Consumer Law

Shmuel Becher Papers on Consumer Contracts

By Jeff Sovern

Shmuel I. Becher has two papers on consumer contracts.  One is Behavioral Science and Consumer Standard Form Contracts, 68 Louisiana Law Review, available at http://ssrn.com/abstract=1016002. Here's the abstract:

Asymmetric information is a serious threat to the market of consumer standard form contracts. Yet, legislatures, courts, and market-forces do not provide an adequate solution to this threat. This Article argues that a considerable part of this failure is due to the fact that important and relevant social science insights regarding consumers' behavior is widely overlooked. This gap results in the prevalence of unfair or inefficient consumer form contract provisions. More profoundly, it entails that current approaches towards consumer contracts are fundamentally flawed and bound to reach erratic and sometimes unjust conclusions.

Cognitive biases and consumers' actual behavioral patterns should have an important role - descriptively and normatively - in the law of consumer contracts. This Article explains how psychological phenomena contribute (i) to consumers' tendency not to read form contracts even when by doing so they fail to maximize their utility; (ii) to consumers' inability to evaluate correctly contract terms once they do read them; and as a result (iii) to sellers' capability of manipulating consumers.

The end point of this discussion is twofold: First, it seeks to expand our understanding regarding the inadequacy of current approaches to consumer contracts and the harm that consumers are exposed to when actual behavioral patterns are ignored. Secondly, it provides policy makers with better insights as to the way in which contract law should design the alternative approach to consumer contracts.

The second paper is Asymmetric Information in Consumer Contracts: The Challenge that is Yet to be Met, 45 American Business Law Journal, which can be downloaded at http://ssrn.com/abstract=1016010.  The abstract is as follows:

The interdisciplinary contribution to the field of consumer standard form contracts is dominated by economics. Prominent law and economics scholars argue that economic analysis of consumer contracts leads to the conclusion that, by and large, there is no need to intervene in the market for contract terms as long as these contracts are offered in competitive markets. Yet, this Article seeks to demonstrate that the model which is employed to justify this anti-intervention approach is seriously flawed. Accordingly, relying on such a model can lead policy makers to reach unjust decisions.

In light of the inadequacy of market forces to reach equilibrium where efficient consumer form contracts are being drafted, it becomes clear that some intervention in the market for consumer contract terms is necessary. However, this inference should not imply that current main paths - regulation by legislatures and judicial control over the substance of consumer form contracts - provide cost-effective avenues. Unfortunately, as this Article illustrates, sometimes they are, but more often they are not.

Thus, this Article establishes that current approaches to consumer contracts do not provide a satisfactory solution to the problems that such contracts pose to traditional contract law. The immediate result of this failure is that sellers frequently incorporate inefficient and unjust contract terms in their form contracts. Consumers, therefore, are left without adequate protection.

Full post as published by CL&P Blog on March 15, 2008 (boomark / email).