Study On The Regulation System For Standard Form Contracts

The standardized production and mass consumption in market economy lead to the standardization of transactions,as the vehicle of standard transactions,standard form contracts lower the transaction costs and simplify the exchange procedure,but also generate unfair outcomes at the same time.Under the traditional regulatory axiom in contract theory focusing on preserving the contracting liberties in individual transactions,these flaws of standard contracts is deemed as originating from the lack of consensus,which can not provide strong persuasiveness for the deficiencies under standard transactions.As the legal reflection of market transactions,standard form transactions are constrained by market order where fostering these transactions,consequently the unfair transactions can be regarded as the outcome of market failure.Classical economic theory reckons that market mechanism disciplined by consumers demanding can safeguard the fairness and efficiency of transactions under the condition of complete information both in competitive and monopolistic markets,and standard form contracts will also be constrained by market discipline.However,the state of complete information will never be achieved in real market,consumer decision-making model indicates that consumers,deliberately or not,always ignore some information due to the reason of both information cost and cognitive limitations,and when certain contract terms are ignored by most consumers,competition mechanism will induce business operators conspire monopolistic equilibrium by providing homogeneous standard terms,correspondingly the market failure of standard form contracts come into being.With regard to this market failure,the existence of informed minorities and reputation effects indicate that the discipline of market power toward standard form contracts can be mostly preserved as long as the information acquisition and processing costs can be lowered as much as possible.Nevertheless the neglect of information caused by cognitive limitations can not be effectively ratified by just lowering information costs,consumers will persistently ignore certain terms related to risk allocation for future contingencies even after obtaining information with ease,and current contract law usually impose content inspection on these terms.The fundamental principle of transaction regulations is that market mechanism usually takes priority against government displacement,which means that the procedural regulation,represented by information obligations with least interference with individual autonomy,is always a better choice comparing to content examination which displace individual autonomy,consequently preserving utmost individual autonomy should become the basic value orientation of standard form contracts regulation.With respect to the market failure led by cognitive limitations,the debiasing mechanism of asymmetric paternalism render the possibilities of relaxing content examination to allow more space available for autonomy.Indeed,asymmetric paternalistic regulations,whether to counteract cognitive biases by providing debiasing information or to relax the rigid mandatory rules by setting default rules,always imply the distrust toward the capacities of consumer autonomy,and inadvertently impose more or less restrictions on free choice.However,asymmetric paternalistic regulations can preserve autonomy to utmost extent comparing with traditional content examination,and most importantly there does not exist much middle ground between positively conducting debiasing and letting business operators take advantage of consumers biases,which makes asymmetric paternalistic regulations an inevitable choice.As for the regulatory functions,debiasing through information will impose more rigid regulations on forms and even contents of information obligations so as to elevate the salience of information,and debiasing through default rules could intervene into terms content and elicit information revelation at the same time,which can all be integrated into current standard form contracts regulatory framework to reconcile the over-rigidity of content control and over-softness of procedural regulation.By reviewing China,s standard form contracts regulatory framework from the aspect of market failure,it obviously concluded that the rule design of explanation obligations is too rough to effectively reduce information cost and counteract cognitive limitations.As a result,more refined rules of information obligations should be drawn by administrative organs to put much emphasis on standardization and simplification of information disclosure,and also impose more regulations on patterns and contents of information disclosure to increase salience.With regard to the uncertain range of content control and over-rigidity of regulatory tool,lawmakers should make clear that the content control should be confined to the range of standard terms related to future risks where market failure most possibly occurs,and more default rules should be introduced into current legal framework to relax the rigid limitation on autonomy by current prohibitive term list and mandatorily incorporated rules.