Standard Form Contracts

 

Standard Form Contracts are agreements that employ standardized, non-negotiated provisions, usually in preprinted forms.  These are sometimes referred to as “boilerplate contracts,” “contracts of adhesion,” or “take it or leave it” contracts. The terms, often portrayed in fine print, are drafted by or on behalf of one party to the transaction – the party with superior bargaining power who routinely engages in such transactions.  With few exceptions, the terms are not negotiable by the consumer.

Standard form, business-to-consumer contracts fulfill an important efficiency role in the mass distribution of goods and services. These contracts have the potential to reduce transaction costs by eliminating the need to negotiate the many details of a contract for each instance a product is sold or a service is used. However, these contracts also have the ability to trick or abuse consumers because of the unequal bargaining power between the parties.  For example, where a standard form contract is entered into between an ordinary consumer and the salesperson of a multinational corporation, the consumer typically is in no position to negotiate the standard terms; indeed, the company’s representative often does not have the authority to alter the terms, even if either side to the transaction were capable of understanding all the terms in the fine print.  These contracts are typically drafted by corporate lawyers far away from where the underlying consumer and vendor transaction takes place. 

The danger of accepting unfair or unconscionable terms is greatest where these artful drafters of such contracts present consumers with attractive terms on the visible or “shopped” terms of most interest to consumers, such as price and quality, but then slip one-sided terms benefiting the seller into the less visible, fine print clauses least likely to be read or understood by consumers.  In many cases, the consumer may not even see these contracts until the transaction has occured.  In some cases, the seller knows and takes advantage of the knowledge that consumers will not read or make decisions on these unfair terms.

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