Law and Choice in Consumer Contracts: Views from Law and Economics

Abstract

Choice in Contract Law, including consumer contracts, has become a focal point for theoretical and policy debate on contracting. In this essay we do not cover all issues of choice surrounding optional sets of Contract Law rules such as CESL. At the same time we do not intend to limit the reach of some of our ideas to CESL. But we do intend to explore several issues concerning choice of legal rules in settings of contracts between firms and consumers, as being revealed by the debate following the publication of CESL. We frame our contribution along two different, albeit related, lines. One is—sorry for the lack of modesty—our own previous work on legal harmonization and European Contract Law. In a first wave of papers we analyzed how efficiency-minded lawmakers should set legal standards in settings of pre-existing divergent legal systems and where building markets across national borders can be expected to produce social welfare gains. The second wave addressed more directly optional sets of legal rules governing contractual interactions, and tried to provide an stylized model of firm’s choice when confronted with optional European rules and diverse national rules. Now we introduce a broader set of economic arguments concerning Law and choice in consumer contracts. The article will be organized as follows: in Sect. 28.2 we present the issue of choice in consumer contracting. In Sect. 28.3 we address the view that optional sets of rules would produce choice only for the wrong (having consumers’ welfare in mind) reasons. Section 28.4 refers to the effectiveness of choice in the presence of optional rules, focusing on the behaviour of the firm. Section 28.5 analyzes the claims of insufficient (for firms) choice in the current legal framework of consumer contracts in Europe, and present economic arguments to undermine the soundness of those claims. Section 28.6 briefly concludes.