May 1, 2025 Orit Gan
A fascinating new article by Andrew Keane Woods examines contracts in the digital age. These contracts are society-wide in scope, and their scale surpasses other massive contracts we use. Moreover, they set the rules for digital society and govern the digital world. Furthermore, they determine constitutional rights such as privacy rights, speech rights and Fourth Amendment rights.
The internet, digital platforms, and social media are heavily governed by private law. However, courts generally apply contract law to enforce these contracts without due regard for their public aspects, as outlined above. Courts emphasize procedural fairness and assent rather than substantive justice and the contract’s social impact. Furthermore, courts usually allow parties to contract away their public rights, such as the right to sue in a court of law, and regularly enforce liability waivers. Moreover, courts commonly overlook the public interests, social costs, and harms these contracts entail, and only rarely invalidate contracts on grounds of public policy. Similarly, scholars and reformers mainly focus on procedural fairness and mutual assent, for example by promoting better disclosure, while neglecting the public aspects of these contracts.
The article‘s main argument is that the contracts described carry significant social and public consequences, and therefore should not be merely enforced as private deals. In other words, the article criticizes the inattention of courts, reformers and scholars to the public costs and social harms stemming from these contracts, as they are more than contracts between two parties.
To address these social harms, the article suggests three reforms: first, rather than the contractarian model of governance, public law should be less willing to defer to private contracts. Second, legislatures should use mandatory rules to place substantive limits on social contracts causing social harms. Third, judges should decline to enforce contracts inconsistent with public policy, policing the social harms caused by the contracts.
This must-read article raises interesting questions. First, the notion that contract law is not purely private law is not new. As scholars noted, contract law is a social phenomenon with public aspects and consequences. Therefore, are contracts in the digital age a new phenomenon or an old one in digital cloths? In other words, given that many contracts have always had public implications, are these contracts different only in scale, magnitude, and degree? Are contracts today simply further evidence of the public nature of contract law and the urgent need for contract law to account for it? For example, as the article notes, hush contracts – though not digital contracts – have a social impact and are of public concern. Nevertheless, Professor Woods argues that contracts in the digital age are fundamentally distinct. The characteristics described in the opening paragraph render them unique and different from any other contract. This makes the need for the law to address them as social contracts more acute.
Second, and relatedly, this article illustrates the intricate relationship between private and public law. There is no clear divide between private law and public law: Contract law is not entirely private and encompasses public and social elements. Professor Woods rejects simplistic binaries offering instead a complex, nuanced and contextual picture of contract law. Rather than strict private-public dichotomy, Professor Woods sees it as a matter of delicately balancing between private law and public law and flexibly setting their borders.
Third, the article debates the preferred reform: legislation or judicial intervention? What state actor is better suited to police the social harms caused by these contracts? As Professor Woods shows, there are advantages and disadvantages,costs, and benefits to each of the reforms. Given the profound social costs associated with digital contracts, it may be necessary for both courts and legislators to collaborate in mitigating these social harms.
This article is not only a significant contribution to the literature on the publicness of contract law but also a wake-up call for reformers, legislators, regulators, judges, and scholars to address the social harms of the new social contracts.
Apr 8, 2025 Aditi Bagchi
It is not every day that we are presented with a new theory of private law that invites us to see the project of private light in a new way.
In a move familiar to philosophers of contract and tort but perhaps surprising to American scholars of those subjects from other traditions and methods, Hanoch Dagan and Avihay Dorfman take “private law” as the operative unit of analysis. Like theories of corrective justice, they aim to identify foundational principles that apply across contract and tort. The language of “relationality” is also familiar from the corrective justice literature. However, Dagan and Dorfman offer us a new way to understand the moral demands that flow from ordinary relationships.
Corrective justice theories conceive of the relationships whose justice private law aims to repair in thin terms. The relationships at issue in corrective justice typically consist of only fleeting interactions. Dagan and Dorfman are more ambitious in the role that they assign private law: It should aim to realize substantive equality between people. It should do this by demanding that people show “reciprocal respect for substantive equality.” Equality understood in this way does not require that everyone has the same income or resources. But relational equality requires that we relate to each other as equals in a more robust—and demanding—sense than does the formal equality of corrective justice. Dagan and Dorfman argue that, when we deal with other people, we must take seriously what they need for self-determination and we must mutually support each other in securing the conditions for self-determination. The justice of even a fleeting interaction may turn on the ground projects of the people involved, and what they need from each other.
Two related features of their account are especially important departures from most existing accounts of private law. First, in their view, principles of equality do not just constrain the state in its allocative role; substantive equality, as they understand it, binds individuals horizontally and informs how we may treat each other independent of distributive justice. Second, because relational justice is strongly horizontal and does not rely on the state and its obligations to promote justice to explain the duties of private law, relational justice does not depend on any particular state. In fact, it constrains states and binds individuals acting across state boundaries.
One of the most interesting examples against which we can test the intuitive appeal of relational justice is the minimum wage. It is likely that raising the minimum wage results in some increase in unemployment. What relevance does this have to how we set the minimum wage? On a view, like my own, that regards contract regulation as a means by which we aim to give people access to the resources they need to pursue their various life projects, the unemployment effects of a minimum wage are cautionary. Where or when it is really the case that the most vulnerable social group fares worse under a proposed minimum wage, that expected effect counsels against the policy. By contrast, for Dagan and Dorfman, it is inherently wrongful for an employer to pay an employee a wage that is inadequate (locally and contingently understood) and the primary purpose of a minimum wage is to prohibit the relational wrong that very low wages represent. On this view, the internal morality of contract law (or more broadly, private law) demands a decent wage as a matter of horizontal justice between employers and employees, regardless of its economic consequences. Whether one is ultimately persuaded that this is the right way to think about the minimum wage, contract or private law, their account sets forth a powerful new way of understanding what we are doing in these domains, and how we might do it better.
