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This introductory chapter first sets out the book's main focus, namely consumer contracts. It traces design features common among multiple types of consumer contracts and explores and explains the forces responsible for these design features. The discussion then turns to market forces and consumer psychology, social costs of the behavioural market failure, and toward more effective disclosure mandates.

This chapter focuses on the failures of the cellular service market. It shows how carriers design their contracts in response to the systemic mistakes and misperceptions of their customers. In doing so, they impose welfare costs on consumers, reducing the net benefit that consumers derive from wireless service. The chapter focuses on three design features common to most cellular service contracts: three-part tariffs; lock-in clauses; and sheer complexity.

More than by any other component of the reform process, the face of the German Civil Code (BGB) has been changed by the incorporation of a number of special statutes aiming at the protection of consumers. The draftsmen of the new law have thus made an effort to streamline, or harmonise, general contract law and consumer contract law. While it had been on the initial reform agenda of 1978, it had no longer been part of the brief of the Commission charged with the reform of Germany's law of obligations. The incorporation into the BGB of the special legislation concerning consumer protection was not required by any fiat on the European level. The issue is very much on the agenda mapped out by the action plan for a more coherent European contract law and it also still has to be considered by the draftsmen of the Principles of European Contract Law who, while providing a blueprint for general contract law, have so far failed to take account of the acquis communautaire in the field of consumer contracts.

This chapter focuses on the credit card contract. It identifies two features common to most credit card contracts — complexity and deferred costs. It presents a behavioural-economics theory of credit card contracts, and then argues that complexity and deferred costs represent a strategic response by sophisticated issuers to imperfectly rational cardholders. There is a behaviour market failure in the credit card industry that reduces efficiency and hurts cardholders. Regulatory intervention can help minimize the adverse effects of this market failure.

This chapter explores the early stages of the EU’s involvement in contract law and is most particularly concerned with examining the sector-specific programme of consumer contract law directives. In this respect, the internal market foundations of the positive harmonisation measures are especially highlighted. In addition, although perhaps not as visible as the legislative programme, the ECJ has made an imprint on this area of law (negative harmonisation) and the chapter analyses the judicial contribution to the development of a European contract law. The chapter also scrutinises the EU’s competence to act in consumer contract law and assesses the constitutional legitimacy of using the EU treaty’s internal market foundations for legislative measures. It reveals that the relationship between market-making and contract law might be more fragile than is normally assumed.

This book has set out to further our understanding of consumer contracts and to provide guidance for optimal regulation of these contracts. This concluding chapter begins with a summary of the preceding chapters. It then identifies three directions for future research and study: more contracts; more countries; and more regulatory strategies.

Consumer protection by European private international law rules have acquired a new dimension that has led to a new paradigm. This change arises from amendments to legislation and new ECJ case law in the field of e-commerce. Firstly, the BIR recast establishes universal rules of jurisdiction in consumer contracts. The reform has eliminated the existence of two different jurisdictional regimes in matters relating to consumer contracts in order to create a unified European system, eliminating the possibility for the national courts to apply the so-called residual jurisdiction rules. Secondly, European Court of Justice case-law concerning e-commerce transactions has shifted its focus to the conduct of suppliers instead of the traditional distinction between active and passive consumers. This new focus covers a wider range of cases in which the consumer is protected. Both changes have greatly increased the protection of the consumer when entering into an international contract. From a European perspective, this should be seen as a step further in the evolution of European consumer policy and its goals. However, more difficulties arise when explaining such an extension from an international perspective.

This chapter examines the subprime mortgage contract and its central design features. It shows that for many borrowers these contractual design features were not welfare maximizing. In fact, to the extent that the design of subprime mortgage contracts contributed to the subprime crisis, this welfare loss to borrowers — substantial in itself — is compounded by much broader social costs. A better understanding of the market failure that produced these inefficient contracts should inform the ongoing efforts to reform the regulations governing the subprime market.

