New Zealand’s Victoria University of Wellington study finds commonly-used consumer contracts too complex

New Delhi: A study co-authored by Victoria University of Wellington has shown the way in which online standard form contracts are drafted often makes them unreadable for the average consumer.

Associate Professor Samuel Becher from the University’s School of Accounting and Commercial Law, alongside Dr Uri Benoliel from College of Law and Business at Ramat Gan Law School in Israel, investigated the readability of sign-in-wrap contracts.

Sign-in-wrap contracts assume that the user agrees to the website’s terms and conditions by registering or signing up, with a hyperlink to the terms and conditions provided. Such contracts do not require the terms to be accessed.

They are routinely accepted by consumers when signing up for popular websites such as Facebook, Amazon, Uber, and Airbnb.

In this study, Associate Professor Becher and Dr Benoliel applied two well-established linguistic readability tests—the Flesch Reading Ease test and the Flesch-Kincaid test—to the 500 most popular websites in the United States that use sign-in-wrap contracts.

The results show that the average readability level of these agreements is comparable to the usual score for articles in academic journals, which typically do not target the general public, explain the authors.

“Effectively reading these agreements requires, on average, more than 14 years of education. This result is troubling, given that the recommended reading level for consumer materials is eighth grade, which is equivalent to New Zealand year nine.”

Currently the law in most common law countries neglects to impose on firms a clear duty to draft readable contracts, says Associate Professor Becher.

“Consumers frequently enter into contracts with large firms. In these cases, consumers are legally assumed to read the terms of their contracts and these terms are generally binding.”

“However, firms do not have a duty to draft their contracts in a readable way. Nevertheless, courts assume that consumers can read these contracts and they generally enforce them.”

Associate Professor Becher and Dr Benoliel say these findings have significant implications for the design of consumer contract law.

“Policy makers need to take further steps to level the consumer-business playing field. A contract is based on mutual assent, and consumers cannot truly assent to something they cannot read.”

“Legislatures should not only require firms to draft plain language contracts, but also detail systematic and objective criteria as to what is readable.”

“Additionally, given our findings, courts should not assume that consumers can read these contracts. This should lead courts to be more willing to excuse consumers from the terms of their agreements in those cases where the contracts are unreadable.”