Colors Are Effective in Addressing the No-Reading Problem In Contract Law

When: 26 Sep 2022, 14:15-15:30
Where: HoF E.21 + online
Speaker: Alessandro Romano

Hybrid event.

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Meeting ID: 647 4662 1462


People are routinely faced with take-it-or-leave-it consumer contracts that have direct implications for their lives. Although ample empirical evidence suggests that people spend very little time reading consumer contracts and have a limited understanding of their terms, courts typically enforce all such terms under the duty to read doctrine. Scholars have found that the major approaches for improving understanding of consumer contracts, such as writing key contract terms in all caps, are ineffective. Against this background, we make two contributions. First, we introduce a more nuanced definition of contract understanding. Second, we run two experiments to show that colors can be effective in enhancing respondents’ understanding of the key terms of a contract. We further investigate which features of colors can affect contract understanding. Our results suggest that policymakers should require firms to flag the key terms of online contracts using colors instead of relying on all caps.