Boilerplate Symposium Part XVI: Guy Rub on Market Solutions to the Boilerplate Problem
Guy A. Rub is an Assistant Professor of Law at the Ohio State University Moritz College of Law.
Those who have notread Professor Radin’s book, Boilerplate, might be tempted to believethat they are fully familiar with the problem of boilerplate provisions instandard form agreements. While the problem of consumers who accept agreementsthey did not read is well documented, Radin’s masterpiece is so comprehensive,and analyzes the issues that boilerplate provisions raise so thoroughly, and inmany instances from a novel angle, that it makes us stop and re-think aboutthis reality and its implications. The reader is challenged to reconsider theeffects of these standardize arrangements on our democratic process, ourautonomy, and our legal system as a whole.
One of the strengthsof the book, and there are many of them, is that while it identifies and lucidlyanalyzes these problems it also acknowledges some of the advantages ofmass-market standard form agreements and therefore includes a broad discussionof possible remedies to the identified problems.
One such suggestedremedy is a market solution. Market solutions, if feasible, are in manyrespects superior to other solutions. First and foremost, they do not require acentral decision making process, which turns out to be extremely hard in thiscontext. Indeed, if market participants can effectively shop for efficient orfair contractual 
Are market solutionsfeasible? Professor Radin, I believe, is somewhat skeptical and I am at leastas pessimistic. It is well documented that consumers do not read standard formagreements and that regulatory schemes that are designed to give them theopportunity to read have little effect on their decision making process. See,e.g., Florencia Marotta-Wurgler, Will Increased Disclosure Help? Evaluating theRecommendations of the ALI’s “Principles of the Law of Software Contracts,” 78 U.Chi. L. Rev. 165 (2001). In a forthcoming article, Ian Ayres and AlanSchwartz suggest, inter alia, that reading might not be required as long as thecontract does not include unexpected terms that are worse than the consumers’expectation, and that a disclosure scheme should focus on these terms. Whilethis might be true that consumers’ awareness of such terms might suffice, onemight doubt whether, in most cases, consumers can reasonably be expected toread even a subset of simplified boilerplate terms.
Therefore, if webelieve that no regulatory scheme can make a substantial number of consumersread even a subset of the boilerplate provisions, then other solutions must beexplored to make consumers shop for contractual terms. Radin explores a fewsuch solutions, including: watchdog groups, seals of approval, rating agencies,and automatic filtering. What is common to these solutions, or a combination ofseveral of them, is that they require a third party to use some judgment toevaluate the desirability of the contractual terms. This is not an unusual wayto make shopping decisions. Many of us use websites that rate laptops before webuy one and, at least in some cities, we look at the sanitation “grade cards”on the windows of restaurants before we chose where to eat (notwithstanding DanHo’s recent research on the problems in that scheme). It is important toappreciate that currently there are very few comparable systems with respect toboilerplate terms and, as explained below, I am skeptical if more will emergein the future.
We need to firstconsider what should be the final product of this evaluation process by thethird party evaluating entity. If we believe that consumers, rationally or not,do not bother to read contractual terms as they are too complex, then we shouldreasonably assume that after this evaluation process the third party mustpresent the consumer with well-dissected and simple information. Indeed,consumers will probably not spend time reading a detailed report regarding theterms of the contract. Making a simplified report, which can be as simple as anA-B-C ranking, or even a binary decision to grant a seal of approval or not,requires the exercising of substantial discretion by the evaluating entity.This ranking process is not trivial. How should one rank an agreement thatincludes a Virginia choice of law provision and a broad warranty provision withlimitations of consequential damages? How should the rating of such a contractbe in comparison to a contract that has a choice of venue in Florida, anarrower warranty provision, and no limitations on remedies? How should theevaluating entity evaluate the inclusion of a mandatory arbitration provision?Doesn’t it depend on that entity’s perspective as to the desirability of consumerclass actions? But didn’t we try to create a market scheme that avoidsdelegating these types of decisions from the consumers to a central entity?!
Indeed, it might havebeen ideal if we could have sketched a scheme in which the consumers drive theprocess of regulation boilerplate terms. However, the same seeds that lead tothe problem in the first place—the consumers’ limited resources, limitedrationality, and sometimes pure ignorance—might make such a solutionimpracticable. Thus, if we believe that the problem of unread boilerplateprovisions is severe, other solutions, which are explored in Radin’s extensivebook, e.g., regulation through tort law, should be seriously considered.
[Posted, on Guy Rub’s behalf, by JT]