Online boilerplate: Would mandatory web site disclosure of e-standard terms backfire?

Boilerplate: The Foundation of Market Contracts

Volumn , Issue , 2007, Pages 83-94

  Hillman, Robert A ^a  

^a Cornell University Law School ^*  (United States)

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EID: 77955742979     PISSN: None     EISSN: None     Source Type: Book    
DOI: 10.1017/CBO9780511611179.009     Document Type: Chapter

References (61)

1. Robert A. Hillman & Jeffrey J. Rachlinski, Standard-FormContracting in the Electronic Age, 77 N.Y.U.L. Rev. 429, 464 (2002). In contrast, in a “browsewrap” transaction, a consumer who is downloading software or purchasing goods electronically views a screen that refers to terms that can be found elsewhere. Browsewrap, therefore, permits consumers to bypass the standard form and to “agree” to the terms without ever seeing them.
2. Jean Braucher, Amended Article 2 and the Decision to Trust the Courts: The Case Against Enforcing DelayedMass-Market Terms, Especially for Software, 2004 Wis. L. Rev. 753, 768 (“Advance disclosure in the age of computers and the Internet is simple and cheaper than printing copies and getting them into boxes.”).
3. Robert A. Hillman, On-Line Consumer Standard-Form Contracting Practices: A Survey and Discussion of Legal Implications, in Is Consumer Protection an Anachronism in the Information Economy? (forthcoming 2006).
4. My survey results show that only 4 percent of purchasers generally read their e-purchase contracts beyond price and product description. Hillman, supra note 3
5. Clayton P. Gillette, Rolling Contracts as an Agency Problem, 2004 Wis. L. Rev. 679, 687-88 (2004) (“It is unlikely that the Internet buyer will devote more time to reading text on the website than more traditional buyers devote to reviewing the terms of tangible [standard forms].”).
6. Even consumers who read their terms do not necessarily account for them in their decisionmaking. generally Russell Korobkin, Bounded Rationality, Standard Form Contracts, and Unconscionability, 70 U. Chi. L. Rev. 1203 (2003).
7. Hillman & Rachlinski, supra note 1, at 478 (footnotes omitted).
8. Lee Goldman, My Way and the Highway: The Law and Economics of Choice of Forum Clauses in Consumer Form Contracts, 86 Nw. U. L. Rev. 700, 720 (1992).
9. Hillman, supra note 3, at 12 tbl.5C.
10. Hillman, supra note 3. at 481
11. Anonymous Posting to Contracts Prof Blog, http://lawprofessors. typepad.com/contractsprof blog/2005/04/paper not plast.html (Apr. 27, 2005) (“The ‘cautionary’ functions of a contract are easier to achieve through the formalities of a written document… ” (relying on a report in BNA’s Electronic Commerce and Law journal)).
12. Hillman, supra note 3. at 485. Few empirical studies examine consumer reading of standard forms in the paper world.Most commentators merely cite or quote Todd Rakoff’s piece on contracts of adhesion for the proposition that consumers do not read standard forms
13. Todd D. Rakoff, Contracts of Adhesion: An Essay in Reconstruction, 96 Harv. L. Rev. 1173, 1179 (1983)
14. Korobkin, supra note 5, at 1217 n.45.
15. Hillman, supra note 3. The survey inquired, among other things, about the frequency of electronic contracting, the subject matter (purchases or subscriptions), the place and time of making such contracts, the extent to which participants read forms, the particular terms read, the reasons for not reading, and conditions and mechanisms that would promote reading. The survey also compared the practices of men and women and of frequent and occasional users. Respondents could select more than one response to many of the questions discussed in the survey.
16. Sixty-five percent of the respondents failed to read for this reason. Hillman, supra note 3. at 10.
17. Hillman, supra note 3. at 13. PC Pitstop’s licensing agreement promised a “consideration” to anyone who read their terms and sent an email to an address listed in the agreement. It took four months and more than three thousand downloads before anyone wrote the e-mail.
