According to basic contract law principles, a consumer contract is defined as a legally binding agreement formed between a merchant and a consumer party. The Uniform Commercial Code (“UCC”) is the doctrine of law that governs consumer contracts. Under this code, a merchant is defined as an individual who deals in goods associated with their specific trade or has special knowledge or skills related to the goods and/or services in the contract. 

On the other hand, a consumer in this context refers to an individual who purchases goods and/or services for personal use. If a person is purchasing the goods or services for business purposes, such as machinery to produce or manufacture products, then the transaction would be regulated by commercial contract law (e.g., Article 9 of the UCC, not Article 2).  

In general, consumer contracts typically involve one of the following three promises:

  • A promise to supply services; 
  • A promise for the sale of goods; and/or
  • A promise to provide digital content (e.g., combination of services and goods like a streaming service). 

In regard to the third category, a consumer contract may contain a promise to provide both services and products. For example, if a consumer purchases a laptop and that laptop comes with an offer for one full year of free repair services, then the consumer has entered into a consumer contract that contains both goods and services. 

Another example of when a consumer contract may include mixed purposes is when a consumer purchases workout equipment for their home. For instance, if you purchase a treadmill, there may be an option to add repair services for a reduced price. However, the majority of consumer contracts are usually for the sale of finished goods (as opposed to raw materials), not services.

Finally, one last thing to keep in mind about consumer contracts is that they can be created either through a verbal agreement, a written contract, or implied conduct (e.g., purchasing band-aids at a pharmacy).

What Are Some Unique Features of Consumer Contracts?

Both the law and the courts assume that merchants are generally more business savvy than the average consumer and thus have a stronger bargaining position when it comes to negotiating consumer contracts

To combat the potential for injustice, state and federal legislatures have enacted a number of different consumer protection laws to protect consumers from merchants. Many of these laws also apply to consumer contracts as a protective measure against unfair contracts.

Aside from overlapping consumer protection laws, some other unique features of consumer contracts include:

  • Acceleration clauses: Acceleration clauses are typically found in installment contracts. An installment contract is an agreement to make monthly payments to a merchant until the remaining portion of the contract is paid. In the event of a default, however, an acceleration clause will require a consumer to immediately pay off the entire balance. 
    • For instance, if a consumer is paying monthly installments on a car and misses several payments in a row, then this could trigger an acceleration clause and the consumer will be forced to pay for the entire car outright. 

      • Since this could have serious financial repercussions for a consumer, many states have consumer contract laws that prohibit the use of such clauses in consumer contracts. 
  • Anti-price gouging measures: Price gouging refers to when a merchant takes advantage of the current market conditions by heavily marking up items and charging exorbitant prices. For instance, after a natural disaster like a flood or hurricane, a merchant may raise the price of bottled water or canned goods since these products will be in greater demand. 

    • This is where consumer contract laws kick in and prevent merchants from charging “unconscionably excessive” prices. 
  • Contract terms: Parties are typically free to include any contract terms that the parties agree upon during the negotiation stage. There are some exceptions to this general principle, however, such as when a specific term would be unfair to the consumer if it was included or could potentially be abused by the seller. 
  • Formation of consumer contracts: The “form” of a contract essentially describes how a contract appears to the parties and the way in which it is structured. Consumer protection laws often regulate how consumer contracts appear to the consumer to ensure that it can be easily understood. 

    • There are also specific rules on what size font can be used when drafting consumer contracts and how certain items and/or prices should be presented in the contract.
  • Consumer Review Fairness Act (“CRFA”): The CRFA was passed by Congress in 2016 and protects consumers’ ability to share their honest opinion about a service or product, including on social media. Specifically, the CRFA makes it illegal for a merchant to insert any of the following provisions in a consumer contract:

    • A provision that bars the consumer’s ability to review a merchant’s services, products, or behavior; and/or
    • A provision that imposes a fee or penalty against a consumer who writes a review.
      • The CRFA also requires consumers to surrender their intellectual property rights when giving a review. 

Additionally, it should be noted that consumer contracts are governed by stricter regulations than standard contracts between merchants. Again, this is because merchants are seen as being savvier than the average customer. Thus, the main purpose of consumer contract laws is to prevent merchants from abusing the system as well as to make it easier for consumers to understand the contents of a consumer contract.

What Are the Consequences for Violations in a Consumer Contract?

As previously discussed, consumer contracts are heavily regulated by various consumer protection laws. Thus, if a merchant violates a consumer contract, they could face a number of serious legal consequences. 

For instance, depending on the type of consumer contract violation that occurred, the contract could be declared null and void. This means that the contract will immediately become invalid without the need for further analysis. In some cases, a court may decide that only certain portions of the contract are invalid or that the contract is voidable, not void. Regardless, void and voidable contracts must be either cancelled or redrafted.

Some other types of consequences that may arise from violation of a consumer contract include:

  • Monetary damages;
  • Civil and criminal fines (e.g., for fraud); and/or
  • An injunction to do or refrain from doing some action promised under the contract. 

Lastly, it is important to note that consumer contracts are regulated by both federal and state consumer laws. Thus, a defendant in a consumer contract case can receive two separate sets of penalties, depending on the facts of their case and which laws apply. 

Do I Need a Lawyer for a Consumer Contract?

One issue that frequently comes up when dealing with consumer contracts is that a consumer party might not even be aware of the fact that their rights have been violated because these contracts are often so complex. Consequently, by the time a consumer has discovered the violation, it may be too late to file a contract claim. Thus, it is strongly recommended that you speak to a local contract attorney before signing a consumer contract.

An experienced contract attorney can review the terms of your consumer contract and make sure that you are not signing away important legal rights. Additionally, your lawyer can explain the meaning of each clause in the contract as well as can ensure that you properly fulfill any obligations you may have agreed to under the contract. 

Finally, your lawyer can help you file a lawsuit in the appropriate court, prepare other necessary legal documents for your case, and provide representation in court if necessary.