This chapter deals with the topic that has assumed major importance in modern contract law, namely legislative control of unfairness. It discusses the difficulties raised by standard contracts and argues that usually the issue is not unconscionable behaviour but unfair surprise and lack of choice. It analyses the provisions of the United Kingdom's Unfair Contract Terms Act 1977, as well as the European Commission's Directive on Unfair Terms in Consumer Contracts and its possible impact on English law. In this context, the chapter discusses the conceptual problem raised by the Directive's test of unfairness, which is based, inter alia, on the concept of good faith. It also points to the need to face up to the phenomenon of mass contracting and welcomes the fact that the Directive enables and welcomes collective action by consumer organizations while expressing disappointment with its substantive requirements.

Chapter 1 sets forth the constitutional framing of European contract law, with a view to clarifying the prevalent terminology used in the debate about European contract law and elucidating a special set of Union contract law measures—referred to as the ‘hard core’ of the EU contract law acquis—which lie at the heart of the debate and underpin certain perennial themes relating to the role and the competence of the Union legislature in the field of contract law, which relate to the use of the internal market competences of Articles 114 and 1115 TFEU, the interplay between general and consumer contract law, and the piecemeal approach to matters of contract law at the European level.

This chapter presents an overview of the behavioral analysis of the law of consumer contracts. The chapter reviews various marketing techniques that build upon consumers’ bounded rationality, including the manner of presenting information, limited availability, low-ball and bait-and-switch techniques, and lenient return policies. It also analyzes several pricing techniques, such as price framing, multidimensional prices, deferred and contingent payments, and odd pricing. The chapter then turns to examining the content of consumer contracts, and highlights how pricing methods, non-salient clauses, and modifications might also exploit consumers’ limited rationality. In light of this overview, the chapter examines market-based (primarily competition and reputation) and legal solutions (primarily disclosure and mandatory regulations) to the challenges posed by consumer contracts.

This chapter discusses the current practice of American courts in resolving contract conflicts under the two Restatements, the U.C.C., and the CISG, and the various modern approaches. Part I discusses cases in which the contracting parties did not choose the applicable law. Part II is devoted to the principle and practice of party autonomy, under which parties to a multistate contract may choose, within certain limits, the law to govern their contract. It discusses the scope of party autonomy; its geographical and substantive parameters and limitations; and the formation, validity, and scope of the choice-of-law agreement, as well as how party autonomy affects presumptively weak parties, such as consumers, employees, and franchisees.

Chapter Six aims to establish ways in which neuroscientific findings can and should better inform the contract doctrine; specifically, it considers challenges to the doctrine of consent. This chapter proceeds by first describing the consent calculus in contract, focusing particularly on the role of boilerplate language in both arm's length and consumer transactions. Seminal cases pertaining to form contracting are used to navigate the common law consent doctrine, especially the modern “clickwrap” nature of consumer consent. The dispositionist nature of contracts is exposed and it is argued that situationism offers a more robust model based on what neuroscience reveals about human agency. The chapter, then analyzes consent in terms of neuroeconomics, explaining the role adaptive mechanisms and emotions play in our decision-making process. The chapter concludes as the consent doctrine stands, many of its assumptions about human agency can be exploited in ways that fail to meet the doctrine’s normative goals.

This chapter examines how Malaysian contract law deals with extremely one-sided, onerous, or otherwise unfair terms, such as exclusions or limitations of liability, penalty clauses, or restraint of trade clauses. It discusses the overt judicial control of such terms under specific legislation, sometimes targeted exclusively at standard terms or consumer contracts. It also analyses how the Malaysian courts have exercised a more indirect control by employing traditional general contract law doctrines, such as contract formation, interpretation, or the rules on procedural fairness, in order to protect parties against the imposition of unfair terms. A number of hypothetical clauses are analysed to illustrate how Malaysian courts regulate unfair contract terms in practice, standard terms, consumer contracts, exemption clause

