Abusive contract terms: Is unenforceability a deterrent sanction?

Sophie Bienenstock () and Claudine Desrieux ()
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Sophie Bienenstock: Centre d’Economie de la Sorbonne – Université Paris I Panthéon Sorbonne
Claudine Desrieux: Université Paris II Panthéon Assas

European Journal of Law and Economics, 2022, vol. 54, issue 2, No 3, 187-216

Abstract: Abstract We investigate the impact of sanctions in the presence of abusive contract terms in a litigation model under asymmetric information on consumers’ ability to litigate. A firm may decide to write an abusive clause to extract part of a consumer’s surplus. Facing such a clause, consumers can seek compensation at a cost, but only a fraction of them are ready to go to court to obtain this compensation. If the case is brought to court, the abusive clause is unenforceable. We then explore the consequences of introducing an additional sanction to this unenforceability. Our results show that the mere non-enforcement of abusive clauses has no deterrent effect. However, the introduction of an additional sanction has to be done carefully because under certain conditions, it leads to more deterrence but may also worsen the utilities of some consumers and generate mixed effects on welfare.

Keywords: Abusive contract terms; Asymmetric information; Economic analysis of litigation; Consumer contracts (search for similar items in EconPapers)
JEL-codes: D82 K12 K15 K41 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s10657-022-09731-y

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