Scholar argues that standardized contracts need to be understandable to be enforceable.
If you have used social media, booked a ride-sharing service, or read news online, chances are you have agreed to a pre-drafted standard form contract—also known as a contract of adhesion.
Yet studies have found that the average American cannot understand most of these contracts.
In a forthcoming article, Michael A. Blasie, an assistant professor of law at Seattle University School of Law, argues that these contracts must be understandable to be enforceable. He explains that key elements of contract formation, such as mutual agreement, assume that consumers can comprehend the terms of the contract.
To ensure fair contract engagement, Blasie recommends imposing a duty on sellers to make contracts of adhesion understandable.
Contracts of adhesion are the most common kind of contract formed, yet consumers have no ability to negotiate them. Consumers must assent to these standardized contracts to access both luxuries, such as social media platforms, and necessities, such as mortgages and employment.
Despite their prevalence, these contracts are often complicated, long, and contain legalistic terms, rendering them incomprehensible to the average consumer, claims Blasie. In fact, studies have found that most of these contracts require a reading level between six and eight grades higher than the average adult’s reading level.
As a result, consumers may unknowingly be agreeing to terms that limit their rights and interests, states Blasie.
He argues that a contract cannot be legally enforceable unless the consumer understands its terms. Without this understanding, a consumer cannot meaningfully assent to the contract, a key element of contract formation.
In addition, under the law, consumers are assumed to have read the terms and conditions of their contracts before signing. Blasie points out that this “duty to read” relies on the premise that a consumer could understand the terms of a contract, even if they read it.
To help consumers understand their rights and duties under contracts, some states have passed “plain language” laws that require drafters to make their contracts more readable and understandable to their intended readers.
These laws, however, have not impacted consumer understanding, argues Blasie. He explains that plain language laws only target certain kinds of consumer contracts. Texas has the most consumer protection plain language laws, for example, and yet the majority of these laws only cover insurance documents.
Furthermore, courts apply different standards to evaluate a contract’s compliance with the law, resulting in unpredictable and inconsistent applications, claims Blasie.
Some courts have also considered plain language when assessing the enforceability of a contract, such as whether the parties mutually agreed to the contract, whether the contract was ambiguous, or whether the contract terms were fair.
This approach has also been ineffective in making contracts more understandable because these analyses are conducted on a case-by-case basis and primarily occur in trial courts—only affecting the parties involved in the case. Blasie notes that most courts require a confluence of factors to void a contract, indicating that plain language issues alone are insufficient.
These piecemeal efforts fail to protect consumers and lack consistency across the states, contends Blasie. He proposes a proactive approach that imposes a duty on sellers to make contracts of adhesion understandable, allowing “courts to pry into whether a consumer had the capacity to consent given the contract’s design.”
Blasie suggests that the standard for assessing these contracts should be whether “the average intended consumer can understand them.” He explains that the “average” requirement would be consistent with the objective standards currently used in contract law and would limit the burden imposed on sellers.
The “intended consumer” component would give sellers the opportunity to tailor their contracts to their target market, states Blasie. In certain industries, contracts may be more complex and contain technical terms when the average consumer is more sophisticated and familiar with such terminology.
Blasie recommends that, if this duty is breached, there is no manifestation of assent between the parties and the contract should be voided.
By requiring the understandability of contracts, a clear legal duty will help consumers comply with their terms, compare competing products or services, and make more informed decisions about whether to enter into a contract, claims Blasie.
Furthermore, a well-specified duty would allow courts to consider how new tools and designs affect a consumer’s understanding of contract terms, contends Blasie. For instance, electronic contracts use tools such as color, sound, hyperlinks, and images. He argues that his proposed duty could adapt to technological changes in contract formation and the law.
Opponents argue that some common contracts, such as insurance contracts, are inherently long and complex. They claim that it would be impossible to include all of the explanations needed to make these contracts understandable for the average adult under Blasie’s proposed duty.
Blasie provides examples to counter this argument. For instance, he highlights a 2022 redesign of 22 states’ food stamp forms, which led more than 650,000 additional people to sign up for food stamps over the course of one year. In recent years, agencies and companies have also revised policies to use more understandable language, states Blasie.
In addition, Blasie suggests that companies leverage technology to improve consumers’ understanding of complex terms, including implementing AI chat support and offering online educational material to explain fundamental concepts and terms.
Under the current law, consumers are assumed to have read contracts before signing, yet sellers have no duty to offer readable contract terms. With consumers entering into billions of these contracts each year, Blasie urges policymakers to impose an affirmative duty on sellers to make contracts of adhesion more understandable.
