Would you ever enter into a legal contract without having any idea of what it contains? The answer that, in all likelihood, is yes. In fact, you probably do it on a regular basis.
When you download an app to your mobile, upgrade the software on your laptop or subscribe to an online service like Facebook, an end user license agreement (EULA) will usually pop-up on your screen – requiring you to press one of two buttons. The first one will say something like: ‘I accept the terms of this agreement’ while second says ‘I do not accept the terms of this agreement’.
There really ought be a third button that says: ‘I’m in no position to agree or disagree because I am a normal person who never reads these absurd contracts and who clicks whatever button it takes to get on with their lives.’
In a wonderfully clear-sighted piece for the Financial Times, also available on his blog, John Kay explains why not reading these agreements is a completely rational thing to do:
“Samsung and Apple are plainly in business for the long term, and their continued success depends on maintaining their reputation with their customers. It is unlikely that these agreements contain anything seriously damaging to my interests, and if they did I am reasonably confident that the combined forces of judges, legislators, regulators and the press would protect me.”
Furthermore, the agreements themselves aren’t worth the paper they’re written on (if indeed they’re written on paper at all):
“On the odd occasion when I have troubled to read similar agreements, I have found they are generally riddled with ambiguities and with conditions that are unenforceable in practice and probably unenforceable in law. The attorneys who draft these documents are mostly unimaginative hacks rather than hotshots of the profession.”
Obviously, there are some occasions when you really do need to understand what you’re legally letting yourself in for. But for routine transactions, John Kay says that life’s too short for such caution:
“So I shall continue to ignore the busybodies who complain that consumers ought to be spending more time perusing the small print on the back of dry-cleaning tickets. Or who scold that savers have no right to complain when they are taken for a ride by their financial advisers because their level of financial literacy is low. These consumer champions are probably the sorts of people who miss their train because they are still studying the national conditions of carriage.”
Markets cannot function without the rule of law, but even more fundamental to their existence, growth and flourishing is a culture of trust:
“The reality is that the terms of exchange in a market economy are defined by social expectations and enforced by the mutual need of the parties to go on doing business.”
We ignore the importance of trust at our peril. Without it, the everyday process of economic life would be enormously more expensive, time-consuming and unpleasant. Just as we make an example of those who subvert the law, we must be zealous in punishing those who undermine trust – the mis-selling of financial products by the banks being a case in point.
In the absence of trust – and the institutions that uphold it – there are two alternatives: Either a centrally managed economy in which fair play is enforced by intensive regulation; or, alternatively, a libertarian dog-eat-dog economy in which the state intervenes only to uphold private contracts (and the rule of law). Both systems would be highly inefficient – with the former you’d be drowning in the state’s paperwork, while with the latter you’d be drowning in your own.