Policymakers like to talk about protecting the public from unscrupulous characters who peddle contracts of adhesion loaded with convoluted legal language.
But if a law that requires plain language in consumer contracts contains too many exceptions and limitations, it can end up having little or no effect.
In Minnesota, the legislature doubtless intended the Plain Language Contract Act to help consumers understand the contracts they enter into with sophisticated parties.
But over the last 30 years, there’s no evidence that the statute has had any effect on the contents of most consumer contracts. Indeed, the statute is example of how well-intentioned plain-language laws do no good if they don’t have teeth.
The Plain-Language Mandate
Enacted by the Minnesota legislature in 1981, the statute requires that every consumer contract “be written in a clear and coherent manner using words with common and everyday meanings.” The statute prohibits parties from asking consumers to waive its protections. And because the statute incorporates by reference Minnesota’s private-attorney-general law, consumers can bring a civil action to enforce it.
If a contract violates the statute, a consumer can sue the other party for injunctive relief, damages, attorney’s fees, and costs of investigation. A court can also reform a contract if (a) “the violation caused the consumer to be substantially confused about any of the rights, obligations or remedies of the contract”; and (b) “the violation has caused or is likely to cause financial detriment to the consumer.”
The Exceptions Swallow the Mandate
On its face, the statute appears to cast a wide net. But the statute contains a number of broad exceptions and limitations that all but gut its plain-language mandate.
- The statute doesn’t apply to contracts for (a) amounts greater than $50,000; (b) the purchase or refinancing of residential real estate, or the purchase of personal property that is “incidental to the sale of an interest in realty”; and (c) the purchase of registered securities or commodities.
- The statute doesn’t apply if “a federal or state statute, rule or regulation prescribes standards of readability applicable to the entire contract,” or where “particular words, phrases, provisions or forms of agreement [are] specifically required, recommended or endorsed by a state or federal statute, rule or regulation.”
- A consumer contract can include technical terms that “describe the services or property which are the subject of the contract, if the terms are customarily used by consumers in connection with the services or property.”
- Consumers can’t bring claims unless they bring them “before the obligations of the contract have been fully performed.”
- The other party to the contract has a defense that “the party made a good faith and reasonable effort to comply with” the statute, and a court can’t award attorney’s fees or costs to a consumer if the other party made that good-faith and reasonable effort to comply.
- Class-action attorney’s fees and costs of investigation are limited to $10,000.
Given these exceptions and limitations, it’s hardly surprising that during the last 30 years no Minnesota appellate court has found a consumer contract to violate the statute. In fact, it appears that the statute’s only effect has been to standardize the language in consumer residential leases.
Aspirational Laws Won’t Change Behavior
Numerous studies — both in and outside of the law — have shown that plain-language principles benefit both consumers and businesses by making it easier for consumers to understand and retain what they’ve read. And I’m not faulting the Minnesota legislature for trying to promote plain language in consumer contracts.
But if policymakers want to effect real change in consumer contracts, they need to examine whether their plain-language laws do more than espouse a plain-language aspiration. Otherwise, new plain-language statutes will end up like Minnesota’s feckless Plain Language Contract Act — on the books, but largely ignored.