Signing Without Reading

Marciano, Alain and Ramello, Giovanni Battista (eds.), Encyclopedia of Law and Economics: Basic Areas of Law, Springer, Forthcoming

Washington University in St. Louis Legal Studies Research Paper No. 16-09-01

10 Pages Posted: 6 Sep 2016 Last revised: 16 Sep 2016

See all articles by Gerrit De Geest

Gerrit De Geest

Washington University in St. Louis - School of Law

Date Written: April 23, 2015

Abstract

Most people sign standard term contracts without reading them. This gives drafters an incentive to insert one-sided, inefficient terms. This problem can be solved directly by giving the drafter a duty to draft efficient terms, or indirectly by giving the signer a duty to read (which may remove the incentive to insert one-sided terms if a sufficient number of signers do read the contract). The problem can also be solved in a more draconian way by holding all standard terms unenforceable, irrespective of whether they are efficient or one-sided. Finally, the problem can be solved through hybrid instruments – for instance, American common law gives the signer a duty to read but intervenes when terms are unconscionable.

In this short chapter (written for a forthcoming book of Marciano and Ramello, eds.), I argue that a duty to draft efficient terms is the superior instrument. Doctrinally, this means that unread contracts are best seen as agreements to delegate the drafting task to the party that can do so at least costs, as is the case under German law. Because rational parties will never give one of them a wildcard to insert inefficient terms, standard terms should be enforced only to the extent they are efficient. Moreover, economic logic dictates that it should be upon the drafter to prove that the terms are efficient, rather than upon the signer to prove that they are inefficient.

Keywords: Standard terms, unconscionability, duty to read

JEL Classification: K12

Suggested Citation

De Geest, Gerrit, Signing Without Reading (April 23, 2015). Marciano, Alain and Ramello, Giovanni Battista (eds.), Encyclopedia of Law and Economics: Basic Areas of Law, Springer, Forthcoming, Washington University in St. Louis Legal Studies Research Paper No. 16-09-01, Available at SSRN: https://ssrn.com/abstract=2834314 or http://dx.doi.org/10.2139/ssrn.2834314

Gerrit De Geest (Contact Author)

Washington University in St. Louis - School of Law ( email )

Campus Box 1120
St. Louis, MO 63130
United States
314-935-7839 (Phone)

HOME PAGE: http://www,degeest.wustl..edu

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