Would contracts be simpler in Libertopia?

Great Debates
1

I am, currently, party to at least a dozen contracts that I only partially understand. Employment, several credit cards, utilities, telephone, cable, lease, etc. Some of these I understand more than others, but I’m not a lawyer, and I didn’t get a lawyer’s advice before consenting, so I imagine that even the ones I think I understand, I don’t fully understand.

The worst of these are the cell phone and the credit card contracts, all of which contain clauses to the effect of “we can change this contract/our rates/your options as we see fit”. I am nervous about these clauses, but I agree to them anyway because I like having a phone and credit cards, and I know that, in the absolute worst case, I can go complain to my elected representatives and the media and something will be done.

For the purposes of this discussion, Libertopia is any society that is more fundamentally based on a libertarian philosophy than ours is, where the state still exists to address wrongs, but things like consumer protection laws and credit and telecommunications regulations are more limited to nonexistent. Since I’m interested in the trend of contract simplicity as government restrictions on private contracts are lifted, I don’t care much how libertarian the society is (unless you think that the trend would not be anatomically increasing or decreasing, in which case, say so).

My belief is that contracts would be less ambiguous, but no simpler. There would definitely be fewer clauses of the “we can do whatever we want” sort, since only crazy people would agree to such a thing if they knew they could really be held to it. However, I think that the driving force behind complicated contracts is that complicated contracts are very effective at extracting money from people who don’t or can’t think ahead very carefully, and powerful/wealthy interests can afford experts to craft complicated contracts in optimal ways, while unsophisticated individuals tend to accept the options that are readily available. Even really smart people are unlikely to beat actuarial tables and professional lawyers when it comes to planning a fee schedule, for example.

2

I would think there wouldn’t be contracts at all in Libertopia. You would do business people as you saw fit. If you never paid your bill, your vendor would cut off service, word would get out and no one would do business with you. Essentially it would be buyer and seller beware.

3

As a lawyer, I don’t think it would make much difference. Anglo-American contract law generally is based on “private ordering” of contracts. You don’t need to use a government-approved form and you don’t need to deposit a contract at the courthouse to make it binding. It’s whatever the parties can agree to as mutually acceptable terms. Some provisions of a contract, if tested in court, might be ruled invalid as “against public policy,” and that might change in Libertopia, but probably only in the details of what is or is not considered to be against public policy, not in the general principle. (I’m assuming Libertopia would still have courts; I’ve never met a Libertarian who wanted to do away with them.)

4

I disagree. Even in Libertopia, people and companies would need to be able to make legally binding agreements with each other. Just because we are libertarians does not mean we are anarchists.

Like BrainGlutton, I don’t think there’d be that much difference.

5

How would I be able to rent an apartment without some agreement on how much the rent will be next month?

6

Somewhere along the way, it would occur to somebody that ‘Simple Contracts in Plain English!’ would make a good selling point and the free market would take it from there.

7

I thought about this, but, then, why hasn’t such a thing taken hold now? Obviously, complicated and confusing contracts are more profitable than simple and plain ones.

8

Most credit card contracts are ridiculously confusing because of government mandates or government-mandated disclosures. The ‘Schumer box’ is one example. State-by-state regulation on escheat laws, arbitration, etc. are another reason.

Another example are mutual fund propectuses. Most of the language in there is mandated by law.

Why would a company want to deliberately confuse it’s customers and potentially scare them away with fine print or gobbledy-gook if they didn’t have to?

Wait, let me guess what the response to that will be…

9

Contracts, like other legal documents, and like statutes and ordinances, appear confusing to the layman because they use legal terminology with precise technical meanings. And don’t think for a minute we can do without all that; such terminology exists because it has precise technical meanings, and all courts of law know those meanings, and more ordinary language is simply inadequate to the purpose.

Contracts are complicated mainly because lawyers, when drafting them, will use standard forms (altered and supplemented to reflect details of the parties’ actual agreements) with tried-and-true boilerplate language that has been developed over the years and is meant to cover every possible contingency or dispute or event that might arise under the contract, including some that no lawyer starting from scratch would think of in a hundred years. Most of those clauses will never actually come up WRT a given contract, but you never know and it’s better to play it safe.

10

I’m assuming that they do so because the profit they make from the customers they don’t scare away is more than what they lose from the ones they scare away.

I understand that some language in a contract is there because regulations require it. That might well go away. Although I think Schumer’s box is a poor example of that. It’s one of the clearest and most easily understandable parts of a credit card agreement. The confusing part is the way the rates can vary and the piles of disclaimers put into it.

That’s a good point, and I wouldn’t really expect that to change.

11

Regarding the above, see this thread. There’s a widespread belief that lawyers are in a conspiracy to baffle the public and create an artificial need for lawyers, but it’s not at all true.

12

Wow. That’s an intelligent comment. And not at all what I expected. At least, from this Board.

Thank you for that.

13

Another reason is that would-be customers usually do not have the option of getting the same thing without the complicated, confusing contract; generally, more or less the same sort of contract is used industry-wide. And naturally, it is worded to favor the seller. OTOH, it is a principle of common law that any ambiguity in the contract is to be construed against the drafter of it. FWIW.

