Dark Contracts

Millions of consumers are routinely subject to non-transparent consumer contracts. Such contracts undermine fundamental contract law notions. They leave consumers uninformed and disempowered. They also encourage unethical behavior and undercut the ability of legal and meta-legal forces to discipline firms. The legal treatment of non-transparent consumer contracts is undertheorized and partial in scope. This Article develops a new holistic framework for understanding these opaque consumer contracts. To conceptualize the various non-transparent ways in which firms use consumer contracts, the Article develops the notion of Dark Contracts. Part I of this Article explains what Dark Contracts are. It documents multiple non-transparent contractual mechanisms and instruments that consumer contracts often incorporate. It delineates how firms design and employ non-transparent tools in almost every possible contractual juncture: from the nature, scope, and language to performance and change to dispute resolution, conflict management, and termination. After documenting this non-transparency in action, Part II places the problem of Dark Contracts in a wider context. First, it argues that the sum of these non-transparent components is greater than its parts; Dark Contracts not only create pockets of non-transparency but also produce an in terrorem effect. Next, it opines that Dark Contracts harm not only consumers. Specifically, Dark Contracts emasculate the ability of legislatures, regulators, courts, and market watchdogs to scrutinize the ways firms exercise their power. Thereafter, it explains how Dark Contracts also interfere with the market’s ability to offer effective reputational systems that discipline firms. Subsequently, it maintains that Dark Contracts facilitate a moral wiggle room, enhancing firms’ unethical behavior. Against this backdrop, Part III calls for introducing transparency-related concepts to the law of consumer contracts. It explicates the potential of and the limitations in utilizing transparency principles in the law of consumer contracts. It further argues that policymakers should design transparency-related principles to (1) better scrutinize firms’ practices, (2) empower consumers to make better-informed decisions, and (3) ensure that firm’s unethical contractual behavior is not the prevalent norm. Concluding remarks follow