JUSTIFYING BAD DEALS.

• Date: 01 December 2020
• Author: Wilkinson-Ryan, Tess

INTRODUCTION 195 I. THE TROPE OF THE FECKLESS CONSUMER: AN ILLUSTRATION 198 II. TERM DEFERENCE: EVIDENCE FROM THE LAW AND PSYCHOLOGY OF 202 CONTRACT A. Law of Form Contracts 202 B. Field Evidence of Term Deference 204 1. Online Shoppers Who Didn't Quit a 480-item Survey 205 2. California Employees Who Didn't Leave Their Jobs for 206 Better Offers 3. Homeowners Who Didn't Walk Away 206 III. JUSTIFYING THE SYSTEM 207 A. A Just World Feels Good 208 B. The Dissonance Resolution Motivation 209 C. System Justification and Ideology 212 D. Fine Print as Status Quo 212 IV. EXPERIMENTAL SURVEY STUDIES 215 A. Study One: Inevitability 216 1. Method 216 2. Results 218 a. Main Effects of Manipulation 219 b. Results by Ideology 220 3. Discussion of Study One Results 221 B. Study Two: Tradition, Inequity, and Ideology 222 1. Method 222 2. Results 224 a. No Harm (Nonsalient Inequity) 225 b. New Term (Nontraditional) 225 C. Summary Results for Studies One and Two: Fairness, Blame, 226 Ideology, and Motivation V. DISCUSSION & IMPLICATIONS 229 A. Discussion of Results 229 B. Implications for Contract Law 230 1. Rhetoric 230 2. Enforcing Unenforceability: Reforming or Disrupting 231 a. Reformation 232 b. Disruption 234 i. Refusal to Sever Bad Terms 234 ii. Civil Fines 235 iii. Public Actions 236 C. Measuring Attitudes About Law 237 CONCLUSION 240 INTRODUCTION

The psychology of contract law is a young field, but it has recently amassed an impressive cluster of null results that might be described as "consumers not complaining about bad deals." It is a longstanding challenge for researchers to systematically describe a fact in the world that mostly manifests as a puzzling absence (for Sherlock Holmes fans, a dog that does not bark), because it can be hard to pin down what is so compelling about something that does not happen. But in the last ten years, scholars have offered detailed accounts of consumer inaction--inaction that costs them real money--across the universe of consumer contracts. A number of high-stakes examples come to mind. In 2009, in a crashing housing market, economists were perplexed to find that underwater homeowners, who could have saved hundreds of thousands of dollars by choosing foreclosure and walking away, kept paying down their inflated mortgages even as the lenders were bailed out. (1) In the decade since California has banned noncompete clauses, employees with patently unenforceable noncompetes in their employment contracts have nonetheless adhered to their terms and refused better job offers. (2) And by their own account, thousands of everyday participants in routine contracting treat the terms of their unread take-it-or-leave-it boilerplate with the same deference as negotiated deals. (3)

These findings could be dismissed as anomalies, but they could also be taken seriously, as prima facie evidence of a behavioral phenomenon. This Article aims to describe consumers' deference to burdensome terms as a phenomenon in its own right, and then to test the role of motivated cognition--i.e., wishful thinking--in the emerging moral psychology of consumer contracts.

The motivated reasoning hypothesis grows from the informal observation that most people would prefer to be agents than pawns. It is also, however, a natural next step in the empirical literature. The last decade of research in the psychology of consumer contracting has identified two important patterns. The first is that people take promises seriously. (4) This finding is easy for psychologists to explain in the sense that it is an explicit value; many people can and do articulate that promise-keeping is a moral norm that they have internalized and hold dear. (5) The second pattern is that people import the conventional morality of interpersonal promise-keeping into situations that might otherwise be described as predatory, exploitative, or coercive. (6) People treat predatory contracts like promises to their friends. That finding is less easy to explain, and the purpose of this Article is to propose a framework for understanding what seems to be widespread acceptance of regulation via unread terms. I describe this deference to terms as puzzling because it seems at odds with most people's material self-interest. The literature suggests that people defer to the terms as written, even when the assent is perfunctory, and even when a term is unfair. We ought to be surprised that people who are otherwise comparison shopping and discriminating on price are leaving value on the table.

