The John M. Olin Center

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82. Meirav Furth-Matzkin & Roseanna Sommers, Fool Me Once, Shame on Me: How Consumers and Lawyers Perceive the Fine Print in Deception Cases, 06/2018; forthcoming in Stanford Law Review (2019).

Abstract: This Article investigates how lawyers and laypeople respond to consumer contracts that are formed as a result of fraud. Across four studies, we show that contrary to the prevailing wisdom in contract law scholarship, fine print is not simply white noise. Rather, it has a significant and detrimental effect on lay consumers. We demonstrate that clauses that consumers neglect to read ex ante, at the time of signing, have a significant psychological effect ex post, when consumers discover they were deceived about the terms of the transaction. Consumers who would otherwise complain about being cheated are demoralized by contractual fine print, and consequently decline to seek redress. This is because they erroneously assume that all contracts--even contracts induced by fraud--are binding. Our studies presented participants cases in which a seller induces a consumer to buy a product or service by making a false representation. The false representation is directly contradicted by the written terms of the contract, which the consumer signs without reading. Our findings reveal that laypeople, unlike legally trained individuals, strongly believe that such agreements are consented to, and will be enforced as written, despite the seller’s material deception. Importantly, the presence of fine print discourages consumers from wanting to take legal action, initiate a complaint, or damage the firm’s reputation by telling others what happened. At the same time, the fact that the seller lied makes little difference to laypeople’s intuitions about whether the contract will be, or should be, enforced. Finally, we show that informing consumers about anti-deception consumer protection laws alters their perceptions about the legal and moral status of contracts induced by fraud, although such information does not completely counteract their formalistic intuition that whatever the contract says is the final word. The implications of our study, we argue, are that prevailing methods for addressing deceptive business practices are inadequate, because they fail to take account of consumer psychology.