18. LarryMagid, It Pays to Read License Agreements, PCPitstop, http://www.pcpitstop.com/spycheck/eula.asp (last visited Oct. 14, 2005).My colleague Doug Kysar points out that PC Pitstop is a free site and people are therefore unlikely to read the terms of use.
19. Alan Schwartz & Louis L. Wilde, Imperfect Information inMarkets for Contract Terms: The Examples of Warranties and Security Interests, 69 Va. L. Rev. 1387, 1409 (1983).
20. Hillman & Rachlinski, supra note 1, at 470
21. Avery Wiener Katz, Standard FormContracts, 3 The New Palgrave Dictionary of Economics and the Law 502, 505.
22. There is ample evidence that some businesses seek to take advantage of consumers. Jeff Sovern, Towards a New Model of Consumer Protection: The Problem of Inflated Transaction Costs, 47 Wm. & Mary L. Rev. (forthcoming 2006) (marshaling evidence of businesses’ strategies to increase consumer transaction costs, such as by utilizing rebates). Businesses that seek to defraud customers are beyond the scope of this chapter.
23. Gillette, supra note 4, at 695.
24. Hillman & Rachlinski, supra note 1, at 471-72
25. Donnavieve N. Smith & K. Sivakumar, Flow and Internet Shopping Behavior: A Conceptual Model and Research Propositions, 57 J. Bus. Res. 1199, 1207 (2004) (“To ensure the desired shopping behavior, e-tailers should attempt to manage the shoppers’ flowstates on an individual basis. They should invest in tools that enable them to develop personal profiles of their customers, while garnering information regarding the consumers’ skills and their perceptions of the challenges presented by shopping the site.”).
26. Hillman & Rachlinski, supra note 1, at 479.
27. Hillman, supra note 3.
28. Korobkin, supra note 5, at 1234 (“‘Notice’ is a prerequisite of salience, but notice is not a sufficient condition of salience.”)
29. David Frisch & John D. Wladis, General Provisions, Sales, Bulk Transfers, and Documents of Title, 46 Bus. Law. 1455, 1495-96 (1991) (discussing courts’ varying requirements regarding “conspicuousness” in disclaimers of implied warranties under the UCC).
30. generally Christian J. Meier-Schatz, A Fresh Look at Business Disclosure, 51 Am. J. Comp. L. 691 (2003) (book review).
31. Annalee Newitz, Dangerous Terms: A User’s Guide to EULAs, Elec. Frontier Found., http://www.eff.org/wp/eula.php (last visited Oct. 28, 2005).
32. Karl Llewellyn, The Common Law Tradition: Deciding Appeals 370-71 (1960).
33. Lon L. Fuller, Legal Fictions 84 (1967).
34. According to one study, e-shoppers may be confident or apprehensive, and highly involved or apathetic. Letecia N. McKinney, Internet Shopping Orientation Segments: An Exploration of Differences in Consumer Behavior, 32 Fam. & Consumer Sci. Res. J. 408, 418-421 (2004). Such attitudes may have a significant effect on reading habits, as well as purchasing frequency.
35. Braucher, supra note 2, at 768. Few software vendors currently display their terms on their Web site. Jean Braucher, Delayed Disclosure in Consumer E-Commerce as an Unfair and Deceptive Practice, 46 Wayne L. Rev. 1805, 1806-07 (2000) [hereinafter Braucher, Delayed Disclosure] (reporting the author’s finding that 87.5 percent of software companies did not make precontract disclosures of their terms).
36. “There are design prescriptions gleaned fromempirical studies ofweb-searching behavior that claim that if in three clicks users do not find information that at least suggests they are on the right track, they will leave the site.” Gary M. Olson & Judith S. Olson, Human-Computer Interaction: Psychological Aspects of the Human Use of Computing, 54 Ann. Rev. Psychol. 491, 500 (2003). The Federal Trade Commission has promulgated rules of Web site disclosure. Federal Trade Commission, Dot Com Disclosures, http://www.ftc.gov/bcp/conline/pubs/buspubs/dotcom/index.html (last visited Dec. 21, 2005).
37. For a discussion, Christina L. Kunz et al., Browse-Wrap Agreements: Validity of Implied Assent in Electronic Form Agreements, 59 Bus. Law. 279, 302 (2003).
38. Junghyun Kim & Robert LaRose, InteractiveE-Commerce:PromotingConsumerEfficiency or Impulsivity? 10 J. Computer-Mediated Comm., Nov. 2004, http://jcmc.indiana.edu/vol10/issue1/kim larose.html.
