Thursday, September 27, 2012

No contract?

I heard Omri Ben-Shahar present a really interesting paper he’d done with Oren Bar-Gill, No Contract, about the rise of “no contract” cell phone service, etc., where the selling point is that there’s no early termination fee.  This wasn’t his focus, but I was intrigued by the question of whether the fine print for these contracts—because there is fine print—could include an enforceable mandatory arbitration clause.  My inclination is no, at least when the promise is “no contract,” especially coupled with an image (“no termination fee” would be a different matter).  Plainly, there is a rudimentary contract between the parties: the customer pays the advertised price and gets the advertised service.  But are there any other terms?  The explicit promise seems to be no, and I don’t see how the fine print can add in a term that would undoubtedly surprise many consumers (a ban on litigation and an arbitration requirement).




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