of commerce. However, this assertion doesn’t hold water in the context of business-to-business transactions where one party’s standard form may not necessarily be accepted as the contract.
Article 2 of the Uniform Commercial Code (UCC) gives a more representative perspective, breaking the connection between whether parties choose to engage in a transaction and the question of which terms they wish to govern their relationship.
While this provision safeguards companies from being inadvertently held to the terms of their counterparties’ forms in their business transactions, the consumer contracts dilemma remains unresolved—as consumers don’t possess their own standard forms. However, consumer-side inputs can be inferred through legal defaults.
In a published article in July, it was explained that contract law must recognize that consumers are only agreeing to terms and conditions that pertain to the transaction—such as the product or service being purchased and its price. Terms that limit or destroy consumer default legal rights stand away from the company-customer transaction and solely serve to benefit the business, rendering any claim of mutual assent entirely unjustified. Courts should presume, for the sake of fairness, that the parties’ contract consists only of those terms that establish the transactional infrastructure.
The solution to this structural manipulation lies in the hands of the courts and their interpretations of contract law. Instead of presuming that boilerplate contracts are binding unless proven otherwise by the consumer, courts should presume that only terms creating the transactional infrastructure are parts of the contract. To enforce this, courts must mandate the businesses to prove a deliberate waiver in cases where consumers choose to forego their legal rights.
This redefining of consumer contracts’ content would better align with consumer preferences and expectations and also bring back the freedom of contract to the consumers. This change in perspective would reduce the increasing dependence on intrusive public oversight, limit companies’ unilateral power to define contract terms, and help return to the underlying purpose of contract laws.
The complete article was written by Andrea J. Boyack, a professor of law at the University of Missouri School of Law and originally published on Bloomberg Law.