Feb 28, 2025 David Hoffman
Erik Encarnacion,
Section 1981 as Contract Law, available at
SSRN (Jan. 10, 2025).
Erik Encarnacion’s Section 1981 as Contract Law presents a striking claim: 42 U.S.C. § 1981, a statute primarily understood as a piece of federal antidiscrimination law, is, in fact, a foundational component of contract law in the United States. Section 1981, originally part of the Civil Rights Act of 1866 and later amended in 1991, prohibits racial discrimination in the making, performance, modification, termination, and enforcement of contracts. Encarnacion argues that this provision does not merely sit adjacent to contract law as a regulatory constraint; rather, it is an intrinsic part of contract law itself. This conceptual reframing has significant implications for legal theory, doctrinal teaching, and the broader understanding of how contract law operates on the ground, and I recommend the paper to you.
Encarnacion’s thesis rests on two primary claims. First, he makes a conceptual argument that Section 1981 should be recognized as part of contract law because it directly governs the formation, enforcement, and modification of contracts. He traces its origins to the Civil Rights Act of 1866, which sought to dismantle the Black Codes—state laws that restricted the contractual and economic freedoms of newly freed Black Americans. These laws imposed additional formal requirements on Black contract formation, often nullifying their economic agency. The 1866 Act, therefore, was as much a reconstitution of contract law as it was a civil rights measure.
The second argument is normative: recognizing Section 1981 as part of contract law aligns with a certain vision of contract law’s fundamental values, including economic freedom, autonomy, and fairness. Encarnacion contends that the principle of good faith and fair dealing, a debated staple of contract doctrine, implicitly supports a non-discriminatory marketplace. If contract law seeks to ensure fair and efficient transactions, then racial discrimination—which distorts bargaining power and restricts market participation—is contractually unreasonable. Thus, treating Section 1981 as a mere external constraint on contract law rather than an integral part of it misconstrues the relationship between contract law and racial justice.
Encarnacion’s reconceptualization carries significant theoretical consequences. If “contract law” includes Section 1981, then contract law theorists should work harder to make their accounts fit in the country’s history of racial discrimination. This recognition challenges prevailing formalist approaches, which treat contract law as neutral and race-blind. However, it also supports the work of recent writers who seek to surface the story of race in private law and provides a way to make the story of private law more congruent with that of the civil rights movement.
On a practical level, Encarnacion highlights the omission of Section 1981 from major contract law casebooks, the Restatements of Contracts, and leading treatises. (By way of full disclosure, his account mentions my casebook, which now includes a 1981 case in the consideration section but does not otherwise center the statute in the book.) This exclusion, he argues, is a mistake. Law professors teaching contracts should integrate Section 1981 into their syllabi, both to accurately represent the law and to provide students with a fuller understanding of contract law’s social and economic impact. Additionally, judicial applications of doctrines like good faith and fair dealing should be informed by Section 1981, ensuring that contractual relationships operate free of racial discrimination.
Encarnacion’s article arrives at a time when legal scholars are reexamining the intersections of private law and civil rights. Contract law has long been regarded as a residual domain of private ordering, free to largely ignore discrimination since it’s taken care of by statutory law. Encarnacion disrupts this view by trying to fit the statute back into the doctrinal course. One of the major conceptual challenges facing contract teachers and scholars today is this boundary: what counts as “contract” and what as other – the blurred lines between our subject and consumer law, employment law, antitrust law, and privacy law, for instance, are constantly challenging. Encarnacion suggests in some ways the choice is false as doctrine itself is influenced by 1981, both directly and indirectly. It would be a mistake to think of “contract” as unconnected to those developments.
Encarnacion thus ultimately calls for a fundamental shift in how contract law is taught, theorized, and applied. He argues that legal scholarship should acknowledge that racial discrimination is not merely an external wrong that contract law sometimes intersects with—it is a problem that contract law itself has historically addressed and which it continues to engage with. As such, Section 1981 as Contract Law challenges deeply entrenched assumptions about the boundaries of contract law and civil rights law. This article is an essential read for anyone interested in the intersection of contract law and racial justice, which should be all of us.
Jan 30, 2025 Nancy Kim
Andrea Boyack’s article, Abuse of Contract: Boilerplate Erasure of Consumer Counterparty Rights, examines “problematic” provisions in consumer contracts and may be viewed as a companion piece to her previous article, The Shape of Consumer Contracts which is more theoretical. Both articles provide a valuable contribution to the literature on boilerplate and merit attention, although I focus this review on Abuse of Contract. Professor Boyack examined the online terms and conditions of 100 companies in a variety of industries. The study aimed to answer two questions: “(A) How prevalent are boilerplate provisions that limit consumers’ legal rights? and (B) to what extent do particular companies use such boilerplate limitations?” (P. 4.) Her study is one of several in recent years taking an empirical approach to terms and conditions, including one by Samples, et.al. that I previously reviewed here.
Boyack identified four broad categories of terms: “(i) dispute resolution mandates, (ii) liability waivers, (iii) limitations on damages, and (iv) pre-authorization of unilateral modifications.” (P. 5.) For accuracy, the terms and conditions were examined twice by two different researchers during 2021-2022. The study included both public and private companies, and these 100 companies belonged to an array of sectors, including retail, financial services, social media, and travel. The study also tracked eleven types of rights-deleting provisions. According to Boyack’s study, 66% of the contracts surveyed contained a mandatory arbitration clause, and the clause was more prevalent in some industries than in others. For example, 82% of retail sector contracts contained such a clause compared to 42% of financial services sector contracts. Similarly, 94% of retail sector contracts contained a waiver of the right to jury trial compared to 42% of financial services sector contracts. The disparity among sectors is perhaps not surprising given the increased governmental scrutiny and regulation of terms, such as mandatory arbitration, in consumer financial services contracts.
