A recent controversy over the American Law Institute’s draft Restatement of the Law of Consumer Contracts (the “Draft”) raises four questions: (i) What is the state of basic contract principles such as formation or unconscionability with respect to consumer contracts; (ii) does the Draft get the existing law right; (iii) how much can contract law do to give consumers a leg up in the modern economy; and (iv) should the Draft do more?

The positive critiques of the Draft are weak. Cases that do not contradict the Draft are cited as showing that it is wrong, district court opinions that have not even been adopted in their home circuit are praised as “leading cases,” and the rules of formation are decried as unsettled and messy, when the standard is clear. The answers to questions (i) and (ii) are that the cases are reasonably settled on principles that are accurately reflected in the Draft.

Normative questions (iii) and (iv) are interesting and hard. Critiques of the Draft presume that contract law could do a lot to help consumers but that the Draft would thwart such efforts. There are limits to what contract law can do to give consumers a leg up, however, and the Draft does not narrow those limits. Sweeping statements, such as that the Draft “if adopted, would drive a dagger through consumers’ rights,” are excessive, even if limited only to doctrines such as unconscionability. Critics are notably short on cases that go their way under current law but which would come out differently under the Draft.

The Restatement project presumes the exercise of nonpartisan judgment. Some criticisms of the draft, notably those contained in a letter signed by numerous state attorneys general, are more political tracts than analytic critiques. Because the Draft does a good job analyzing and distilling the law, the real question in this debate is whether the ALI and the Restatement project as a whole can withstand efforts, such as the AGs’ Letter, to use the tools and standards of retail politics to defeat the analytic approach of the Draft. To the extent such efforts succeed, the Restatement concept as a whole will fail.

McGowan, David, Consumer Contracts and the Restatement Project (September 2, 2019). Available at SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3446802

David McGowan

University of San Diego School of Law

David McGowan is the Lyle L. Jones Professor of Competition and Innovation Law and the Director for the Center for Intellectual Property Law & Markets at University of San Diego School of Law. Professor McGowan clerked for the Hon. A. Raymond Randolph of the U.S. Court of Appeals for the District of Columbia Circuit. He practiced in San Francisco with Skadden, Arps, Slate, Meagher & Flom and Howard, Rice, Nemerovski, Canady, Falk & Rabkin, where he was elected a director shortly before moving to academia. McGowan taught at the University of Minnesota School of Law from 1998 to 2005. He joined the USD School of Law faculty in 2005.


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