Boilerplate

The Fine Print, Vanishing Rights, and the Rule of Law

Margaret Jane Radin

• Publisher: Princeton University Press
• Year: 2012
• ISBN:
  9781400844838
• Topic: Diritto
• Subtopic: Diritto contrattuale

Why the increasing use of boilerplate is eroding our rights Boilerplate—the fine-print terms and conditions that we become subject to when we click "I agree" online, rent an apartment, enter an employment contract, sign up for a cellphone carrier, or buy travel tickets—pervades all aspects of our modern lives. On a daily basis, most of us accept boilerplate provisions without realizing that should a dispute arise about a purchased good or service, the nonnegotiable boilerplate terms can deprive us of our right to jury trial and relieve providers of responsibility for harm. Boilerplate is the first comprehensive treatment of the problems posed by the increasing use of these terms, demonstrating how their use has degraded traditional notions of consent, agreement, and contract, and sacrificed core rights whose loss threatens the democratic order.Margaret Jane Radin examines attempts to justify the use of boilerplate provisions by claiming either that recipients freely consent to them or that economic efficiency demands them, and she finds these justifications wanting. She argues, moreover, that our courts, legislatures, and regulatory agencies have fallen short in their evaluation and oversight of the use of boilerplate clauses. To improve legal evaluation of boilerplate, Radin offers a new analytical framework, one that takes into account the nature of the rights affected, the quality of the recipient's consent, and the extent of the use of these terms. Radin goes on to offer possibilities for new methods of boilerplate evaluation and control, among them the bold suggestion that tort law rather than contract law provides a preferable analysis for some boilerplate schemes. She concludes by discussing positive steps that NGOs, legislators, regulators, courts, and scholars could take to bring about better practices.

PART I

Boilerplate, Consumers’ Rights, and the Rule of Law

CHAPTER ONE

An Overview of Worlds A and B

ONCE UPON A TIME, it was thought that “contract” refers to a bargained-for exchange transaction between two parties who each consent to the exchange. This once-upon-a-time story is the ideal of contract. The story of bargained-for exchange represents contract as it is imagined to be in a world of voluntary agreement, the world I am calling World A (for Agreement). In this book I am referring to contracts, such as the one between Sally and John (in the invented story in the prologue), that actually look like the free exchanges imagined in liberal theory as contracts of World A.* This is still how many people understand contract (with good reason). And it still animates contract theories. Contract is supposed to involve consent by each party to give up something of his or her own to obtain something he or she values more. Sally values the bicycle more than she values her $120; John values $120 more than he values his bicycle. Contract, at least in this paradigm case, is typified by a process of negotiation that results in a bargain satisfactory to both parties. The paradigm case involving negotiation is not the only kind of contract that can be valid under the basic commitment to freedom of contract; but, as we shall see, the elements of the paradigm case involving a bargain and free choice or consent are indispensable.

Once upon a time, it was also thought that when a contract is broken, there will necessarily be a remedy available to the aggrieved person. If Sally hands over her $120 but John fails to deliver the bicycle, Sally can bring John to court in a place convenient for her, and ask that John be found in breach of contract and have the court order John to make it up to Sally for his breach. Depending on the circumstances, the court will simply order John to refund Sally’s money, or perhaps even to hand over the bicycle. What is important to understand is that the ideal of contract has as an important component the idea that if a contract is breached, there must be the opportunity to seek a remedy. The aggrieved party must have her day in court, and so must the party who allegedly breached. Courts, as an arm of the state, enforce contracts so that all of us may have confidence in dealing with one another. In order for the system of contract to function, there must be a viable avenue for redress of grievances in cases where the bargain fails; otherwise the trust that the ideal of contract imagines would be weakened and perhaps collapse.

The Stories of the Prologue: Issues for the Basis of Contract

The Vanishing Right to Jury Trial

Tonya and Garrit’s father both attempted to bring lawsuits to try their grievances before a jury. By using paperwork to shunt them to arbitration, the companies automatically cancelled their right to a trial before a jury of their peers. Jury trial vanishes in such cases, even if the claimant has not been informed that this will happen—in spite of the fact that most people don’t know what arbitration is and have no idea that their right to jury trial is so fragile. In arbitration, the claimant must appear instead before one or more arbitrators, who are widely believed to be more favorable to businesses. No public record is made of the arbitrators’ decision, and no class actions are permissible.

The holding in Garrit’s father’s case meant that henceforth in his state, at least, all parents can sign away the remedial rights of their children as well as their own. It also meant that almost all tour companies would include this clause in their pretrip paperwork in the future, as indeed they now do. Companies are also trying the same thing in other states. Although other states are not bound by one state’s holding, judges in other states often take opinions of sister states into account.