Boyack’s article is valuable not only because she examines the terms and conditions of companies in an array of industries but because of her knowledge regarding how they fit within the larger context of consumer rights law. For example, she notes that 79% of the contracts surveyed contained a choice of forum clause – of interest in itself – but then emphasizes that choice of forum is important because it can also limit the time to bring a claim, even acting as a class action waiver in some states, such as Virginia, where class actions are not permitted. (P. 14.)
Boyack argues that much of the boilerplate terms are unnecessary to the “transactional infrastructure” because they do not impact the underlying exchange itself. In other words, according to Boyack, the clauses do not have a substantive impact on the transaction but only whittle away at the default rights of the consumer. Some of the boilerplate’s defenders would likely disagree and offer up the old argument that the cost savings from boilerplate are passed along to consumers. Boyack pushes back on that argument, stating that even if cost savings are passed along to the consumer in the form of lower prices — a claim that has never been empirically proven – “our legal system does not allow private persons to force other persons to sell their rights – even for a fair price.” (P. 15.)
I might disagree with Boyack on that last point. Our legal system should not permit private persons to force other persons to sell their rights, but unfortunately, it has done so. That is essentially the entire problem with boilerplate in consumer contracts. They are contracts in name only – and only because judges have not resisted hard enough the rhetorical labeling of terms and conditions as “contract.” (Elsewhere, I have suggested a more accurate label would be “adhesive terms”).
Boilerplate defenders typically make market-based claims to justify calling adhesive terms contracts even when they lack indicia of bargaining and diminish the meaning of assent and consent. Boilerplate defenders claim that “assent deficiencies of non-negotiable standard form contracting” are “mitigated by reputation and consumer choice in the context of a competitive market.” (P. 4), but, as Boyack points out, “assurances that market forces reward consumer-friendly boilerplate requires there to be a variety of boilerplate options. If most companies have substantively identical boilerplate provisions, market choices cannot possibly reflect a choice of boilerplate content.” (P. 4.) In other words, the consumers won’t punish an individual company for abusive terms if all other companies provide those same abusive terms. As Boyack’s study indicates, the best way to protect consumers from rights-deleting terms is likely governmental regulation.
Boyack’s article is a rebuke to the fanciful market-based arguments put forth by boilerplate defenders. As her study demonstrates, the claims of boilerplate defenders are not supported by empirical evidence. Boyack’s study should lead to better-informed discussions among contract scholars about the role of boilerplate in consumer transactions and the need for more regulation of oppressive terms.
Jan 13, 2025 Daniel Barnhizer
One of my favorite cases from the perspective of consumer bargaining power is Boucher v. Riner, which involved both my third-greatest physical fear (jumping out of a perfectly good flying airplane a few thousand feet above the ground) and my first-greatest jurisprudential concept (what is ‘assent,’ really, in the context of consumer contracts). The case involved a contract between a consumer who for some reason wanted to jump out of a perfectly good airplane in flight…because reasons, and a producer who apparently really believed in providing consumers with meaningful choices in a standard-form contracting paradigm.
Specifically, the standard-form contract in Boucher provided the consumer with two options regarding exculpation of the people who were offering the consumer the opportunity to jump out of that perfectly good airplane – (1) pay the standard base price and release the producer from liability for its own negligence or (2) pay an additional $300 (presumably with which the producer would purchase insurance against personal injury) and retain the right to sue the producer for injuries resulting from the producer’s negligence. Notably, the standard form contract presented these options in menu form, and the consumer was free to choose either option. The Boucher case is important because of the efforts of the producer to make the options regarding the exculpatory clause salient for the consumer. Nothing makes things salient like paying money for a choice.
Prof. Williams’ article takes this concept further with a nuanced analysis of the normative need for selective assent in consumer contracts as well as examining possible regulatory responses for “market testing” boilerplate clauses. Specifically, the Boucher case epitomizes the ideal situation proposed by Prof. Williams, namely that producers should make boilerplate terms in standardized consumer contracts with consumers salient in a manner that would allow the market to accurately price those terms. While this thought experiment has been attempted in the past, Prof. Williams examines the economic, legal, and regulatory realities of such attempts at pricing selective assent to standard terms at a sophisticated level that recognizes both the potential benefits and pitfalls involved.
Beginning with the observation that consumers virtually never read the boilerplate terms in standard form because those terms are not salient to the consumer, Prof. Williams argues in favor of a regulatory scheme under the Federal Trade Commission that would identify potentially problematic contract terms and require producers to give consumers the opportunity to opt-out of those terms for a price. (P. 232.)Specifically, Prof. Williams identifies four categories of contract terms that are potentially problematic from a consumer perspective: (1) “terms that seek to alter the operation of the legal system and the rights it usually provides consumers”; (2) “terms that allow the business to change the terms of the contract at any time, without the specific consent of the consumer”; (3) terms imposing unexpected costs on the consumer; and (4) “terms that purport to limit personal liberties in unexpected ways.” (P. 247.) Prof. Williams’ categories cover what I would consider to be the usual suspects in any lineup of arguably anti-consumer terms.
However, it must be stressed that the article only identifies these terms as potentially problematic. Instead of arguing that such terms should be banned outright, Prof. Williams notes that many contracting platforms such as airline travel websites, Amazon.com, and Walmart have already implemented “choice infrastructure” that allows customers to “customize their experience, choosing different elements of a product or service, seeing the individual price of each element, and arriving at a total package and price that fits the consumer’s budget.” (Pp. 258-60.) Under Prof. Williams’ proposal, FTC regulation of the four categories of problematic terms would require producers wishing to include such terms in their contracts to implement their own choice infrastructure that would permit the consumer to accept the producer’s base (presumably lower) price for a contract containing those terms or opt out of those terms for an increased contract price.
