There is nothing more worth celebrating than articles you learn from even when you think they are wrong from soup to nuts. Keith Hylton’s new draft, Waivers, is that kind of piece for me. In the paper, Professor Hylton considers waivers, which as Professor Bob Hillman once described, are “crazy stuff.” They aren’t necessarily contracts and need no consideration; they extinguish legal rights with the lightest of touches, but can be retracted just as easily, except when they can’t; and they are subject to a policing regime that varies considerably between states and across time. Is waiver x enforceable can be one of the most difficult questions for contract and tort jurists to answer. And yet, as the Waiver Society Project has illustrated, waivers are increasingly ubiquitous. We need clear thinking about this phenomenon, and Waivers is therefore a paper I like lots, even though I reject its premises, analysis and conclusion.
The Article summarizes some of the skeptical law on waivers, and the scholarly worries which helps to justify it. It’s fair to say that Professor Hylton, as a practicing legal economist, is not convinced by claims that waivers are bad for the rule of law, create externalities that can’t be managed, undermine democratic control over the lawmaking power, or reduce individuals’ dignity. But he does summarize those complaints lucidly and fairly. He then offers a defense of waivers that starts by first providing the ideal case—fully informed consumers—and then a more realistic one. The argument that will be of most use to you, I suspect, is his claim that waivers (which can stand in for other kinds of boilerplate) have social value even when they are unread, unknown and adhesive. As he says, firms will benefit from waivers regardless of whether consumers know what they’ve lost; in competitive markets waivers thus can be assumed to result from consumer choices between products based on price, and maximize social welfare.
Professor Hylton offers some limits on this market-valorizing solution, which largely cash out at worries that consumers are systemically undervaluing their legal rights, either as a result of information asymmetry or wealth effects. From this he generates (P. 34) a test, which would teach courts to condition enforceability of a waiver on the degree of the underlying negligence it exculpates. When the underlying conduct suggests “weak or ambiguous” negligence, the waiver is likely welfare enhancing, while when it suggests “strong or unambiguous” negligence, it is not.
The theory is both normative and descriptive. He suggests that this hydraulic test better explains the relevant caselaw than some of the more diffuse public policy ideas that are extant, and would ground it better in a testable economic theory. In particular, Professor Hylton says that his test explains why we continue to see waivers deemed unenforceable in contracts: as the question of enforceability turns on the facts of the negligence, not the general situation, firms “continue to include waiver provisions in their contracts with consumers…because the unenforceability holdings are often conditioned on the facts of the case, in spite of the expansive rhetoric often employed by courts.”
What I liked–and why I recommend Waivers to you–is that this very short piece will offer readers a sophisticated version of classic law and economics arguments in general defense of boilerplate. You can understand, reading the piece, the gist of the case against policing the fine print. Professor Hylton’s description of the limits of that case is equally useful, particularly his careful teasing out of litigation and information costs. Almost all modern contract scholarship thinks that the case against boilerplate died with the informed minority reading hypothesis: He aptly shows us how consumers might benefit from product (contract) attributes they never know about, and when they might, without particularly complicated economic jargon. And his hydraulic test does offer a charitable defense for the (shocking?) fact that many consumer-facing contracts contain terms that courts have found unenforceable.
I had questions reading the piece. Most importantly, I was unclear if courts could actually determine negligence without reference to the waiver in those circumstances where one of the inputs into the legal rule is the consumers’ knowledge of risks. That is, waivers have two effects: they might legally exculpate liability as a matter of contract, and (separately) they can inform the factual question of whether the firms conduct is wrongful. If a supermarket puts a “WET FLOOR” sign in an aisle, it primarily affects the latter judgment; if Instacart requires you to waive your rights to sue for foodborne illness in its terms and conditions of delivery, the effect is primarily on the former. But many waivers can do both things simultaneously, which makes it difficult to clearly know if a waiver should be enforceable as a function of the quantity (or quality) of the negligence it governs. Or to put it differently, isn’t negligence endogenous to waiver?
And generally, I wondered about the scope of the claim. What counts as a waiver–would we think (as Professor Hylton suggests) that arbitration is a waiver merely because it varies the litigation default? Are choice of law clauses a waiver? This seems to put great weight on the status quo. Some of the time reading the paper I was unclear if instead of “waiver” we should substitute “right affecting term,” and if so whether the conclusions would follow.
Regardless of these disagreements, this is a good paper to read. It’s short, elides Greek letters and equations that will turn off the math-phobic, and steelmans most of the arguments it rejects. I recommend it to you.