This chapter examines the law of the Philippines on contractual interpretation and the regulation of unfair terms. With regard to the former, it discusses two closely connected issues in defining the contents of contracts: the approaches adopted in interpreting the meaning of agreed contractual terms, as well as to what extent additional terms are implied to supplement the express terms. It discusses the underlying philosophy of interpretation with regard to the dichotomy of ‘objective’ and ‘subjective’ approaches; it details the various interpretative aids, such as customs, usages, the commercial background, good faith, and the negotiations of the parties; and it shows how the law of the Philippines resolves the tension between literalist and contextualist approaches to interpretation. With regard to the latter, the chapter details the various responses available to tackle extremely one-sided, onerous, or otherwise unfair terms, such as exclusions or limitations of liability, penalty clauses, or restraint of trade clauses. It discusses the overt judicial control of such terms under specific legislation targeted at terms in consumer contracts. Attention is also paid to the enforcement mechanisms for measures of consumer protection. The chapter further analyses how the courts have exercised a more indirect control by employing traditional general contract law doctrines, including the rules on procedural unfairness, in order to protect parties against the imposition of unfair terms. A number of hypothetical scenarios illustrate how the courts in the Philippines deal with issues of contractual interpretation and gap-filling and how they regulate unfair terms in practice.

This chapter focuses on individually tailored contracts commercial parties negotiate for themselves. These contracts are distinguished from consumer contracts, where liberal rules of interpretation might make more sense. The chapter also distinguishes between liberal contextualism and a conservative textualism.

This chapter examines how Indian contract law deals with extremely one-sided, onerous, or otherwise unfair terms, such as exclusions or limitations of liability, penalty clauses, or restraint of trade clauses. It discusses the overt judicial control of such terms under specific legislation, sometimes targeted exclusively at standard terms or consumer contracts. It also analyses how the Indian courts have exercised a more indirect control by employing traditional general contract law doctrines, such as contract formation and interpretation or the rules on procedural fairness, in order to protect parties against the imposition of unfair terms. A number of hypothetical clauses are analysed to illustrate how Indian courts regulate unfair contract terms in practice.

This chapter examines the law of Vietnam on contractual interpretation and the regulation of unfair terms. With regard to the former, it discusses two closely connected issues in defining the contents of contracts: the approaches adopted in interpreting the meaning of agreed contractual terms, as well as to what extent additional terms are implied to supplement the express terms. It discusses the underlying philosophy of interpretation with regard to the dichotomy of ‘objective’ and ‘subjective’ approaches; it details the various interpretative aids, such as customs, usages, the commercial background, good faith, and the negotiations of the parties; and it shows how the law of Vietnam resolves the tension between literalist and contextualist approaches to interpretation. With regard to the latter, the chapter details the various responses available to tackle extremely one-sided, onerous, or otherwise unfair terms, such as exclusions or limitations of liability, penalty clauses, or restraint of trade clauses. It discusses the overt judicial control of such terms under specific legislation targeted at standard terms and consumer contracts. Attention is also paid to the enforcement mechanisms for measures of consumer protection. The chapter further analyses how the courts have exercised a more indirect control by employing traditional general contract law doctrines, including the rules on procedural unfairness, in order to protect parties against the imposition of unfair terms. A number of hypothetical scenarios illustrate how the Vietnamese courts deal with issues of contractual interpretation and gap-filling and how they regulate unfair terms in practice.

This chapter examines the Indonesian law on contractual interpretation and the regulation of unfair terms. With regard to the former, it discusses two closely connected issues in defining the contents of contracts: the approaches adopted in interpreting the meaning of agreed contractual terms, as well as to what extent additional terms are implied to supplement the express terms. It discusses the underlying philosophy of interpretation with regard to the dichotomy of ‘objective’ and ‘subjective’ approaches; it details the various interpretative aids, such as customs, usages, the commercial background, good faith, and the negotiations of the parties; and it shows how Indonesian law resolves the tension between literalist and contextualist approaches to interpretation. With regard to the latter, the chapter shows that Indonesian contract law has only limited responses available to tackle extremely one-sided, onerous, or otherwise unfair terms, such as exclusions or limitations of liability, penalty clauses, or restraint of trade clauses. It discusses the overt judicial control of such terms under specific legislation, targeted exclusively at standard terms in consumer contracts. Attention is also paid to the enforcement mechanisms for measures of consumer protection. The chapter further analyses how the Indonesian courts have exercised a control by employing traditional general contract law doctrines such as good faith and equity, including the rules on interpretation, in order to protect parties against the imposition of unfair terms. A number of hypothetical scenarios illustrate how the courts in Indonesia deal with issues of contractual interpretation and gap-filling and how they regulate unfair terms in practice.