Such a regulatory scheme would require significant adjustments in contracting behavior by producers. Notably, Prof. Williams admits that the FTC would have to engage in some policing of the prices producers attach to each opt-out option “so that firms do not use pricing to unduly discourage consumers from opting out.” (P. 236.) I believe such regulatory policing of prices for individual contract terms is the most significant challenge to Prof. Williams’ proposal. Among other reasons, government agencies such as the FTC lack sufficient information regarding the potentially millions of different standard form contract terms as well as market information that would be necessary to both set a price for each term and permit timely adjustments to those prices with changes in market conditions. Prof. Williams recognizes this concern and suggests initially that producers should initially offer the opt-out options without prices and “wrap the expected cost of consumer opt-out into their total price….” (P. 266.) By identifying the terms consumers consistently accept or reject, producers could then develop information regarding pricing those terms or even whether to keep them at all.
Overall, this article makes an important contribution to the literature regarding consumer assent to standard form contract terms. Menu pricing of contract terms is theoretically easy in an online context, and yet, other than in rare cases like Boucher, it is unusual to see producers providing options to opt out of boilerplate terms. Such options, however, could yield valuable price information regarding the benefits or drawbacks of specific standard terms within a competitive market while at the same time providing consumers with the ability to customize their contract obligations. Although Prof. Williams’ proposal would likely be costly to implement in its initial stages, it suggests a potential solution to the difficult problem of consumer assent to non-salient terms in standard-form contracts.
Nov 18, 2024 Shawn Bayern
Yonathan A. Arbel,
The Readability of Contracts: Big Data Analysis, 21
J. Empirical Legal Stud. __ (forthcoming, 2024), available at
SSRN (Jan. 01, 2023).
Probably all law professors, even textualists, have experienced frustrations with overly rigid applications of supposed rules about language. For example, they’ve encountered editors who require that all contractions be spelled out or replace every instance of the word “like” with “such as” regardless of whether the substitution makes sense in context. Editing like that serves formalistic assumptions about the readability and professionalism of text and usually rests on various “myths” or outdated conceptions about language. Similarly, many professors, even formalists, have encountered and been frustrated by institutional “metrics” that reduce rich, substantive endeavors (like education) to rigid and formalistic abstractions (“learning outcomes” or test scores).
In a critique at least broadly sensitive to the same kinds of frustrations, Yonathan Arbel’s recent draft article, The Readability of Contracts: Big Data Analysis, studies the Plain Language Movement, which has influenced language in such documents as consumer contracts and medical disclosures. Professor Arbel’s legal focus in the draft is on consumer contracts, and his point is not, of course, that language in consumer contracts should be unreadable. Instead, it is a sharp critique—backed both with analytical insight and with significant data—against formalized metrics of notions like readability.
A significant portion of the article critiques such metrics, like the famous Flesch-Kincaid scores that depend on such simple features of language as syllables per word and words per sentence. In a world with large language models, those simple metrics appear almost quaint; they are not unlike early attempts at the computational processing of natural language that mostly went nowhere until machine-learning systems, backed with massive amounts of data, replaced them. Arbel’s critique is deeper, though; he takes aim at the “conceit” that “formal aspects of the text are reliable indicators of its ‘readability’” (P. 8), noting that readability scores aren’t even internally consistent and that they rest on arbitrary decisions. More directly relevant to scholars of contract law, he uses earlier studies to highlight a conceptual distinction between superficial perceptions of whether text is “understandable” and deeper measures of comprehension, like “behavioral responses to contract breach.” (P. 12.) In other words, while it ought to be clear that whether a form contract is readable probably has little to do with the prevalence of polysyllabic words in its text, metrics in the first place may be problematic because they miss the point, may be manipulated, and target the average reader rather than individuals who may need more protection.
Indeed, while Arbel hearteningly highlights some evidence that “average” Americans are more literate than people give them credit for, he is sensitive throughout the article to the notion that practical comprehension is “heterogeneous.” (P. 16.) Consumers, for example, grow up speaking different languages and are neurodiverse. Some are more vulnerable than others to deceptive practices that the law properly aims to restrict.
Having laid this groundwork, Arbel’s empirical study (of millions of consumer contracts and other documents) finds that consumer contracts aren’t—using formal metrics—harder to read than other common sources of text that people encounter (news websites, Wikipedia, and so on). In view of this conclusion, Arbel suggests that reforms that address problems in consumer contracting “may need to be more ambitious than mere copyediting of contractual text.” (P. 37.)
Apart from its specific strengths, Arbel’s draft is perhaps a helpful general reminder that—and these are my words rather than his—legal commentators may be paying far too much attention to language in the first place and not enough attention to substantive features of the situations that law aims to regulate. Like most other social activities, the law is not language. That is, it is not coextensive with the language that represents its decisions, which are only imperfectly captured by words. Obsession with language and its form has clouded many fields, including contract law, and diverted effort from potentially more important reforms.
Arbel’s point in the current draft is not to lay out those reforms in detail. But just like the general suggestion I’ve just made, the draft makes a specific suggestion to shift focus away from form and text in the context of consumer contracts (including most notions of “readability,” particularly formalized ones) and instead toward substance, individual differences among consumers (specifically with more attention to “vulnerable individuals”), and better understandings of the potential market failures associated with consumer contracts. It’s worth quoting Arbel in full on this general point:
For instance, the resources devoted to simplifying contract language could have been directed towards addressing more fundamental issues in consumer markets, such as improving market competition to give consumers more meaningful choices; addressing information asymmetries through targeted disclosure requirements; strengthening enforcement mechanisms against unfair or deceptive practices; or removing regulatory barriers to entry to markets. (P. 42.)
That language is plain enough.
Cite as: Shawn Bayern,
Consumer Contracts Have Many Problems, but “Readability” May Not Be One, JOTWELL
(November 18, 2024) (reviewing Yonathan A. Arbel,
The Readability of Contracts: Big Data Analysis, 21
J. Empirical Legal Stud. __ (forthcoming, 2024), available at SSRN (Jan. 01, 2023)),
https://contracts.jotwell.com/consumer-contracts-have-many-problems-but-readability-may-not-be-one/.
