Dark Contracts

Abstract

Millions of consumers are routinely subject to non-transparent consumer contracts that undermine fundamental contract law notions. Such contracts leave consumers uninformed and disempowered, encourage unethical behavior, and undercut the ability of legal and extralegal forces to discipline firms. 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 delineates how firms design and employ non-transparent tools at almost every possible contractual juncture. Part II places the problem of Dark Contracts in a wider context, arguing 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. Dark Contracts harm consumers and emasculate the ability of institutional actors to scrutinize firms’ use of power. Such Contracts also interfere with the market’s ability to offer effective reputational systems that discipline firms and facilitate unethical behavior. Part III calls for introducing transparency-related concepts to the law of consumer contracts. It explains the potential and limitations of utilizing transparency principles in policing consumer contracts. It further argues that policymakers should design such principles to (1) better scrutinize firms’ practices; (2) empower consumers to make better-informed decisions; and (3) ensure that firms’ unethical contractual behavior is not the norm.