The appellate court in Tonya’s case recited governing law in its jurisdiction suggesting that Tonya could have overturned the effect of the paperwork on her right to try her civil rights claim in federal court before a jury of her peers if she could have proved that she was not able to obtain some other job that did not force her to sign this paperwork. (It seems judges in many jurisdictions actually think that a $7,000-per-year wage earner can look around for another job with less onerous clauses in its paperwork, and perhaps find such an employer if she does look.) Dismissals based on paperwork shunting those with grievances to arbitration are routinely upheld, though in rare cases (as I will describe later in this book) some lucky claimant may be able to overcome the loss of rights accomplished by the paperwork.¹

It is reasonable to infer that many claimants simply do not try to challenge the paperwork. Most people do not know what an arbitration clause is. Moreover, given the state of the law, lawyers would be remiss if they did not inform a client who is subject to an arbitration clause that very likely he or she should not bother to bring a wrongful death action or a civil rights action in federal court, unless there is something very special about the case.

Once one business firm finds that courts will enforce dismissal of suits such as these, other businesses will use the same forms. Terms that are favorable to businesses will spread, because they serve the firms’ economic interests. Any term that a court (in a rare case) finds questionable will disappear. All of which means that most people in Tonya’s position would indeed be unlikely to find another employer that did not use the same type of waiver of legal grievance rights that she encountered, or one even more robust. Likewise, most parents wanting to avoid the unhappy position of Garrit’s father in case an unimaginable loss were to befall them would be unlikely to find another tour company that did not impose an arbitration clause.

Making Redress Remote

A legislature provides for class actions when it intends for people in its jurisdiction to have the opportunity to seek a remedy, even if the harm to each person is too small to make it worthwhile for that individual to bring suit alone. Class action remedies also are intended to deter companies from reaping large profits by unjustly extracting small overages from large numbers of customers. In the case of Jeffrey K., it is reasonable to infer that the legislature’s intent was thwarted by a choice of forum/choice of law clause that forced the plaintiff into another state.

Another means whereby a choice of forum clause can effectively deny a remedy to injured parties is by limiting claimants to bringing suit in a jurisdiction that is very far away.² Federal courts are very favorable to choice of forum clauses, based on a famous US Supreme Court case of 1991, Carnival Cruise Lines v. Shute,³ which validated a choice of forum clause forcing injured claimants to bring suit in Florida. In that case, Mrs. Shute was injured on a cruise ship and tried to sue the company in her home state of Washington. The Shutes did not sign anything. The choice of forum clause that prevented Mrs. Shute from suing in Washington was in fine print on the last page of her ticket, which she received after booking the cruise, and which was nonrefundable. Nevertheless, the reasoning upholding the choice of forum clause was based on the assumption that the claimants had willingly accepted the clause. In their enthusiasm for choice of forum clauses, federal courts routinely cite Carnival Cruise as precedent for upholding choice of forum clauses, even in situations where consent by recipients is problematic.

Escape from Fault

Michael J., who was injured by the rented Bobcat, was subject to an exculpatory clause. This type of clause waives (cancels) the usual legal rights an injured party would have against a company that was at fault in causing the injury, thus exculpating the company from its own fault. An exculpatory clause goes even further than an arbitration clause, because instead of merely depriving the injured party of a remedy in court, it deprives the injured party of all remedies. Many tour companies, as well as many other proprietors of activities such as camping trips or physical fitness training, are using exculpatory clauses instead of, or in tandem with, arbitration clauses. At this point, parents wanting to escape what happened to Garrit’s father if such a terrible loss were to befall them would be unlikely to find a tour company, or a sports camp, or a training facility, that did not have a clause exculpating itself from liability for any harm suffered by the child while participating in its program, no matter how that harm was caused.

In some cases a court can hold an exculpatory clause unenforceable (as I will describe later in this book).⁴ In such a case, an injured party would have to litigate, perhaps all the way to a state supreme court or a federal appellate court, before knowing whether he would have the right to hold the company responsible for his injury if he could prove the company was at fault. A litigant could only succeed in achieving this result if he could afford the time and money to litigate or, more likely, if the situation were extreme enough that lawyers who work on a contingency fee basis were willing to take the case. We may safely assume that in cases where the injury is not serious enough (or the injured party is not rich enough), exculpatory clauses will prevail. In general, in situations without the kind of special circumstances that might ultimately persuade a court that the case is exceptional, many people injured through the fault of a business they deal with are precluded by the company’s paperwork from holding the company legally accountable.

Alternative Legal Universes Created by Forms

Like the injured parties in the stories of the prologue, most of us are used to receiving paperwork (or its electronic equivalent) during transactions. We are given forms to sign when we rent an automobile or an apartment, and piles of forms to sign when we buy an automobile or a house. Most of us don’t read them, and most of us wouldn’t understand them if we did. We are given forms to sign when we get a job, when we join a gym, when we send our kids to camp. We click “I agree” to buy products or services on the Internet, after being shown lists of fine-print terms that we don’t read. We receive forms even though we don’t sign them or click “I agree,” such as the fine-print terms of service interior to websites, or the fine print on everything from parking lot tickets to theater tickets to sports events tickets. Illustrations of some of these commonly used forms are shown on pages 117–119.

