iPromise: How Contract Theory Can Inform Regulation of Online Consumer Contracts

• Author: Christopher McMahon
• Position: Senior Sophister LLB (Political Science) candidate and Scholar, Trinity College Dublin
• Pages: 174-197

© 2018 Christopher McMahon and Dublin University Law Society

IPROMISE: HOW CONTRACT THEORY CAN

INFORM REGULATION OF ONLINE CONSUMER

CONTRACTS

CHRISTOPHER MCMAHON

Introduction

The law of contract has proved itself to be an adaptable institution at the

heart of Western economies, the rules of which matured in the late

nineteenth century to allow industrialists to deal at arm’s length.

1

Though

the decline of this legal institution was prophesied with the rise of more

interventionist states,

2

the advent of digital technologies has reaffirmed its

importance. Today, as people in increasing numbers avail of services

mediated by online platforms which confound state regulation, the

contracts and private legal orders that govern these online services have

gained prominence.

3

Contracting has also become a more frequent and

often accidental feature of daily life.

4

Online contracts have reshaped the

environment in which consumers conclude agreements,

5

with many

agreements adopting the form of the wrap contract.

6

This article seeks to

examine the changes in consumer contract practices brought about by

 Senior Sophister LLB (Political Science) candidate and Scholar, Trinity College Dublin.

Although the usual disclaimer obviously applies, the author would like to express his

gratitude to Dr Andelka Phillips for her comments on an earlier draft of this article and to

Cian Henry for his suggestions and deft contributions to the editorial process.

1

Patrick Atiyah, The Rise and Fall of Freedom of Contract (Oxford University Press 1979)

681.

2

ibid 717.

3

Margaret Radin, Boilerplate: The Fine Print, Vanishing Rights and the Rule of Law (Princeton

University Press 2013) 16-17.

4

Nancy Kim, Wrap Contracts: Foundations and Ramifications (Oxford University Press 2013)

1-2.

5

Brett Frischmann and Evan Selinger, ‘Engineering Humans with Contract’ (2016) Cardozo

Legal Studies Research Paper 493, 5

accessed on 31 October

2017.

6

Nancy Kim provides the following useful definition of wrap contracts as 'a unilaterally

imposed set of terms which the drafter purports to be legally binding which is presented to

the nondrafting party in a nontraditional format.' Nancy Kim, Wrap Contracts: Foundations

and Ramifications (Oxford University Press 2013) 2.

[2018] iPromise 175

175

digital technologies and assess their impact on theoretical understandings

of the nature of contract.

The changing nature of contracts in this online environment

displaces the links between classical contract doctrine and its normative

justification. In order to advance the same purposes, and to preserve the

doctrine’s current social function, contract law requires amendment from

its classical position.

7

In particular, these changes militate in favour of an

understanding of contract as relational rather than based on discrete

transactions, and as more authoritarian than deliberative. This article thus

evaluates the efforts, both at common law and through legislation, to adapt

contract law to this new environment and to recalibrate its connection to

normative theory, both in Ireland and the United States. It is argued that

while the doctrine of unconscionability, which has been elaborated in

greater detail in the United States than in Ireland, works towards

mitigating the negative consequences of wrap contracts, legislation

targeting consumer transactions specifically is to be preferred.

I. The Online Environment, Consumer Contracts, and

Analytic Theory

The emergence of intricate, non-negotiable, and lengthy standard form

contracts precedes internet technologies.

8

However, many of the trends

that were prevalent before the democratisation of the internet were

accelerated once contracting began to take place online. The quantity of

text that can constitute a digital contract is not limited by the cost of

producing a physical copy.

9

Furthermore, while lengthy printed contracts

may worry consumers and dissuade them from signing, particularly for

quotidian transactions, no such pressure exists where the text is online

and its volume less apparent.

10

Attempts of consumers to read online contracts may be irrational

even when compared to written contracts of adhesion. Ben-Shahar

explains that even if consumers were to read contracts, they stand to gain

7

Daniel Barnhizer, ‘Contracts and Automation: Exploring the Normativity of Automation

in the Context of US Contract Law and EU Consumer Protection Directives’ (2016) 9(14)

Yearbook of Antitrust and Regulatory Studies 15.

8

Friedrich Kessler, ‘Contracts of Adhesion – Some Thoughts on Freedom of Contract’

(1943) 43 Colum L Rev 629, 631.

9

Barnhizer (n 7).

10

Kim (n 4).