Back to basics, continued — The American Law Institute adopts a “reformulation” of consumer contract law | Denton


Lawyers, law professors, and judges turn to many resources to determine exactly what the law is on a given topic. For many years, the American Law Institute (ALI) has published its view of the law in several different areas, including tort law and contract law. After many years, he has just published and adopted his “Restatement” of consumer contract law. As creditors in the financial services industry know, consumer credit agreements are a special class of agreement.

Consumer credit contracts are by nature contracts in which few consumers read or understand the legal jargon. So over the years, courts, legislatures, Congress, and regulators have developed a sophisticated regime of consumer protections. Laws and regulations, as well as their interpretation by the courts, have served as benchmarks or bumpers to regulate consumer financial transactions, thereby ensuring reasonable transparency and fairness for the consumer. It is a world that we have come to know and understand.

Now ALI has entered the scene. After a long effort, years of training, ALI has adopted its own roadmap for the interpretation of consumer contracts. Just as ALI’s restatements in the areas of tort law and general contract law have guided us (and more importantly, judges) in understanding the law, this new restatement will take its place as a resource important for orientation in the area of ​​consumer contract law.

Is this a good thing? Depends on who you ask.

Many commentators, including state attorneys general, corporate counsel, and trade association representatives, have suggested that the ALI missed the mark in adopting this restatement. The main concern that has been expressed is that the Restatement is adopting or advancing “public policy” that contradicts existing law. For traditional consumer creditors, who have come to rely on the interpretations of their regulators, this restatement may create confusion or a new understanding of “what exactly the law is”.

Admittedly, consumers rarely read and almost never negotiate consumer credit agreements. We have all come to rely on all federal and state laws and regulations providing consumer protection to offset this reality.

To the extent that the ALI restatement shifts the balance between protecting consumers (including defenses to enforceability) and protecting the integrity of the consumer contract for the creditor, we may be entering a new era. interpretation of contracts.


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