Toward a Fairer Model of Consumer Assent to Standard Form Contracts: In Defense of Restatement Subsection 211(3)

Abstract: Standard form contracts permeate our very existence, and now even include contracts we assent to online by way of "clickwrap" and "browsewrap" methods. Notwithstanding the ever-increasing presence and complexity of such standard form contracts, both offline and online, the law of contracts in this area has remained fairly static since before the nineteenth century. The only meaningful salve to the problem of misinformed assent to onerous clauses in standard form contracts thus far has been the unconscionability doctrine, but that doctrine tends to be reserved for the harshest and severest terms. Therefore, a new tool is needed for courts to protect consumers' interests. Section 211 of the Restatement (Second) of Contracts creates such a tool. Subsection 211(3) provides: "[w]here the [merchant] has reason to believe that the [consumer] would not [assent] if he knew that the writing contained a particular term, the term is not part of the agreement." This rule has thus far been largely rejected and marginalized by courts and commentators as running afoul of the traditional duty to read, but in fact the rule is quite sensible. It is squarely grounded in the objective theory of contracts, which provides that a party's manifestations of assent are taken to mean what a reasonable party would think they mean. It also advances contract law by taking into account recent research into the cognitive limitations of human decisionmaking. Businesses should not be allowed to unfairly exploit consumers' limitations by inserting grossly unfair terms into their contracts. Although the unconscionability doctrine is an important fail-safe protecting consumers entering standard form contracts, subsection 211(3) is also needed to resolve the dissonance between the fictional duty to read on the one hand, and the reality of cognitive limitations and the objective theory of contracts on the other. INTRODUCTION Standard form contracts are nothing new. Neither are articles about standard form contracts.1 However, notwithstanding the voluminous treatment of standard form contracts in the literature, there is no uniform line of thought regarding the appropriate treatment of such contracts. Professor Todd Rakoff thus correctly observed that "the subject [of adhesion contracts] is inherently intractable."2 Put another way, since the problem of form contracts was first addressed, "contract law has died,131 and been resurrected,141 reconstructed,151 and transformed.161 Doctrines of adhesion,[7] reasonable expectations,181 and unconscionability[9] have all been advanced."10 But the battle continues.11 And the battle has been fought on an increasingly complex battlefield. Form contracts, once the purview of Industrial Revolution-era manufacturing companies and insurance companies, have now permeated virtually all industries and trades, and have also been wholeheartedly embraced by merchants in the online contracting environment.12 As Professors Robert Hillman and Jeffrey Rachlinski recently noted, "[t]he Internet is turning the process of contracting on its head."13 Through a few clicks of the mouse, consumers are agreeing in record numbers to unfavorable, one-sided terms in adhesion contracts. These include many of the standard favorite terms of businesses, such as arbitration clauses, damage limitations, and warranty disclaimers. But, in the online and software contract context, it also increasingly includes new creations such as spyware clauses14 and severe license restrictions.15 And, in spite of the breadth of the legal literature on such form contract terms, a clear resolution is still elusive. Contract law has always assumed that consumers have a duty to read the contracts which they sign and are thus bound by all terms in such contracts, regardless of their actual failure to read or understand such terms.16 The primary principle applied by courts to protect consumers from one-sided terms to which they did not subjectively agree is the unconscionability doctrine. …