To be intentionally tendentious: in the United States, firms unilaterally draft private legislation, without oversight, and use American contract law to enforce their rules. (7) Everyone does (8) and everyone must agree to take-it-or-leave it deals in order to participate in American economic and social life. (9) Taking no particular view about whether or not companies make good rules, and acknowledging that firms may not consistently choose the worst terms they can get away with, (10) it is still true that terms are not closely regulated by the market or the government, and are not "chosen" in any interesting sense of that word by the individuals subject to their constraints. (11) So why is the assent analysis so sticky? Why do courts and consumers still talk about what consumers have agreed to? (12)

The core hypothesis for this Article is that term deference is a motivated reasoning phenomenon. What this means is that when it feels better to believe that contracts are fair and that assent is reliable, people are at least marginally more likely to hold those beliefs. This itself is not controversial; self-serving biases are well-documented in the law and psychology literature. (13) What is novel, and counterintuitive, is the proposition that it might feel good for consumers themselves to believe that consumers should defer to their corporate counterparties. "Myside bias," (14) as it is sometimes called, usually favors the material benefit of the one making the judgment. (15) So why would consumers themselves support hidden fees or fine-print arbitration clauses? The prediction is twofold. First, it is psychologically appealing to believe that overall the system functions. (16) Consumers have very little actual control, and so it is appealing to believe in the social order. This is the just world hypothesis, (17) or system justification theory. (18) The second is that there is something particular about believing that assent--or perhaps more correctly, consent--is meaningful. It is important to believe that when humans agree, that agreement is real.

1. THE TROPE OF THE FECKLESS CONSUMER: AN ILLUSTRATION

   A core fact of consumer contracting is that individuals are sometimes subject to bad terms. (19) One way to interpret this fact is that firms prey on unsuspecting consumers, who are powerless to help themselves. (20) Another interpretation is that consumers have power that they are too lazy or shortsighted to exercise (21)--they are feckless, not powerless.

   A familiar window into the rhetoric of all's-fair-in-love-and-contracts is the fable of the feckless consumer who did not read the fine print. (22) If there is one thing that almost everyone (except contracts scholars) can agree on, it is that reading contracts is good. Even in academic literature, researchers have been preoccupied with increasing readership since pre-internet days. (23) Readership, or failure to read, is also a perennial feature of popular contracts commentary. (24) Articles exposing or criticizing bad contract terms are often framed in terms of the foolish consumer who finds himself victim to the savvy firm. Take, for example, a recent op-ed in The Washington Post on the pitfalls of travel contracts:

   It's no exaggeration to say that many, if not most, travel problems start with a failure to read the terms and conditions.... [For example, c]ruise contracts say the staff may search your cabin for any reason at any time. The cruise line can also use your image for any purpose without compensation.... Travel insurance policies are written in gibberish. Even if you think you understand what you've read, you might want to read it again. (25) Cruise ship employees with carte blanche search power is probably a term people both strongly dislike and fail to anticipate. In light of that, the rhetoric is telling. In the face of a stark consumer choice--accept unlimited search or do not go on your cruise--the op-ed locates prime responsibility not with the firm that insisted on intrusive privacy terms, but with the consumer who did not read them. Indeed, the suggested remedy for what we might view as fine print overreach by the firms is to read the fine print more than once. Such a commitment to consumer prudence is not supported by either the evidence or by the underlying logic, which suggests that the scolding tone is motivated by something other than accuracy. The belief that consumers ought to help themselves appears to be more deontological than consequentialist.

   That example is admittedly cherry-picked, but it is not isolated. Those who follow contracts in the national media may recall the 2015 multi-part investigative series in the New York Times. (16) The series, a serious look at the ubiquity and equities of arbitration, nonetheless went by the subtitle, "Beware the Fine Print." (27) I drew five examples from the past two years of national news media of terms that were, by the lights of the articles themselves, egregious. The purpose is largely suggestive, to bring some specificity to a cultural narrative that most of us will find very familiar.

   A Nonrandom Sample of Popular Rhetoric Around Bad Terms:

   * Class action waivers in consumer contracts: "The next time you open a bank account or sign up for a credit card, make sure you read the fine print." (28)

   * Mandatory arbitration for workplace sexual harassment claims: "[I]t's easy to overlook practical tasks such as closely reading your...