Arbitration clauses, choice of forum/choice of law clauses, and exculpatory clauses, such as those that figured in the stories in the prologue, are common components of the alternative legal universes created by firms. Most readers, I expect, are subject to one or more of them. But there are many other ways in which fine print has the effect of deleting recipients’ legal rights. One common provision limits remedies for losses caused by a defective product or service to the replacement, repair, or reimbursement for the cost of the product itself, thus eliminating damages for injurious consequences of the product’s failure. Another deletes (“disclaims”) warranty coverage. Another says the firm will continue billing you forever for whatever you have purchased unless you notify it that you wish to terminate. Yet another waives recipients’ user rights in information not protected by the law of intellectual property and otherwise free for public use; and still another waives information privacy rights. (These practices are widespread in the US. Countries other than the US do not make as ubiquitous use of such clauses against consumers. Later in this book I will consider some solutions to boilerplate issues that prevail outside the US.)

In short, if you are like most US consumers, you enter into “contracts” daily without knowing it, or at least without being able to do anything about it. The purported contracts come in the form of paperwork that you receive and are asked to sign, or that contain terms supposedly binding without your signature, and sometimes even without their your knowing this is happening. This paperwork is boilerplate, or, less colloquially, standardized form contracts. These are the contracts—the purported contracts—that belong to World B.

Standardized form contracts, when they are imposed upon consumers, have long been called “contracts of adhesion,” or “take-it-or-leave-it contracts,” because the recipient has no choice with regard to the terms.⁵ “It’s my way or the highway,” says the firm to the recipient. Such paperwork is often called boilerplate, because, like the rigid metal used to construct steam boilers in the past, it cannot be altered. I have been calling boilerplate “paperwork” because “paperwork” is a neutral term, but you will have noticed that courts most often treat boilerplate as if it were a contract. The law considers boilerplate to be a method of contract formation. World B is the expanding universe of purported contracts that don’t look or act like those of World A.⁶ World B is the world of boilerplate.

Some of you may belong to firms that impose boilerplate on their customers. But even if you are the CEO, you are subject to boilerplate from other firms, just like everyone else. I myself am subject to many of these clauses. Even though I know more about their legal significance than most people, I can’t do anything about them, so, just like almost everyone else, I don’t read them.⁷ I must, like everyone else, accept them or forego the transaction. I can’t employ a financial manager for my retirement account without accepting an arbitration clause. I can’t use iTunes without clicking “I agree” to its terms of service. I can’t proceed with an exercise class until I’ve signed a form that exculpates the provider for any injury to me no matter how caused. Once I tried to tell a person presenting paperwork to me that the exculpatory clause would be unenforceable if her studio harmed me intentionally or through gross negligence rather than mere negligence. I took out a pen and offered to emend the clause, but the person presenting the form would not hear of legal niceties. It was take it or leave it.*

Varieties of World B (Purported) Contracts

Here is an overview of the varieties of World B contracts we are seeing in practice. (I will stop calling them “purported” contracts, but please understand that labelling something a “contract” does not necessarily make it one.)

1. Standardized Adhesion Contracts of the traditional variety: An example is the parking lot ticket. (See examples on page 117.) It’s a contract of adhesion because either you “adhere” to it by taking hold of it and then driving your car into the lot, or else you don’t park there. The ticket often says, “This contract limits our liability. Read it.” Hardly anyone does so. The online analogue is clicking on-screen buttons to signify receipt of contractual terms. By clicking, it says, you are saying that you’ve read the terms and “agree” to them. It is doubtful that many people are truthful in saying this, though, because very few people read them.*

2. Offsite Terms: Refers to terms that are a part of standardized adhesion contracts but that are not stated in the document you can see. An example is the airline ticket. It says you are bound by the set of terms that make up the airline’s tariff and that you can find them somewhere else—in the airline’s office, perhaps, or online. Who knows what background legal rights have been given up in favor of the airline?

3. “Shrink-wrap Licenses”: So called because they originated with the shrink-wrapped commercial software products that you buy in a box. The idea is that if you break the wrapper you are bound to the terms that are printed below it. By tearing cellophane you have “agreed” to a bunch of boilerplate.

A later variant, sometimes called “shrink-wrap of the second kind,” seeks to bind you to terms that you can’t see until you run the software and look at the first screen. An online analogue to the standard adhesion contract, sometimes called “click-wrap,” is also considered shrink-wrap of the second kind; it refers to terms that you adhere to by clicking a box onscreen that says “I agree.” Here the recipient affirms that she has read the terms—but, again, most likely she has not.

4. “Rolling Contracts” (also called “money now, terms later”): Perhaps the earliest example of this variant is the insurance contract. The agent sells you a policy, but when the pages of fine print arrive, they contain (if you read and can understand them) a lot of exclusions and wrinkles that you didn’t know about. You are still bound to the purported contract, even though you signed it before the terms were delivered to you.

Another example is ordering a product by telephone or online. You select the product and give the seller your credit card information, the company charges your card, receives the funds, and ships the product. When the product arrives, you open the box and a piec...