By Aman Gebru (SJD candidate and CILP Fellow) and Diego Garcia-Ricci (SJD candidate and CILP Fellow)
How many times in your life have you clicked “I Agree” or signed a “standard” form contract without even reading it, much less knowing what you consented to? How many times today?
Increasing numbers of online activities require us to agree to a long list of “terms and conditions.” Whether it is email, a social networking site, a research database or online banking, we are required to agree to “the Ts and Cs” before proceeding. However, in most cases, customers do not read the terms of the contract and would not understand them if they did. Those terms are usually found in fine-print phrases at the bottom of the page or through a link to another website. They are drafted by the firms with which we do business and are called “boilerplate” – like the old cast-in-steel newspaper printing plates – because consumers cannot change them. They replace the law of our country with the “law” of the firm, where we no longer have the right to take companies to court when and where they harm us, and lose our rights to adequate remedies, trial by jury and class action.
Boilerplate is proliferating and the conference organized on April 1 by the University of Toronto Faculty of Law’s Centre for Innovation Law and Policy attracted a diverse audience, ranging from senior professors to curious students and even outraged victims. The purpose of the conference was to reflect on a book - Boilerplate: The Fine Print, Vanishing Rights, and the Rule of Law – by Prof. Peggy Radin from the University of Michigan Law School, who was this past term’s Microsoft Visiting Fellow at the University of Toronto. Legal scholars from four different universities and a judge of the Ontario Court of Appeal responded to Professor Radin’s major claims: boilerplate is not read and understood by consumers, and thus is not “agreed”; it undermines our democratic system; it poses important questions of justice, and courts are not carefully addressing the problems it causes.
The conference was organized into three panels that debated the claims raised by Prof. Radin. The first panel, with Professors Stephen Waddams of the U of T and Aditi Bagchi of Fordham Law School, debated Radin’s contention that boilerplate causes “democratic degradation,” permitting firms to take away precious rights given to us by our legislatures.
Waddams agreed with Radin’s claim that boilerplate is degrading our democracy. While asserting that “Nobody reads boilerplate terms except Peggy!” he said accepting such terms as valid is unjust. He rejected the usual claim of the courts that the law on boilerplate contracts is clear and therefore its hands are tied. Waddams argued that courts have available to them grounds such as public policy and abuse of contract that could be used to invalidate unjust provisions. Waddams also addressed the differences between Canadian and US laws. One common boilerplate provision forces a consumer to give up his right to a trial, making private arbitration his only remedy in the case of breach. Waddams noted that because arbitration provisions are subject to the jurisdiction of each province in Canada, and because some provinces have already used consumer protection clauses to reject arbitration provisions, that particular abuse may not be as big of a threat in Canada as it is in the US, where arbitration provisions fall within federal jurisdiction and have long been upheld by the courts.
Professor Bagchi, on the other hand, disagreed with Radin’s main claim that boilerplate degrades democracy. Radin’s case seems to be, argued Bagchi, that there is a sacred divide between the private and the public (required in democratic systems), and that boilerplate destroys this divide by taking what used to be in the power of courts and making it part of the private, contractual realm. But, Bagchi went on, parties have always had the right to negotiate terms, and there is no empirical evidence to support the claim that consumers do not know what they are consenting to. Bagchi also stated that we should wait and see the outcome of boilerplate contract transactions and ascertain whether the outcomes are just or unjust before beginning to consider it a problem.
The second panel considered how the courts are dealing with proliferating boilerplate, and included Professors Catherine Valcke and Peter Benson of the U of T and Justice Kathryn Feldman of the Ontario Court of Appeal, who is also a Visiting Judge at the Faculty of Law.
‘‘Les contrats de cyberconsommation sont presque tous illégaux !” - “Almost all Internet consumer contracts are illegal!” (V. Gautrais, (2005) R. du Notariat, 617-650)
Valcke presented a comparative analysis of the consideration of boilerplate terms in both the French and English legal systems. The French system, as it has progressed in Quebec, is more willing to strike down unfair provisions in consumer contracts than is the English common law system, judicial monitoring being a principle in the French legal system where written codes are used to fill in voids. Summarizing the state of Quebec law, Valcke referred to an article whose title says it all: ‘‘Les contrats de cyberconsommation sont presque tous illégaux !” - “Almost all Internet consumer contracts are illegal!” (V. Gautrais, (2005) R. du Notariat, 617-650).
