Standard Form Contracts

Abstract

Among legal commentators, standard form contracts have long been received with distrust, and the rules governing their interpretation have engendered considerable controversy. While economic analysis has little to say regarding the libertarian objection to standard form contracts or their relationship to personal autonomy, it can help evaluate their effects on efficiency and the distribution of the gains from trade. From such a perspective, standard forms should be analyzed like any other productive input, comparable to design, marketing, and technical support. Whether their use raises any special regulatory or policy concerns, therefore, depends on their implications for the standard litany of market failures: scale economies, monopoly, externalities, imperfect information, and the like. This essay surveys and discusses such implications, concluding that a measure of special legal treatment for form contracts is appropriate on economic grounds.

JEL Classification: K12