Standard Form Contracts are preprinted agreements that use standardized, non-negotiated provisions. These are also known as “boilerplate contracts,” “adhesion contracts,” or “take it or leave it” contracts. The terms, which are frequently depicted in fine print, are drafted by or on behalf of one party to the transaction, the party with superior bargaining power who engages in such transactions on a regular basis. The terms are not negotiable by the consumer, with a few exceptions. Find out more on standard form of contracts here.
Business-to-consumer contracts in standard form play an important efficiency role in the mass distribution of goods and services. These contracts have the potential to lower transaction costs by eliminating the need to negotiate the many details of a contract each time a product or service is sold or used. However, due to the parties’ unequal bargaining power, these contracts have the potential to deceive or abuse consumers. For example, if a standard form contract is entered into between an ordinary consumer and a salesperson of a multinational corporation, the consumer is typically unable to negotiate the standard terms; indeed, the company’s representative frequently lacks the authority to alter the terms, even if both parties to the transaction are capable of understanding all of the fine print. These contracts are typically drafted by corporate lawyers located far from the actual consumer and vendor transaction.
The risk of accepting unfair or unconscionable terms is greatest where these skilled contract drafters present consumers with appealing terms on the visible or “shopped” terms of most interest to consumers, such as price and quality, but then slip one-sided terms benefiting the seller into the less visible, fine print clauses least likely to be read or understood by consumers. In many cases, the consumer may not even be aware of these contracts until after the transaction has taken place. In some cases, the seller is aware of and capitalizes on the fact that consumers will not read or make decisions based on these unfair terms.
Standard forms are widely used because they make common business transactions more efficient and cost-effective. These contracts are typically many pages long and contain specifics outlining the terms and conditions. Standard contracts are frequently used in situations where vendors and customers participate in legally and technically complex transactions on a regular basis. While standard forms have many advantages, they also have drawbacks and risks.
One of these concerns is the “battle of forms,” which occurs when both parties use their own form for the transaction. Furthermore, because these contracts are so detailed and lengthy, consumers frequently sign them without reading the fine print.
Furthermore, the terms of standard form contracts frequently benefit the party with the greatest bargaining power. This type of purchasing power disparity exists between businesses and consumers. When there are disparities in negotiating power, the result is an agreement that works economically against the consumer. In these cases, the courts are on the side of the consumer. The courts will intervene if the contract does not genuinely look out for the best interests of all parties.
