Regulation of Unfair Terms in Consumer Contracts--An American Perspective

Abstract

In the typical merchant-consumer transaction, standard terms are of course the norm. Consumer transactions are documented by contracts of adhesion where most, if not all, of the terms are drafted by the merchant and are not negotiable. Even if they were negotiable, the vast majority of consumers will either not be aware of this possibility or, quite reasonably, will conclude that they cannot bargain effectively over terms either because they do not understand their legal import or they cannot envision alternatives that would better serve their interests. Sometimes those standard terms are so one-sided in favor of the merchant that they inflict unfair hardship on the unknowing consumer. In the United States, there is no omnibus law on unfair contract terms that applies uniformly throughout the country. Regulation of unfair terms is addressed piecemeal, with limited protection in certain sectors at the federal level and most of the regulatory norms imposed by the individual states. Those norms can take statutory or common law form, and while they can vary widely from state to state, there are some parallel themes.