Consumers often sign form contracts without reading them — if you don’t believe me, just drop by a car rental agency and watch what happens.
Consumers may have many reasons for not reading contracts, including that they are too long (the iTunes contract is 32 feet long when printed); that the contracts are incomprehensible (all that legalese); or that they can’t negotiate better terms.
But do consumers think they know what’s in the contracts they skip over?
My colleagues, Elayne Greenberg, Paul Kirgis and Yuxiang Liu decided to explore what consumers believe about the contracts they sign without reading. We showed 668 consumers a credit card contract and asked them to give the contract “the exact same amount of attention” that they would have if it had just been provided to them, along with a new credit card.
It seems safe to say that many respondents did not read the entire contract or the part we asked questions about: the contract’s arbitration clause. The average respondent spent about four minutes on the contract — less than 15 percent of the time an average reader would have needed to read it completely.
The contract had told consumers to read the arbitration clause carefully, and the clause was printed in bold, italics, and partly in capital letters, which should have made it noticeable. The key parts of the arbitration clause would have taken an average reader at least 75 seconds to read, or about four times as long as the average respondent spent on the page containing those parts. So we expected many consumers to say they didn’t know the answers to our questions.
Many consumers did indeed say they didn’t know. But more thought they did know the answers — only they didn’t. For example, when we asked if the contract waived the right to sue in court, 49 percent said it didn’t, even though it did. And 48 percent said the contract didn’t prevent consumers from joining a class action, when it did.
Overall, respondents gave wrong answers 37 percent of the time, nearly the same as the 38 percent of answers we got that said “I don’t know.” In contrast, respondents were right only a quarter of the time.
And more than half the respondents got at least three of the eight questions we asked wrong, suggesting that many people think they know more than they do. Respondents who thought they knew the contract better actually got twice as many wrong answers as those who said they understood very little of the contract.
Many consumers believed they retained rights that the contract said they actually gave up. Some thought that contract terms taking away rights would not be enforceable even though they are.
In short, even when consumers do not read contracts, many think they still have rights that they don’t. This means that businesses can write contracts taking away rights from consumers, and the consumers won’t even realize it or won’t believe it when they do.
Jeff Sovern is a professor of law at St. John’s School of Law and co-coordinator of the Consumer Law and Policy Blog.