WASHINGTON – At its annual meeting this week, the Philadelphia-based American Law Institute voted to approve a Restatement intended to give legal clarity to consumer contracts – a project which has been subject to controversy, since its foundation is said to diverge from established contract law in some respects.
While the ALI publishes the Restatement of Torts and other projects that aim to serve as summaries of certain areas of law that judges can use, some have accused the group of straying from that goal by trying to create law instead of summarize it.
For example, its insurance liability law Restatement was called “litigation fuel," leading a number of judges and lawmakers in several states to reject it.
The “Restatement of the Law, Consumer Contracts” has been in the works for nine years and went through several drafts prior to its approval.
The project was helmed by its Reporters, professors Oren Bar-Gill of Harvard Law School, Omri Ben-Shahar of the University of Chicago Law School and Florencia Marotta-Wurgler of the New York University School of Law. The trio was advised by more than 30 fellow professors, practitioners and judges.
Containing 10 sections, the project sought to address and close a perceived inherent information gap between the business and consumer parties to a contract, through reference to “the Restatement Second of Contracts, the Uniform Commercial Code, and on court opinions in cases involving disputes between businesses and consumers,” according to the organization.
The Restatement has sections on unconscionability, deception and promises not included in standard contract terms. Other sections include discretionary obligations and effects of derogation from mandatory rules, in addition to contract items consumers may encounter in online transactions, such as software licensing terms, privacy policies and potentially costly conditions of sale, such as restocking fees and early-cancellation charges.
Two specific areas of consumer contract law specifically addressed by the Restatement are the doctrine of mutual assent – rules that determine how contractual terms are adopted and the processes a business uses to introduce and to modify terms in the agreement – and the use of mandatory restrictions governing the contract, such as rules that limit business’ discretion in drafting contractual terms and setting boundaries for permissible contracting.
Prior to the Restatement’s approval on Tuesday, the ALI voted to approve a motion which added a new, 10th section to the Restatement, titled “Interpretation and Construction of Consumer Contracts.”
It read that standard contract terms would be interpreted to effectuate the “reasonable expectations of the consumer” and construed “against the drafter of the term”, or a given business. It further explained any ambiguities in the language of a standard contract term or the process by which a consumer assents to provisions, would be resolved against the business who provided the term or process in question.
According to ALI’s Deputy Director Stephanie Middleton, the Restatement of Consumer Contracts was no different than any of the group’s projects, in that ALI “welcomes specific comments and input on the drafts” as they proceed.
“Our Restatement projects all have the same purpose they always have had for nearly 100 years, which is to clarify and simplify the law,” Middleton previously said.
In January, a collective group of general counsels representing major corporations – such as Comcast, Verizon, General Motors and General Electric, as well as trade associations like the Pennsylvania Chamber of Business and Industry and Pennsylvania Coalition for Civil Justice Reform – sent a letter to the ALI explaining why, in their view, the Restatement of Consumer Contracts should be dropped altogether.
In May 2019, the attorneys general of 23 states, led by the State of New York, also sent a letter to the ALI opposing the Restatement. They contended it ignores “established precedent and black-letter law, deprives consumers of a meaningful benefit and offers them no real protection.”
American Tort Reform Association (ATRA) President Tiger Joyce issued a statement on the ALI’s approval of the Restatement of Consumer Contracts.
“We are disappointed to learn that the ALI voted to approve its so-called ‘consumer contracts’ restatement today. Today’s approval shows unequivocally that the ALI should now be called what it is – an advocacy organization focused on expanding liability for civil defendants. We’d hoped to see ALI members vote down the restatement, but rather they took affirmative steps to make it even worse. It seems ALI will instead continue down a path toward advocacy rather than scholarship,” Joyce said.
“This is an example of ALI purporting to summarize existing law that has never been clearly adopted in the first place. It and many previous restatements depart from the traditional objective, which is to survey and synthesize the consensus on legal rules based on existing law developed by judges, usually over the course of many years.”
A follow-up on the ALI’s approval of the Restatement of Consumer Contracts in the Pennsylvania Record is forthcoming.
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com