Oct 16, 2024 Eyal Zamir
Scott Schanke, Gordon Burtch & Gautam Ray,
Digital Lyrebirds: Experimental Evidence that Voice-based Deep Fakes Influence Trust, __
Management Science __ (forthcoming), available at
SSRN (May 1, 2024).
The reviewed article describes an experiment in which an audio chatbot was either imbued with a random voice or with a clone of the participant’s voice, and the participant was either informed or not informed that they were communicating with a bot. It found that people tended to trust the bot more when it imitated their voice and that this effect was not influenced by whether or not participants were informed that their partner was a bot. While the article does not discuss any legal questions, it is submitted that it carries interesting implications for consumer law and regulation.
In recent decades, thousands of behavioral studies have documented numerous systematic and substantial deviations from the assumptions of economic rationality (Zamir & Teichman 2018). A very influential strand of scholarship has called for the use of behavioral insights not only to better understand deficiencies in human judgment and decision-making, but also as a means to mitigate those deficiencies through nudges—“low-cost, choice-preserving, behaviorally informed approaches to regulatory problems” (Sunstein 2014). While effective in some contexts, it has been persuasively argued that nudges are unlikely to be effective in business-to-consumer relationships, where firms are both able and motivated to undo their effect (Willis 2013). In fact, firms are quicker and more effective than legal policymakers at taking advantage of consumer heuristics and biases for their own interests. Unlike nudges, which aim to improve decision-making for the benefit of the decision-maker or society at large, sludges aim to benefit the entities that employ them. The proliferation of online transactions, the spread of personalized marketing techniques, and advancements in AI technology provide marketers with new opportunities to exploit consumer heuristics—and pose new challenges for legal policymakers.
Specifically, a large portion of customers’ interactions with firms—prior to purchasing the product or service, during the contracting process, and throughout the contractual relations—are no longer conducted with human beings, but rather with chatbots. While currently most of these interactions are in writing, it is expected that with the advancement of AI models and other technologies, more and more interactions will take place via oral conversations. From the perspective of the firms, the effectiveness of such communication depends on the extent to which customers trust the honesty and reliability of the entity with which they communicate. Firms may enhance customers’ trust in the chatbots by ensuring that the information they provide and the commitments they make are truthful and reliable. However, they can also promote this goal by shaping other aspects of the interaction, such as manipulating cues that unconsciously enhance people’s trust. In particular, they may utilize the similarity attraction, namely the attraction people feel to others who are perceived as similar to themselves in some personal dimension.
In their thought-provoking paper (forthcoming in Management Science), Scott Schanke, Gordon Burtch, and Gautam Ray report the results of an experiment designed to examine how the use of a voice clone enhances consumer trust. The participants in the online experiment—native English speakers from North America—were invited to take part in a Trust Game, a well-known paradigm in experimental economics.
In the basic form of the trust game, one player (A) is given a sum of money and can choose to send some, all, or none of it to the other player (B). The amount sent is then multiplied (usually tripled), and B decides how much of the multiplied amount to return to A. If both players are rational maximizers in the economic sense, that is, if each one of them cares only about their own self-interest, then A would assume that B would return nothing, and would therefore send nothing to B. However, if A and B could trust each other, they would both be better off by A sending the entire amount allocated to them, and B splitting the multiplied amount with A. Indeed, contrary to the prediction of standard economic analysis, experiments show that very often, A does send a considerable portion of the money to B, who then reciprocates by sending back an amount that exceeds what A initially sent (Berg et al. 1995).
In the version of the game used by Schanke and his colleagues, A could either send nothing—i.e., keeping an endowment of $1.25 to themselves—or send the entire endowment to B. B could then either keep the money to themselves—in which case they would get $3.50 (the multiplied amount) and A nothing—or roll a dice. If B rolls the dice and the resulting number is 1, A receives nothing and B receives $2.50. If the resulting number is 2, 3, 4, 5, or 6, A receives $3.50 and B $2.50.
All the participants in the experiment were assigned to the role of A. Before deciding whether to send the money to B, they received an oral message, ostensibly from player B, trying to convince them to send the money. Before playing the game, the participants were asked to call a 1-800 number and read a consent statement. This enabled the experimenters to generate a message using a clone of the participant’s own voice (footnote 12 of the article provides a link to a website where one can listen to a sample of the recorded messages.).
The participants were randomly assigned to one of four experimental conditions, in a 2 X 2 factorial design: Half of them were told that they had been paired with another player and half with an AI autonomous agent. Then, half of them heard the oral message from player B in a randomly depicted voice, while the other half heard a message that was generated using their own voice.
The key results of this neatly executed experiment were that using a voice clone significantly increased participants’ inclination to trust player B (that is, to send them the money), while informing the participants that they are paired with an autonomous agent, rather than a human being, had no discernable effect on their decision.
Such stylized experiments inevitably raise concerns about their external validity and the generalizability of their finding, and one should be careful not to draw far-reaching conclusions from a single study. Nevertheless, the results of the study make one wonder about the ramifications of the use of such manipulations by marketers. Large tech firms already have access to very large amounts of people’s voice samples, such information is tradeable, and is already used for various commercial purposes (Turow 2021). So, there is every reason to believe that the studied manipulation is not a mere fantasy.
Compared to more worrying online manipulations (AKA dark patterns; see Luguri & Strahilevitz 2021), imbuing chatbots with the customer’s voice does not seem overly troubling. Indeed, it is unclear whether, even in legal systems that protect consumers from large firms more effectively than US law, it warrants a regulatory response. There appears to be no sufficient ground to prohibit such practices altogether. As for disclosure duties, these are generally ineffective (Ben-Shahar & Schneider 2014; Zamir & Ayres 2020, pp. 284–302), and the results of the current experiment suggest that they are ineffective in the present context, as well.
