Law & Economics Working Papers
What if consumer contracts were legally enforceable only against the consumers, but not against the business? This paper, part of my project on the "myths of consumer protection," describes a regime of "one-way contracts"— contracts between consumers and business to which only consumers are bound, the business is not. A breaching business would face no contractual liability. The paper argues that many consumer contracts are already disguised one-way contracts. It then demonstrates the variety of alternative consumer protections devices that would emerge in the total absence of legal protection. In a one-way contracts world, transactions will be redesigned to limit consumers' exposure to breach; insurance and bond services would develop to protect aggrieved consumers; reputation services and rating intermediaries would have a greater role; and public enforcement could potentially fill some of the remaining deterrence gaps. Thus, despite weakening the legal protections, the one-way contracts regime has the potential to improve consumer well being. The paper concludes that the focus within the consumer protection movement on enhancing access to, and the scope of, legal remedies may be misguided.
Omri Ben-Shahar, "One-Way Contracts: Consumer Protection without Law" (John M. Olin Program in Law and Economics Working Paper No. 484, 2009).