Consumer Contracts Must Be Based on Real Agreement, Not Clicks

Contracts supposedly represent terms voluntarily chosen by all parties. Courts almost always enforce the contract terms as expressed by the parties, regardless if those terms are fair.

Freedom of contract supports both liberty and prosperity. But in the context of consumer transactions, contract principles have been twisted to justify enforcement of company-authored, non-negotiable, sneak-in waivers of consumers’ legal rights.

We are all consumers, engaging with companies every day—with every new website browsed, every new service ordered, and every click of “I Accept.” Companies crafting online terms have convinced courts that, by agreeing to do business with them, consumers have voluntarily waived their default rights.

Based on this reasoning, courts find that every time we buy, subscribe, borrow, or browse, we relinquish our legal rights—if the company so wishes. Acquiescence to company boilerplate has become the cost of doing business.

The vast majority of online boilerplate terms include waivers of the right to litigate claims in court—particularly as part of a class action. Based on my research of 100 standard forms in 2021, nearly all companies (98%) use their standard terms to limit their liability, typically by having their customers disclaim warranties that are implied by statute.

Almost all companies also restrict what sorts of damages can be awarded to aggrieved customers, typically capping recovery at a refund of amounts paid. Companies almost always include a provision in their standard terms that authorizes them to unilaterally make future changes to the parties’ contract, with the customer’s assent granted in advance.

For years, consumer advocates have pointed out that almost no one reads online terms. But what is truly objectionable about unilaterally imposed terms is their characterization as the parties’ mutually chosen contract.

Contract enforcement is justified by our voluntary choices that, by definition, should represent win-win transactions. Instead, companies, which are always the drafting parties, have the unilateral power to dictate applicable legal rules, perverting contract law principles.

Companies have long claimed that their online boilerplates must be afforded contractual status, or else the world of commerce would be thrown into chaos. This is absurd. In the context of business-to-business transactions, the law rejects the need to adopt one party’s standard form as the parties’ contract.

Recognizing that boilerplate terms are neither read nor negotiated, the Uniform Commercial Code decoupled the question whether parties choose to engage in a transaction from the question of which terms they mutually wish to govern their relationship.

Under Article 2 of the UCC, when parties agree to a transaction while exchanging differing standard forms, their contract is an amalgam of the two battling forms, approximating both parties’ preferences.

Although UCC Section 2-207 protects companies from being inadvertently held to the terms of their counterparties’ forms in their business-to-business transactions, it doesn’t solve the problem of standard form contracts involving consumers—because consumers don’t have their own standard forms.

When it comes to legal default rules, a consumer-drafted form isn’t necessary. But consumer-side inputs can be imputed through legal defaults.

As I explain in my forthcoming article, contract law could and should recognize that when consumers indicate a desire to proceed with a transaction, they’re only agreeing to terms and conditions that pertain to the transaction—such as the product or service being provided and its price.

These terms construct the parameters for the exchange, and most consumers likely would understand and expect those terms to govern the transaction.

The same can’t be said for destructive terms—which exist apart from the company-consumer transaction and whose function is solely to limit or destroy consumer default legal rights. Waiving the right to sue or capping damages at $1 are not terms necessary for the exchange—and are wins for the company alone. Nothing justifies deemed counterparty assent to such sneak-in waivers.

Contract law starts with a presumption that contract terms are binding, although courts can declare certain terms unenforceable based on their gross unfairness. For example, if consumers can prove the term is so surprising and unfair that it shocks the judicial conscience (for example, an appallingly high late fee or onerous requirements to cancel service), then the court can excise this “unconscionable” term from the contract.

Although the new Restatement of the Law of Consumer Contracts suggests courts should be more proactive in policing consumer contract content by applying the unconscionability doctrine more liberally, in practice, unconscionability is difficult to prove and tricky to predict before litigation.

I propose that contract law start with a different baseline. Instead of presuming all boilerplate is binding unless the consumer proves otherwise, courts should presume that the parties’ contract only consists of those terms that create the transactional infrastructure.

The destructive terms lurking in company boilerplate, on the other hand, wouldn’t be deemed part of the parties’ contract based on consumers’ blanket assent to the transaction.

This definition of the contract’s content better aligns with consumer preferences and expectations. Consumer parties could still choose to voluntarily relinquish a known legal right. But it would be up to the company to prove a deliberate waiver occurred.

Disaggregating choice of a transaction and choice to waive legal rights would return freedom of contract to consumers. Consumers’ contracts should be tailored to fit the realities of consumer contract relationships. This simple but impactful change of perspective with respect to consumer contracts would avoid the increasing need to rely on intrusive public oversight of private contracts.

Limiting the effectiveness of sneak-in waivers and companies’ unilateral power to define contract terms would realign the law of consumer contracts with the reasons we have contract law in the first place.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Andrea J. Boyack is professor of law at University of Missouri School of Law.

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