Note, however, that in the experiment, the disclosure was about the partner being a bot—not about its imitation of the participant’s voice. Disclosing this fact might have made a difference. Regardless, contracting parties should have a free-standing right to receive significant information—such as knowing that they are interacting with a bot that imitates their own voice—even if this information does not affect their behavior. At the very least, realizing that the firm is willing to use various manipulations to gain their trust, such disclosure may put customers on guard.
To be sure, voice cloning can be used for both manipulative and valuable purposes. However, the potential harms of such manipulations are likely to extend beyond the market, potentially affecting the political sphere as well. Therefore, it is important to pay attention to these risks.
Aug 12, 2024 Robert Hillman
Kimberly D. Krawiec, Nathan B. Oman,
The Case for Specific Performance of Personal Service Contracts, 110
Iowa L. Rev. __ (forthcoming, 2025), available at
SSRN (May 17, 2024).
Professors Krawiec and Oman’s insightful new article caught my eye, having myself challenged various contract remedial rules in my research and writing over the years. The title of the Professors’ article made me wonder, however, whether the authors can convince readers that the seemingly inviolate rule against specific performance of personal service contracts should be overturned. But it turns out that the call for specific performance in the article actually applies to a quite limited set of personal service contracts, with the rule against specific performance still governing most such contracts. Despite the title, the authors have a good explanation for why their more narrow thesis is important: Personal service contracts that should be subject to specific performance are “legally and economically significant.” (P. 58.)
Early on, the authors clarify that their goal is to show that specific performance should not be ruled out and the general rules governing equitable remedies should apply if the breaching employee is wealthy, sophisticated, and money damages are incalculable or insufficient to make the employer whole. Further, courts should consider specific performance only when a reasonable substitute employee is not available. In addition, specific performance would only apply if the parties agreed to the remedy in their contract and would never apply if the employee had little bargaining power nor to contracts with at-will employees (the latter for obvious reasons). Finally, the duration of a specific performance order would be limited to one year or less. Thus, the authors would target for specific performance fixed-term contracts between employers and employees such as sports figures, entertainers, and teachers, and even in these instances the typical flexible rules of equitable remedies would apply so that specific performance would not be automatic.
Thus, the force of Krawiec and Oman’s argument is limited in scope, but the categories of personal service contracts that would qualify for specific performance are important, often litigated, and high-stakes, and therefore well-worth their concern. (Part IV of the article presents three helpful examples from actual cases.) Moreover, the lesson of the article is broader than simply advocating for specific performance of certain personal service contracts. The article sends the message that seemingly intractable remedial contract rules can and should be challenged when inefficient and problematic.
In this brief review, I cannot do justice to the authors’ many insights and arguments and I urge people to read the article. But in short, the authors first discuss their view of the advantages of specific performance over existing remedies in the contracts they target, including money damages, which are “often difficult to calculate and under-compensatory” (P. 8), and negative injunctions prohibiting employees from working elsewhere because existing law already bars such injunctions that coerce performance. The authors also point out that many breaching employees in their target group can afford to decline substitute work, so negative injunctions may be worthless. The authors also focus on the special benefits of specific performance, including that employers can invest in their human capital with confidence of an adequate remedy in case of breach.
Assuming money damages are inadequate and negative injunctions are an insufficient solution, the authors still must contend with the traditional reasons for denying specific performance of personal service contracts, including the Thirteenth Amendment’s involuntary servitude prohibition, additional autonomy concerns, and the hurdles to successful judicial monitoring of performance. The authors have reasonable responses to each concern.
The authors first discuss involuntary servitude and the 13th Amendment and conclude in part that “it is very unlikely that specific performance of personal service contracts would run afoul of the original meaning of the 13th Amendment.” (P. 26.) In part, they reason that the employment contracts they have in mind have limited durations, measured obligations, and include compensation. (P. 29.)
Among the authors’ responses to autonomy concerns, they point out that money damages may be large and quite coercive as well. Relatedly, they observe that objections to specific performance often arise because of the substance of the contract, such as a movie star subject to “demeaning conditions.” (P. 34.) In such cases, the authors unsurprisingly do not favor specific performance, but point out that their proposal “is about the remedy that should be available for otherwise unobjectionable contracts.” (P. 34.) And recall that the authors would apply specific performance only when the contract calls for that remedy after breach and when the employee enjoyed equal bargaining power.
Can the judiciary successfully monitor performance, including by an employee whose performance is at best half-hearted? Kraweic and Oman note that contract law already successfully requires evaluation of the quality of performance, for example, in cases involving allegations of bad faith or material breach. The authors also argue that employees’ reputational concerns often will make a perfunctory performance unlikely.
Of course, there are reasonable responses to many of the authors’ arguments. For example, I wonder whether reputational concerns will have much effect on performance when athletes, entertainers, and the like wish they were elsewhere. They might not purposefully breach, but doesn’t effective performance require enthusiasm for what they are doing? In addition, the reader may be uneasy about requiring warring parties to perform their contract. Krawiec and Oman respond in part that courts already order employers to reinstate wrongly fired employees, but it would be helpful to know how that has worked out for both the employer and employee.
I have only scratched the surface of the authors’ arguments that specific performance of personal service contracts should be available in a limited set of circumstances. Although the reader may not agree with all or even many of the arguments, they are worth pondering and the article is well-worth reading!
Cite as: Robert Hillman,
The Case Against Static Contract Remedies, JOTWELL
(August 12, 2024) (reviewing Kimberly D. Krawiec, Nathan B. Oman,
The Case for Specific Performance of Personal Service Contracts, 110
Iowa L. Rev. __ (forthcoming, 2025), available at SSRN (May 17, 2024)),
https://contracts.jotwell.com/the-case-against-static-contract-remedies/.
Jul 10, 2024 Orit Gan
Inequality of bargaining power between parties is a significant concern in contract law. Parties are not always equal, and negotiations may occur under conditions of power imbalance, impacting the contract terms.
A fascinating new article by Rebecca Stone explores which determinants of inequalities of bargaining power between contracting parties should be legally relevant.
