Revisiting the Contracts Scholarship of Stewart Macaulay, Post VII: Peter Linzer

This is the seventh in a series of posts in our online symposium on the Contracts Scholarship of Stewart Macaulay.  More about the online symposium can be found here.  More information about this week’s guest bloggers can be found here.  

Peter Linzer is a Professor of Law at the University of Houston Law Center.

Contracts ofAdhesion: An Oxymoron? 

Contracts of adhesion are a bigtopic this year, what with Peggy Radin’s Boilerplate,Oren Bar-Gill’s Seduction By Contractand the ALI’s new Restatement Third of Consumer Contracts.  I’ve been focusing on the notion of adhesion,so my view of the fine book that Jean Braucher, Bill Whitford and the late JohnKidwell have put together in honor of Stewart Macaulay (pictured below left) is tilted in thatdirection.  Macaulay’s 1963 AmericanSociologicaly Review article referred to non-contractual relations in business, and many of the essays inthe Festschrift (Stewart probably finds the term pretentious, but it surely isa celebration of him and his work) are about business contracts.  But only three years later, Macaulay wrote Private Legislation and the Duty to Read –Business Run by IBM Machine, the Law of Contract and Credit Cards, 19 Vand.L. Rev. 1051 (1966), which is excerpted in the book.

The reference to IBM machines mustsound quaint to younger readers, but like early Kurt Vonnegut stories(“Epicac”) and novels (Player Piano)that saw the problems of technology and people in an era of vacuum tubes, itstill rings true.  Most of the Vanderbiltarticle deals with businesses, but in a footnote Macaualay cited LawrenceFriedman’s discussion of how discrete areas such as labor law and occupationallicensing have been spun off from general contract jurisprudence, and madereference to his own discussion of automobile franchising.  (It’s note 5 on page 22 in the book, and note18 in the Vanderbilt article.)  In afairly short discussion of consumers, Macaulay considered both case-by-casepolicing and legislationve regulation of standard terms, as in fire insurance contracts,and didn’t go much beyond that.  But inan article not included in the book, but with the happy short title of Bambi Meets Godzilla, 26 Houston L. Rev.575 (1989), he looked at consumer and deceptive trade practices laws and showedhow they should be an integral part of the Contracts course, even though theyhad frequently been distorted into windfalls for well-informed consumers (oftenlawyers), rather than as weapons of defense for the little guy.

Others in the book have built onMacaulay (and Ian Macneil) to suggest that consumer transactions should betreated as a separate form of contract law. Bob Scott, whom Bob Gordon seems to describe, with respect, as aneo-formalist relationalist, has put forth a strong argument in that ahands-off policy makes no sense with consumer transactions, even if it doeswhen sophisticated businesses are dealing with each other, while Ethan Leib hasargued strongly that relationalists should “fragment consumer form contractsinto its own sphere for treatment with the reasonable expectations approach,”but that this will require even more fragmented empirical research “to beuseful to courts and regulators.” Ethan Leib, What is the Relational Theory of Consumer Form Contract? Chapter 9,at 284).  Chuck Knapp, who has writtenfrequently on adhesion problems, shows in his Is There a ‘Duty to Read’? (Chapter 11), how courts have or shouldhave distinguished consumer transactions, and argues that what he calls a“presumption of knowing assent” should not preclude scrutiny of contracts ofadhesion.

I think, however, that the realissue is whether we should treat adhesion contracts as part of contract law atall.  I started teaching forty years ago,and from the beginning I had my doubts about the lines among the basic topicsof private law: tort, contract and property, or even about how private privatelaw was, and Peggy’s book in particular has led me to doubt that we should callany legal document a contract when it involves no real agreement, nonegotiation or bargaining, little understanding of terms by the non-dominantparty and no opportunity to change terms, except by walking away.  In a previous blog, about Boilerplate, I pointed to the removal ofproducts liability from the law of negligence. There, I pointed out that beforethe great 1914 Cardozo opinion in MacPhersonv. Buick Motor Co., liability for a defective product was based oncontract, while the expansion of liability away from the proof of negligencecame from the use of implied warranties, which are sort of contractual, untilRoger Traynor spoke of strict liability in a res ipsa loquitur case and, half a generation later, theRestatement of Torts Second § 402A took us off to the races. 

This is hardly the place to reviewthe immense body of writing about adhesion contracts, but I would like to pointout that much of the apology for the dominant party imposing terms seems reallyto treat the issue as a matter of property law – “It’s my widget (or software)and I can set any terms for your license [a property term] to use it.”  In effect, a no trespassing sign.  That’s all right, I suppose, but it isn’tcontract, and it should be judged by whether an owner of a thing owes a publicduty to treat those who wish to use it with some degree of fairness, ultimatelya matter of public law, like antitrust.

 None of this answers the question ofhow to deal with what Knapp calls “individual contracts,” not just consumerdeals, but franchise, employment and at least some professional servicecontracts (lawyers, brokers, etc.).  Weknow, as both Stewart Macaulay and Jean Braucher have shown us, thatindividualized review through litigation, even with a presumption in favor ofthe little guy, is economically unfeasible in most circumstance, especiallywith the Supreme Court’s rigid imposition of the Federal Arbitration Act tofavor pre-dispute arbitration clauses in contracts of adhesion.  Bob Scott points to the European Union’sregulation of consumer contracts through a Council Directive imposing strongrules favoring the consumer, but the EU member states seem more amenable to aregulatory regime than we have been in recent years, though our formercolleague and friend, Senator Elizabeth Warren’s Consumer Financial ProtectionBureau has begun to make headway. 

 I think, and have written before,that legislation or administrative regulation forbidding specific terms invarious individual adhesion transactions (examples could include choice of adistant forum, mandatory arbitration, limits on consequential damages, waiverof jury trials) is probably the best way. It is an appropriate area for state legislature, and more important,Congressional intervention, particularly because this issue has almost nothingto do with freedom of contract. 

In fact, it has almost nothing to dowith contract.

[Posted, on Peter Linzer’s behalf, by JT]