Heather Daiza, ‘Wrap Contracts: How They Can Work Better for Businesses and Consumers’

In most online transactions, consumers enter into contracts without understanding or knowing the terms of the contract. Although technology has improved economic efficiency, and convenient access to low-cost or free products and services is now expected by consumers, the cost of conducting business is still high. The tradeoff for such convenience is forfeiting important rights and exchanging valuable consideration such as proprietary data. Consumers have a duty to read ontracts, but studies overwhelmingly demonstrate that consumers are not reading; and, if they are reading these contracts, they do not understand them. Traditional elements of contract formation have essentially morphed into one general issue: whether there was sufficient notice that a contract exists. As a result of the gap between consumer contracts (or ‘wrap contracts’) and contract law, consumer contracts are predominantly one-sided and esoterically unreadable, unnoticeable, and more favorable to the businesses. When consumers wish to challenge the transaction and contract terms after being dissatisfied with the product or service, consumers learn that in most circumstances, there are limited remedies available. The result is the courts’ engagement in reactive legal analysis that varies from jurisdiction to jurisdiction – and this negatively impacts both consumers and businesses. Despite the advantage businesses have over consumers, some businesses have attempted to impose terms that later turn out to be unenforceable, which is not favorable to the business either. So, businesses would also benefit from clear standards regarding contract presentation and what is considered unconscionable. The least that should be required to establish fairness and transparency is to legally specify the manner in which consumer contracts are being presented to consumers. In addition to modifying the presentation of these consumer contracts, there should be graylisted terms in non-negotiated contracts so that there is less confusion as to what type of terms are enforceable. California, being on the forefront of much of the contract law reform, can set an example for other jurisdictions to further protect consumers and businesses and provide fair, simple, and clear standards. The end goal would be for federal law to enact a similar statute that would apply to all states.

Daiza, Heather (2018) Wrap Contracts : How They Can Work Better For Businesses And Consumers, California Western Law Review: Volume 54 : No 1 , Article 14.

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