The article begins by defining bargaining power as the party’s ability to ensure that the contract terms serve their own objectives. Inequality of bargaining power means that one party possesses a greater ability to do so than the other. Bargaining power is influenced by factors both within the party’s control (such as their interest in the contract) and outside their control (such as the actions of the other party and social conditions), as well as by objective factors (such as the market) and the parties’ perceptions (such as a party’s beliefs regarding the other party’s interests).
Inequality of bargaining power has legal consequences and may lead to invalidation or adjustment of the contract under doctrines such as unconscionability, duress, undue influence, fraud, and misrepresentation. Which inequalities of bargaining power should be legally relevant? The article examines several theories and demonstrates how each theory yields a different answer to this question.
Economic analysis of contract law assumes that parties are rational self-interested agents entering a contract to maximize their welfare. Therefore, this theory advocates a procedural approach to address inequalities that hinder the disadvantaged party’s rational pursuit of their ends. Consequently, some instances of informational asymmetries, coercion, or exploitation warrant intervention to enhance efficient outcomes. However, the distribution of welfare is largely beyond the reach of contract law.
Rights-based analysis may endorse one of three different notions of justice. Under the procedural justice approach, contract law is committed to formal equality and free will. Therefore, contract law should intervene in cases of inequality of bargaining power that impede the disadvantaged party’s consent. Under the transaction-specific justice approach, contract law should also consider substantive requirements of transaction-specific fairness alongside procedural requirements. This approach is broader, justifying, for example, regulation of standard form consumer contracts due to consumers’ cognitive biases. According to these two notions of justice, contract law generally need not intervene in cases of situational inequalities. Under the systemic justice approach, contract law is committed to substantive justice, which is the broadest notion of justice of the three. That is, contract law should consider systemic background inequalities and support just relations between the parties. Under this approach, a contract must meet both procedural and substantive standards to be morally valid. This approach justifies, for example, mandatory rules and consumer regulations.
This thought-provoking article raises several interesting issues: First, there are different kinds of bargaining power. The stronger party might gain its advantage due to individual reasons (for example, being better informed than the other party) or due to systemic advantage (for example, sellers over consumers) due to personal reasons (such as less interest in the contract than the other party) or social reasons (such as discrimination based on gender, race, or class). Accordingly, there are also thin concepts of the inequality of bargaining power principle (that consider only procedural requirements) and thicker ones (that consider moral, substantive requirements). Second, according to some approaches not only courts but also other branches of government should police inequality of bargaining power. That is, alongside contract law doctrines (such as unconscionability, duress, undue influence, fraud, and misrepresentation), legislation and regulations (for example, consumer law) also reduce disparities of bargaining power. Third, according to some approaches the law can be committed not only to reducing inequality of bargaining power but also to promoting equality and just relations between the parties. That is, the law should invalidate contracts due to inequality of bargaining power as well as actively advance social equality by empowering disadvantaged parties.
By analyzing inequality of bargaining power from different theoretical perspectives, this article beautifully demonstrates the richness of theories of contract law.
Jun 12, 2024 Martha Ertman
Danielle D’Onfro’s article Contract-Wrapped Property, provides a new lens to understand—and counter—sham consent in clickwrap and browse wrap agreements. Judicial treatment of constructive notice as assent in online agreements, of course, greatly benefits huge companies like Amazon, Google, and AT & T at the expense of everyone else, especially consumers. The big take away of Contract-Wrapped Property is that attorneys and judges unwittingly protect a long-prohibited type of property interest—equitable servitudes in chattels—when they enforce clauses limits on liability against downstream buyers that were not parties to the original contract. According to D’Onfro, these decisions endanger the very foundations of private ordering such as ownership itself and also could undermine product liability doctrine.
Contract-Wrapped Property makes a tremendous contribution to our understandings of private ordering. By exposing this threat to previously stable property doctrine and the policies behind it, D’Onfro’s article issues a wake-up call to how doctrinal developments in contracts can upset what she calls the “private law equilibrium” between contract, property, and tort law.
Readers who spend most of their time in contractual silos and barely remember equitable servitudes from the bar exam should rest assured that the article’s tour through property law is worth the effort. The article offers new tools to police the reach of online form contracts. Better still, D’Onfro offers a fix, at least regarding contracts for chattel. Courts, she contends, should refuse to enforce arbitration and other restrictive clauses against remote buyers on the grounds that these provisions impermissibly impose equitable servitudes on chattels. In the alternative, legislatures should regulate this radical derogation of common law and refuse to enforce contract clauses against remote buyers unless the original seller that wrote the contract provided actual notice of those terms to downstream buyers that lack privity with the initial seller.
Contract-Wrapped Property covers a lot of ground in seventy-five pages, so this jot focuses on two points after describing the equitable servitude problem. The first—a policy against secret liens—matters for those of us who toil in the fields of secured transactions and bankruptcy. The second—the waste created by equitable servitudes—is relevant to anyone concerned about the climate crisis.
1. The Pathology of Equitable Servitudes: Tamko Shingles
Tamko, a roof shingle manufacturer, has successfully enforced shrink-wrap terms against remote buyers even though only the first buyer—often a builder—saw the terms. D’Onfro describes a line of cases in which remote buyers have been held to Tamko’s terms such as arbitration, warranty limits, and—most surprising—requiring the loser to pay attorneys fees. (Pp. 1060, 1096.) Though parties litigated and judges decided these cases under contract doctrines, D’Onfro contends, the cases create “de facto equitable servitudes” on the shingles. That trend does indirectly what property law forbids directly by the ban on equitable servitudes on personal property. (Some courts, D’Onfro notes, have declined to enforce downstream Tamko’s terms against homeowners who don’t know about the original contract.)