I once heard Ralph Nader give a lecture where he pointed out that you don’t actually have to accept the contract offered; every purchase is an arm’s-length negotiation and all clauses are negotiable. Most consumers are unaware of that. The businesspersons seem vague on that point themselves, in fact. He once went to an auto dealership, was offered a financing agreement, pulled out his pen and started striking out this clause and that. “And they called the police.”

But it is a fact, generally, that when making a major purchase such as an automobile, you can take the financing-contract terms the dealer offers, or you can pay cash, or you can go without a new car, because they ain’t quite that hard up to make a sale. (So it has been, but in the current environment, who knows? :wink: )

14

Which would of course lead to a totalitarian networking culture that if you were not a party to you’d be left out in the cold. All the outsiders and the staunch libertarians would consider this as a form of oppressive government and talk about what it would really be like if they ACTUALLY lived in Libertopia rather than under the tyranny of the duopoly of LinkedIn and Facebook.

15

Every insurance policy I’ve had talks about how they don’t cover things to due (I’m paraphrasing) “An Act of War, whether declared or not, the discharge, intentional or not of a nuclear weapon, or the act of any vessel of combat…”

I’m sure a lawyer thought of this 50 years ago and decided it was good and then became standard.

16

It’s because insurance claims based on damage resulting from acts of war is something that actually comes up, now and then, and most insurance companies don’t want to risk it – it’s too unpredictable, can’t be fit into the actuarial tables. Same thinking as behind “Acts of God” exclusions.

For top dollar, a corporation with interests overseas can buy “political risk insurance” to cover them if their factory is destroyed by civil war or nationalized by a new government.

17

Well, the story sounds like bullshit. But it’s kind of like a lease. You can go ahead and start striking out parts of the lease, but the landlord might tell you he would simply rather rent to someone else.

18

The marginal utility of shorter contracts is highly non-linear. To most people, it makes no difference whether it’s a 2 page contract or a 63 page contract, they’ll scan over the first page and then look for the place to sign. Unless you can bring a contract down to something people can scan over in under 15 seconds, contracts are going to go unread anyhow. Since this is the case, there’s almost no cost and plenty of benefit for companies to make long contracts that contain terms as onerous as the company can get away with. Additionally, in an ogliopoly, companies can band together to make mutually onerous contracts such that the consumer has no choice. The way that banks compute overdraft fees for accounts is a good example of this (from largest deposit to smallest deposit rather than in chronological order).

The only away around this is to make such things illegal through consumer protection regulation. Any other solution simply has too high a co-ordination cost to be practical.

Additionally, as has been said before in this thread, there are inherent limits to how short contracts can be. Contracts are complex because life is complex. If you are to carefully delineate every contingency, special case and combination of events, then it’s by necessity going to expand the length of your contract.

19

I’ve always assumed that contracts would be both more complicated and more numerous in a libertarian/minarchist state.

Every legal obligation that parties have towards each other under the current regime is something that doesn’t have to be spelled out in a contract. Relatively speaking, a libertarian state would lack an external, uniformly imposed framework that we all have to operate under. That would mean that every new relationship would require a unique bilateral negotiation of many more of the details.

For example, every loan contract would have to include explicit language about what to do in bankruptcy-type situations. You might think the answer would always be “throw them into debtors’ prison!” But I think it more likely that some sort of consensual free-market version of bankruptcy would emerge in the absence of the state-imposed kind the we have today. However, it would be enormously more complicated to implement because of all the bilateral agreements involved.

Moreover, all these things that are now settled by laws would be covered by various different kinds of language in all the different contracts. There would be some pressure towards industry-wide standards. But that doesn’t force contracts to be identical now, so we shouldn’t expect that they would be identical in a libertarian regime. This increases the risks of not reading the entire contract, so more time will have to be wasted on doing that.

Finally, contracts would be more numerous. For example, easement rights would only exist under a bilateral arrangement between the property-holder and each individual who wants to cross the property. In some cases, these arrangements would require some kind of contract detailing exactly where the property-crosser is allowed to go. I don’t know if that’s a bad thing on net, but it certainly entails an explosion in the number of contracts!

20

I think they might actually be more complicated.

I’ve had contracts in several countries; IME the more “socialist” the country, the simpler the contracts. In Spain you can write a rental contract about this big:

Mr John Doe (from now, “the renter”), with ID#12345678,
and Ms Jane Deer (from now, “the owner”), with ID#34567890, owner of Apartment 3, 13 Oak Street, 12345 Village,
agree that the aforementioned property will be rented to the renter for an amount of XYZ €/month, payable monthly before the 5th day of the month via e-transfer to account
12 3456 78 901234567890, starting on the 1st of January, 2009,
under the conditions laid in the General Rental Law, with no special conditions.
Signed
The Owner… The Renter …

In less “socialist” countries, the specific document has to be a lot more detailed, simply because it’s not possible to use a non-existing law as your reference.