By Orly Lobel. Full Text.
Contract clauses should be assessed in relation to each other when examining their meaning, validity, and enforcement. In contemporary markets, drafters create impenetrable bundles of clauses and sets of interrelated contracts operating together. This Article exposes the ways that a contract is larger than the sum of its separate clauses and a set of interrelated contracts is more harmful than the aggregation of each contract on its own. The Article further shows that contract adjudication embeds these insights intuitively, but both contract law and antitrust law have yet to develop a principled and consistent analysis of how contract clauses collude in action.
These understandings have implications for nearly every contract doctrine and in every policy field. Recognizing how contractual clauses produce a different effect than a simple summation of each clause enriches regulatory fields ranging from employment law to consumer law, insurance law to intellectual property law, and speech law to arbitration law. This Article analyzes several key contexts to demonstrate the significance of aggregation: contract clauses that substantively restrict rights such as speech and mobility and clauses that procedurally restrict rights and access to litigation, including predispute arbitration clauses and class action waivers. I argue that courts have instinctively employed notions of aggregation in their decisions, albeit without consistent analysis and without the wealth of contemporary behavioral research on the psychological effects of aggregation. The Article is the first to analyze how behavioral studies on the human tendency to judge probabilities and risks differently when events are compiled versus unpacked are critical to understanding the effects generated by boilerplate collusion.
The Article concludes with policy implications for both contract interpretation and regulation. I argue that recognizing aggregation supports reforms in adjudicative defaults, including the rejection of reformation and blue-penciling and the treatment of redundancy as a feature, not a bug, in contract adjudication. Second, a better understanding of the phenomenon of boilerplate collusion points to the need for a more proactive approach to contract policy. As contract thickets abound, antitrust law must reject its sharp divides between vertical and horizontal constraints; and agencies, including the Federal Trade Commission, the Equal Employment Opportunity Commission, and the United States Department of Labor, should use their regulatory powers to address the harms of boilerplate collusion.