Contract-Wrapped Property explains in detail why property law has banned servitudes on chattels, including the dangers of past owners controlling present uses of property, and clarity in what owners can and cannot do with their property. A case highlighted in the article—Juarez v. Ward—provides a rare example of a court openly acknowledging its imposition of an equitable servitude in an Oscar statue. When David Ward won the Oscar for his work on the movie The Sting, he signed an agreement with The Academy of Motion Picture Arts & Sciences giving the Academy a right of first refusal to buy the statue back for $10 before he sold or otherwise transferred it. After his housekeeper won a suit against him for unpaid wages, the Academy successfully prevented her from selling the statue to satisfy the judgment based on what the court recognized as the “unusual” situation in which a “reasonable restriction on alienation” protected the “prestige” of the Oscar. (Pp. 1104-05.)
A. Secret Liens
While D’Onfro applauds the Juarez court’s recognition that it was departing from the general prohibition on equitable servitudes on chattel, she nevertheless critiques the outcome as undermining the policy against secret liens that runs through UCC Art. 9 and bankruptcy law.
Often, concerns about debtor fraud underlie the refusal to enforce secret liens. For example, notice requirements such as recording interests in real estate or filing UCC-1 financing statements prevent debtors from secretly encumbering their property with multiple creditors who do not know about each other. To prevent that kind of fraud—and increase certainty of who gets what and the efficiency of the determination—bankruptcy trustees likewise enjoy priority over unrecorded interests in property.
We got to the present situation where equitable servitudes on chattel are rising from the dead via what D’Onfro and other commentators call “software exceptionalism” (P. 1072) that allowed doctrinal developments in transactions involving software to depart from traditional rules of contract and property law. Consider casebooks. Our students can sell their hard-copy casebooks to remote buyers, and indeed do. But digital versions of the casebook and any associated online features come larded with limits on use, resale and alteration. On a much larger scale, manufacturers “brick” electronic devices with software updates, which maximizes manufacturer profits and exacerbates the trash problem by requiring consumers to throw away instead of fix devices. (P. 1076.)
Software is part of many chattels: cars, stoves, and business equipment just for starters. D’Onfro points out that the doctrinal trend of allowing a manufacturer to unilaterally modify terms and enforce those changes against downstream owners who never knew about the initial sale contract leaves owners—and their creditors—in the dark about what ownership actually includes. Worse, D’Onfro asserts, servitudes “are creeping into chattels without a software hook,” (P. 1075) such as the Tamko shingles.
B. Waste
In addition to increased information costs, and subscription agreements that can greatly increase consumer expenses, equitable servitudes in chattel cause both economic and physical waste (aka trash). (P. 1074-75.) This tendency of equitable servitudes to compound the mess of overflowing landfills and plastic-choked waterways may be D’Onfro’s most innovative insight as she calls out this trend toward owners and creditors not knowing “which sticks in the bundle of rights they hold” because “another party has the right to rearrange the sticks.” (P. 1088.)
Contract-Wrapped Property identifies the high stakes of this seemingly technical matter of how far equitable servitudes reach: “In an age of climate disaster, it is morally abhorrent that the law may bind purchasers to landfilling usable goods and their recyclable materials.” (P. 1075.) For example, manufacturers of smart homes, toasters, and tractors have “bricked” old devices to hinder secondary markets. Not incidentally, that practice makes consumers chuck the old devices and buy new ones, creating ever-expanding piles of trash. (P. 1115 n.412.) An additional level of waste that D’Onfro identifies is that “every new object produced exacts a toll from the environment via energy, water, and raw materials.” (P. 1116.)
Property and contract law have long sought to prevent economic as well as physical waste. As an example, D’Onfro offers the Missouri case Eyerman v. Mercantile Trust Co. in which the court refused to enforce a provision of a woman’s will that required the executor to burn down her house. (P. 1116.) More typical situations are the increasingly vibrant markets for thrifting, recycling, upcycling and scrap operations. In clothing alone, brick and mortar operations such as Value Village thrive alongside online clearinghouses such as PoshMark, ThreadUp, and The Real Real. Sellers such as Ikea, Patagonia, and Eileen Fisher are getting into the action by operating websites that sell their own used goods.
Those markets are hobbled if an equitable servitude prevents resale or repair of a good. For example, D’Onfro critiques the restrictive licenses that come with many complex consumer goods that forbid repair except by manufacturer-authorized professionals. (P. 2024.) Contract and property law can and should do better.
2. The Fix: Enforce Old Bar on Equitable Servitudes in Chattel
Contract-Wrapped Property concludes with a proposed fix to the problem of contract creep into property law via de facto equitable servitudes. The “best path” according to D’Onfro, is to dust off the old ban on equitable servitudes on chattels. (P. 2024.) That way remote purchasers of houses shingled by faulty Tamko shingles would retain their rights, as would buyers who want to repair phones or laptops or upcycle an old fan to a new purpose.
Second best, however, would be to have legislators, rather than courts, address this new doctrinal development. D’Onfro’s proposal makes sense in light of courts’ traditional caution about changing long-standing common law doctrines. The legislation she proposes would require actual notice of the servitude travel to remote buyers, making constructive notice inadequate. In the case of Tamko shingles, the terms would have to be durably inscribed on the shingles themselves to bind remote purchasers. Even then, D’Onfro would limit enforceability on the same grounds as servitudes that run with land: irrationality, unconscionability, and restrictions on trade. (P. 1128.)
Among the most exciting elements of Contract-Wrapped Property is D’Onfro’s proposal that seems to urge the law students who become judicial clerks to help litigators and judges recognize the seismic changes to property law involved when courts enforce contractual limits on downstream buyers of goods. Judges that enforce contractual provisions against downstream buyers, D’Onfro asserts, should at a minimum “include some cabining language…to make clear that the court is not opining about servitudes.” (P. 1111.) That call to action reflects the best of what a law review article can achieve: shed light on an important problem in law; provide both ideal and pragmatic solutions; and give every day legal actors like litigants, judges, law students, and judicial clerks the tools to do some good.
