Fair Contracts (faircontracts.org) is a website dedicated to encouraging the use of only one type of contract: the kind that ordinary people can read and understand. Here, based on an excerpt from the Fair Contracts website, is the problem:

The Problem with Standard Form Contracts

Many businesses use standard form contracts, pre-printed contracts filled with fine print, in transactions with individual consumers. These contracts are usually “boilerplate,” “take-it-or-leave it,” non-negotiable contracts.

The problem presented by many of these contracts can be summed up as unequal bargaining power — between the consumer and the corporate entity that uses them.

Corporations use these contracts to have uniformity and efficiency by reducing the costs to them of negotiating with consumers on an individual basis. Consumers sign these kinds of contracts routinely — usually never reading, much less understanding, the fine print they contain. And there is the rub.

The party with superior power — the corporate entity that drafts the contract — can use the fine print, coupled with the knowledge that the consumer rarely, if ever, reads the terms, to take advantage of the unsuspecting consumer in the underlying transaction.

Consumers often make purchases based on price and quality, but there are a number of other factors in the fine print of these transactions that merit consumer attention: These provisions may, and often do, work against consumer interests. Though some say consumers can always walk with their feet or dollars and choose to not engage in these transactions, often the consumer, having not read the fine print, is completely unaware of these provisions until the corporation tries to enforce them against the consumer. Worse, often entire industries have contracts containing these unfair provisions, thereby leaving the consumer with no meaningful alternate choice. Even worse, businesses often reserve for themselves the right to modify or change the terms of the contract, making comparison shopping pointless if the contract or the prospective contract is always subject to change.

To add insult to injury, these contracts often contain forced arbitration, venue and/or choice-of- law provisions, so resolution of disputes no longer even takes place in a public courtroom forum, but in a private, business-dominated industry of arbitrators, who are neither required to follow the rule of law, nor are subject to its oversight. Contract law and a consumer’s day in court has been “privatized” to a process whose outcomes are often unknowable and unchallengeable.

[T]he modern-day reality with fine print in standard form contracts is that there is no mutuality of assent, and there is often no time for or inclination by the consumer to read the terms, or even an ability to cross comparison shop those terms. And even if the consumer did try to comparison shop, it wouldn’t do much good if the sellers can always change their terms and insulate their provisions from meaningful judicial review. This adds up to a fiction in the law of contracts and makes a mockery of the idea of consumer freedom in a free market.

Ralph Nader shares these concerns:

This problem of consumers failing to understand critically important contracts if rife in the field of real estate mortgages. Consider, for example, the findings reported by law professor Jeff Sovern, that “more than two-thirds of the brokers reported that less than 30% of their borrowers spent more than a minute with the disclosures.” From “Preventing Future Economic Crises Through Consumer Protection Law or How the Truth in Lending Act Failed the Subprime Borrowers,” p. 786. Here’s another excerpt:

The brokers were nearly unanimous in reporting that borrowers never withdrew from a loan after reading the final TILA disclosures at the closing and never used those disclosures for their stated purpose of comparison shopping for loans. In addition, brokers reported that many borrowers spent a minute or less with the disclosures, despite the fact that mortgage loans are among the largest, longest-term, and most complex obligations most consumers ever assume. It thus appears that many borrowers enter into their mortgages without comprehending the terms and the ramifications of those loans.

Sovern has many ideas for un-tilting the playing field. One of those ideas is for independent consumer agencies to review form contracts and to grade them for consumers. The current problem is that consumers have no incentive to read fine print contracts and businesses have no incentive to draft contracts in readable form.