Gillette, Clayton P. --- "Standard Form Contracts" [2011] ELECD 124; in De Geest, Gerrit (ed), "Contract Law and Economics" (Edward Elgar Publishing, 2011)

Book Title: Contract Law and Economics

Editor(s): De Geest, Gerrit

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781847206008

Section: Chapter 7

Section Title: Standard Form Contracts

Author(s): Gillette, Clayton P.

Number of pages: 10

Extract:

7 Standard form contracts
Clayton P. Gillette


Standard form contracts, sometimes referred to as `boilerplate' or adhe-
sion contracts, constitute a category of contracts that are presented to a
party for acceptance or rejection without substantial additional negotia-
tion. A standard form contract may be drafted by the party who presents
it or by a third party, such as a trade association. Early commentary on
standard form contracts assumed that the absence of bargaining indicated
the superior market position of the drafter, usually the seller of goods or
provider of services. As a result, these contracts were thought to have a
poor fit with conceptions of volitional consent that underlie the neoclas-
sical basis for enforcement of contracts. Kessler (1943), Slawson (1971),
and, to a lesser degree, Rakoff (1983), exemplify this position. In eco-
nomic terms, this literature contends that standard form contracts tend
systematically to be identified with the presence of market failures. Courts
also concluded that standard form contracts implied superior bargaining
power and the imposition of terms on the adhering party. In Henningsen
(1960), for instance, the court noted an absence of competition for war-
ranties and inferred an inequality of bargaining power from the fact that
(1) a substantially similar limited warranty was found in virtually all auto-
mobile contracts, and (2) the warranty was presented to the consumer as a
condition for purchasing the automobile.

1. Benefits of Standard Form Contracts
Subsequent literature identified more socially useful roles for standard
form contracts, analogous to the ...