The Restatement of the Law, Consumer Contracts is now available. This Restatement seeks to clarify how the courts have applied contract law embodied in the Restatement of the Law Second, Contracts to transactions that either were not contemplated at the time the earlier Restatement was completed (and therefore not addressed), like the purchase of software licenses and all online transactions, or have become a more significant part of the economy since that time.
Consumer contracts present a fundamental challenge to the law of contracts, arising from the asymmetry in information, sophistication, and stakes between the parties to these contracts: the business and the consumers. On one side stands a well-informed and counseled business party, entering numerous identical transactions, with the tools and sophistication to understand and draft detailed legal terms and design practices that serve its commercial goals. On the other side stand consumers who are informed only about some core aspects of the transaction but rarely about the list of standard terms. These consumers enter the transaction solely for personal or household purposes without any professional understanding of its legal contours.
In restating the rules that apply contract law to consumer contracts, this Restatement relies on the common-law principles that have been guiding courts in adjudicating consumer contract disputes. Those principles were originally found in the Restatement of the Law Second, Contracts (and often reflect the statutory provisions of the Uniform Commercial Code (UCC)) but have evolved and been applied by the courts in particular and important directions that are specific to consumer contracts and are restated in this Restatement. When appropriate and consistent with the common law of contracts and the UCC, the rules of this Restatement also reflect the principles of fairness and anti-deception guiding consumer protection statutes and regulations, just as the UCC influenced provisions of the Restatement of the Law Second, Contracts.
The challenges posed by consumer contracts have heightened over the past generation as courts have adapted traditional contract law rules to consumer contracts. To track this development, this Restatement follows the traditional ALI methodology and bolsters it with an additional layer of transparency. Primarily, this Restatement follows leading court decisions, eliciting from them the guiding rationales. It clarifies the policy goals underlying the rules applied by courts and develops their conceptual implications to accord them greater clarity and coherence.
In addition, and in order to confirm that the rules identified through this primary method indeed reflect the “law in action,” the Reporters read the entire body of contract-law decisions relating to consumer contracts and to a number of the rules of this Restatement—higher-court as well as lower-court decisions, both state-court and federal-court (applying state law) cases, published and unpublished, and holdings as well as dicta, made available in online legal-research directories and from secondary sources. By looking at all the information flowing from case law and carefully organizing it according to outcomes, rationales, and influence, this methodology made it possible to examine with greater subtlety the emerging rules, their impact, and their prominence. It decreases the possibility that important or well-reasoned cases may have been missed and allows a closer consideration of the evolution of the doctrine to better understand how courts are addressing key issues.
How is the Restatement organized?
The traditional method of legal reasoning is reflected in the black letter and explicated in the Comments to the Sections of this Restatement. The comprehensive analysis of the entire case law is explained and reported in Reporters’ Notes accompanying the relevant Sections. Additionally, as the case law on consumer contracts continues to develop, this Restatement does not seek to cement the rules governing this body of law and stifle their evolution. Rather, this Restatement clarifies and unifies the principles that underlie several decades of jurisprudence in the field, establishing a coherent basis for the field’s further development.
This Restatement is organized as follows: Section 1 defines key terms, states the scope of this Restatement, and provides a roadmap of this Restatement’s structure and provisions. The first substantive rule is the provision on the adoption of standard contract terms in § 2. The rule in § 2 reflects an approach, widely embraced by a large majority of courts, that enables businesses to design the terms of the transaction, as long as they provide reasonable notice and meaningful opportunity to review the terms and to avoid the transaction. This rule is complemented by a related provision in § 3, extending similar principles to the adoption of modifications of standard contract terms.
The remaining Sections comprise a set of rules that rely on ex post scrutiny by courts to limit the risk of abuse. Section 4 restates the rules of interpretation and construction from the Restatement of the Law Second, Contracts, that are most relevant to consumer contracts, including interpretation against the drafter and the duty of good faith and fair dealing. Section 5 addresses the problem of open-ended terms, which grant the business unrestricted discretion to specify and adjust its obligations. Section 6 is the unconscionability rule, providing the framework for refusing enforcement of terms that unreasonably favor the business and unfairly surprise the consumer. Section 7 deals with the problem of deception, whereby the standard contract terms conflict with explicit affirmations or promises made to the consumer. Section 8 includes the rules regarding the legal consequences of precontractual affirmations of fact and promises. Section 9 creates presumptions of integration for standard contract terms (under the parol-evidence rule) and explains how such presumptions are rebutted by prior affirmations of fact or promises. And § 10 completes this list of anti- abuse provisions by stipulating the effects of striking terms out of contracts and related remedies.