39. Junghyun Kim & Robert LaRose. (citing DennisW.Rook&Robert J. Fisher, Normative Influences in Impulsive Buying Behavior, 22 J. Consumer Res., Dec. 1995, at 305-13).
40. Junghyun Kim & Robert LaRose. Reluctance to purchase because of fear of disclosing information diminishes when firms have good reputations, when the consumer is familiar with a site, and even when sites have “visually pleasing” layouts, including easy navigation and “professionalism.”
41. Miriam J. Metzger, Privacy, Trust, and Disclosure: Exploring Barriers to Electronic Commerce, 9 J. Computer-Mediated Comm., July 2004, http://jcmc.indiana.edu/vol9/issue4/metzger.html (“Web sites of respected organizations that were visually pleasing were rated high in trustworthiness and expertise.”).
42. Kim & LaRose, supra note 29
43. Robert LaRose & Matthew S. Eastin, Is Online Buying Out of Control? Electronic Commerce and Consumer Self-Regulation, 46 J. Broadcasting & Electronic Media 549, 559 (2002) (“[D]eficient self-regulation… may be amore important determinant of onlinebuying activity than either rational or economic expectations about the cost and convenience of Internet shopping or the personal and economic characteristics of e-commerce consumers.”).
44. LaRose&Eastin, supra note33, at 552
45. Robert LaRose, OntheNegative Effects ofECommerce: A Sociocognitive Exploration ofUnregulated On-Line Buying, 6 J. Computer-Mediated Comm., Apr. 2001, http://www.ascusc.org/jcmc/vol6/issue3/larose.html.
46. Paul Markillie, Crowned at Last, Economist, Apr. 2, 2005, at 3-4
47. Alan Mitchell, Marketers Must Face Up to the Buyer’s Side of the Coin, Mktg.Week, Apr. 14, 2005, at 32 (discussing how the Internet “turns the tables” on businesses)
48. Victoria Murphy, The Revolution That Wasn’t, Forbes, Oct. 27, 2003, at 210 (asserting that the anticipated benefits of online shopping have failed to materialize).
49. Kim & LaRose, supra note 29 (citing Sharon E. Beatty & M. Elizabeth Ferrell, Impulse Buying: Modeling Its Precursors, 74 J. Retailing 169-91 (1998)).
50. Metzger, supra note 32.
51. For example, at the moment that Iamtyping this, Iamexperiencing pain inmy shoulder and neck from looking at this manuscript on the screen. This is likely bad formy tennis.
52. Kunz et al., supra note 28, at 280-81 (“[T]he terms most commonly providing the impetus to challenge the validity of electronic standard-form agreements are dispute resolution clauses, forum selection clauses, disclaimers of warranty, limitations of liability, and prohibitions on the commercial use of the data or software available on the site.” (footnotes omitted)).
53. Magid, supra note 13 (discussing the licensing agreement that accompanies Gain Publishing’s eWallet software, which authorizes the collection of data about a consumer’s reading behavior, TV interests, and communication partners, effectively allowing the company to “follow [the transferee] around”).
54. Comb v. PayPal, Inc., 218 F. Supp. 2d 1165, 1172-76 (N.D. Cal. 2002)
55. In re RealNetworks, Inc., Privacy Litigation, No. 00 C 1366, 2000 WL 631341 (N.D. Ill. May 8, 2000)
56. Strand v. U.S. Bank Nat’l Ass’n ND, 693 N.W.2d 918, 924 (N.D. 2005).
57. See Robert A. Hillman, Debunking SomeMyths About Unconscionability: A New Framework for U.C.C. Section 2-302, 67 Cornell L. Rev. 1, 42 (1981).
58. Armendariz v. Found. Health Psychcare Servs., Inc., 6 P.3d 669, 690 (Cal. 2000).
59. Magid, supra note 13 (quoting the licensing agreement that accompanies Gain Publishing’s eWallet software).
60. Florencia Marotta-Wurgler, “Are ‘Pay Now, Terms Later’ Contracts Worse for Buyers?” Evidence from Software License Agreements (Aug. 22, 2005) (unpublished manuscript, on file with author) (noting that evidence suggests that “sellers whose boilerplate is more one-sided tend to make their contract harder to challenge by requiring buyers to unequivocally accept it”).
61. Cain et al., supra note 73, at 3 n.2 (quoting Action on Smoking and Health, Warning: History ofTobaccoManipulation ofCongress (Sept. 11, 1997), http://www.no-smoking.org/sept97/9-11-97-1.html).