The John M. Olin Center

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61. Meirav Furth-Matzkin, On the Unexpected Use of Unenforceable Contract Terms: Evidence from the Residential Rental Market, 06/2017; published in Journal of Legal Analysis, Vol. 9, No. 1 (June 2017).

Abstract: This article explores the prevalence of unenforceable and misleading terms in residential rental contracts. For this purpose, the study analyzes a sample of seventy residential leases from the Greater Boston Area in terms of Massachusetts Landlord and Tenant Law. The article’s findings reveal that landlords often use deceptive--as well as clearly invalid--provisions in their contracts, and regularly fail to disclose the vast majority of the mandatory rights and remedies that the law bestows upon tenants in their leases. Building on psychological insights and on survey evidence, the article suggests that this drafting pattern may significantly affect tenants’ decisions and behavior. In particular, when a problem or a dispute with the landlord arises, tenants are likely to perceive the terms in their lease agreements as enforceable and binding, and consequently forgo valid legal rights and claims. Therefore, the article expects that such clauses will persist as long as monitoring and enforcement mechanisms do not sufficiently deter landlords from using such terms in their contracts. In light of this evidence, the article discusses preliminary policy prescriptions.