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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 presents an overview of the behavioral analysis of contract law. It first presents a behavioral theory of contracts that highlights the role of values such as promise-keeping and trust, and examines how the role played by those values depends on whether the contract is a product of negotiation or not (i.e., a standard-form contract). The chapter then discusses specific issues in contract law from a behavioral viewpoint—including pre-contractual negotiations (with special emphasis on the role of default rules and other reference points), contract formation, contract interpretation and supplementation, performance, and remedies for breach of contract, including agreed-upon remedies.

This chapter discusses the development of the law of suretyship. It identifies legislative and judicial changes in the law of suretyship and changes in the operation of the law. It argues that the move towards standard-form contracts has rendered large parts of the law redundant, even if not formally repealed. Moreover, there are signs that the kernel of the law may no longer be the ancient law of Justinian, but a new law whose heart will be present-day public policy.

This chapter questions the usefulness of contract law’s core structural element—the consensual nature of contractual obligation. It examines the seminal US Supreme Court case of Carnival Cruise v Shute, as well as a number of decisions by US Judge Easterbrook dealing with ostensibly apposite provisions of the Uniform Commercial Code. It persuasively shows that consent in modern contract law is not the normative paradigm that sits at the centre of classical contract law theory, but is much more diminished in its purity, with lesser quality consent being the predominant form that satisfies the requirements for contractual obligation.

This chapter focuses on the exploitation of consumers’ loss aversion by suppliers. One example is the effect of different framings of price and other attributes on consumer decisions (for example, cash discounts versus surcharges for credit). The chapter also examines how the limited availability of goods influences purchase decisions. It argues that escalation of commitment is one explanation for consumers’ failure to read standard-form contracts, and for the effectiveness of “low ball” and “bait-and-switch” marketing techniques. It explains why liberal return policies are a double-edged sword, given customers’ endowment effect. Finally, it draws attention to how suppliers exploit consumers’ status quo and omission biases to the suppliers’ advantage.

This chapter explores some lines of development in contract law after 1600. First there were questions flowing from the decision in Slade’s Case – the pleading formulae known as the ‘common counts’ in indebitatus assumpsit were quickly settled and the perjury problems after the disuse of wager of law were dealt with in the Statute of Frauds 1677. Attempts to rationalize consideration in the eighteenth century were unsuccessful save that it became distinct from the requirement of an intention to be bound. The chapter traces the history of privity of contract and of the various attempts to give remedies to third-party beneficiaries. It then discusses the implication of terms into contracts, the difference between conditions and warranties, exclusion clauses, and the problems occasioned by standard-form contracts.