Are "Pay Now, Terms Later" Contracts Worse for Buyers? Evidence from Software License Agreements

Florencia Marotta-Wurgler ()

The Journal of Legal Studies, 2009, vol. 38, issue 2, 309-343

Abstract: The rise of commerce over the Internet and telephone has led to widespread use of "pay now, terms later," or rolling, standard-form contracts, in which buyers are not able to read the standard terms until after they have purchased the product. While some scholars and judges argue that rolling contracts do not merit special attention, others, including consumer advocates, are concerned that sellers take advantage of delayed disclosure by hiding especially unfavorable terms. I find no evidence for this view. In a large sample of software license agreements, I find that software publishers that use rolling contracts for their online sales do not offer more one-sided terms than those who make their licenses available prior to purchase. The results suggest that to the extent there are inefficiencies associated with standard-form contracts, they are not made worse by delayed disclosure. (c) 2009 by The University of Chicago. All rights reserved.

Date: 2009
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