Justice Feldman then discussed the Canadian case law on boilerplate contract provisions. She noted that the courts have clearly accepted boilerplate contracts as valid. Nonetheless, Justice Feldman noted that the leading case on fine print, Tilden Rent-A-Car Co. v. Clendenning (1978), where the Ontario Court of Appeal, finding for the consumer, stated that “We do not allow printed forms to be made a trap for the unwary,” was not dead: a recent decision in British Columbia held that an unreasonable boilerplate provision violated the “reasonable expectation standard” for contracts, citing Tilden. She stated that although courts have accepted boilerplates contracts as valid, there have been cases which applied the competence-competence principle to strike down contractual provisions that blocked the right of access to courts, such as mandatory arbitration provisions. Justice Feldman also referred to examples of consumer protection legislation that explicitly prohibit the inclusion of mandatory arbitration provisions in boilerplate contracts.
Prof. Benson offered two interesting alternatives. He agreed that boilerplate contracts delete rights in some instances, and, as a result, reactions could be classified into two. The first one is to deem boilerplate provisions invalid because no one reads them (invalidity for lack of consent). The second alternative is to embrace citizens’ trust in commercial transactions and to validate reasonable terms. Benson stated that consumers trust that commercial transactions will not include “outrageous” obligations. He seemed to prefer this alternative of validating boilerplate provisions so long as they are reasonable. Anticipating a criticism, he responded that provisions are “reasonable” so long as they do not change the core purpose of the contract or go against the spirit of the transaction.
The final panel considered “private” (non-judicial) reform and included Prof. Omri Ben-Shahar of the University of Chicago, Prof. Guy Rub of the Ohio State University and Prof. Michael Trebilcock of the U of T. Prof. Ben-Shahar called his presentation a boilerplate “apologia” and challenged two “myths” about the standard form contracts. First, he challenged the claim that boilerplate contracts are more complex than other contracts. He argued that although a “handshake contract” seems so simple, if issues arise, common law principles become applicable and the common law is more complex and scattered than boilerplate contracts. Ben-Shahar also challenged the myth that boilerplate terms could be replaced with informed consent. He argued that even in the clearest cases where scholars presume informed consent is vigourously pursued (e.g., in medical services), consumers are not fully informed. He claimed that it is impossible to replace the benefits that boilerplate contracts serve. Moreover, Ben-Shahar challenged the audience to come up with real victims of boilerplate (perhaps forgetting the two audience members who used the Q & A period to ask the speakers if they could help explain the boilerplate in their hands). He concluded with an even more provocative claim: consumers have an idea of what they are giving up but they still sign boilerplate agreements because of the lower prices they bring with them, and it makes better economic sense for consumers to take the money they save and buy insurance than for all of us to pay higher prices to cover that risk.
Prof. Guy Rub, on the other hand, focused on the “proposed market solutions” for the boilerplate problem. He cited three types of market solutions to similar problems faced by society – private, hybrid and public. Rub gave examples of the personal computer industry (private), the health standard for restaurants (hybrid) and the regulation of the bond market (public) where a separate entity provides information about unobservable characteristics of products and services thereby solving the problem of information asymmetry. However, Rub noted that even in such a system, we would be relying on a company or the government to select relevant characteristics, thus making the market solution imperfect. He further mentioned that there is a lack of demand for market solutions when it comes to boilerplate terms which may result in lack of supply of such solutions.
Prof. Trebilcock used a law and economics analysis to criticize Radin’s concern with boilerplate terms. He argued that because companies engage in repeat business, they have an incentive to be fair to consumers. He claimed that even in cases where there is no repeat business, victims of boilerplate terms have the power to inflict far more harm to the reputation of companies, and, as a result, companies do not want to victimize them. Trebilcock, however, did not discuss the cases where victims may be left without means of redress. He agreed with Prof. Bagchi that empirical research is still needed to back the claims and concerns regarding boilerplate, thus providing more grounds to achieve better solutions.
After thanking all of the speakers for their scholarly comments and criticisms, Prof. Radin provided her own reflection. Since none of the panelists read an actual boilerplate contract to the audience, she read an example provided by her niece, which purported to exempt the owner of a children’s birthday party facility from any kind of liability “whatsoever.” Radin warned of the risk of destroying the basis of our social order if boilerplate were permitted to continue to erode our democratic rights. She acknowledged that empirical research in the area is still missing, and called for researchers to take on this exciting challenge.
