Digital Contracting Is Broken. A Little "Friction" Could Go a Long Way in Fixing It

In mid-October, the Federal Trade Commission (FTC) announced a final “click-to-cancel” rule, which, after its provisions go into effect, will make it easier for consumers to cancel recurring memberships and subscriptions.

The rule is an undoubtable victory for consumers who have run into roadblocks attempting to protect their wallets amid the flurry of oversubscription in today’s world, but it also begets an important question: Why is oversubscription occurring in the first place?

“One important reason for that problem is that getting into contracts is frictionless, it’s too easy,” said Brett Frischmann, JD, the Charles Widger Endowed Professor in Law, Business and Economics in Villanova University’s Charles Widger School of Law. “The FTC is addressing a real concern in making it easier for people to exit agreements of this sort. But while making it as easy to unsubscribe as to subscribe sounds great – we all like even playing fields and symmetry – it might be better to also make subscribing a little more burdensome, so people understand what they are getting themselves into in the first place.”

This idea is the focus of Frischmann’s recent paper, titled "Better Digital Contracts with Prosocial Friction-in-Design," the publication of which coincides with public dissatisfaction over digital contracting processes. In August, Disney attempted to have a wrongful death lawsuit blocked, citing print in terms and conditions from a one-month Disney+ free trial the plaintiff signed up for in 2019. Since then, other companies have succeeded in recently blocking the commencement of similar lawsuits.

In the research, Frischmann and his co-author, Rice University computer scientist Moshe Vardi, describe these contracts as “dehumanizing” and that they “undermine human autonomy and sociality, by design,” citing how they elicit behavior in a pre-determined manner (such as clicking on cue) and often include side agreements with other entities, unbeknownst to the users.

“One-click” contracts rely on legal fictions, such as presuming that clicking an “I have read the terms and conditions” button actually means that they have. They are structured this way intentionally.

“The idea behind digital contracting is ‘Let’s make the contract as quick as possible before people leave or change their mind,” Frischmann said. “They only want to do the minimum that the law requires, and all the law requires is notice of terms and action that says, ‘I agree.’”

For these reasons, he argues, modern digital contracting contradicts the purpose of contract law in the first place; enabling people to reach genuine agreements and cooperate.

“It’s antithetical to the underlying values of a contract,” Frischmann said. “Autonomy is undermined because people are not able to exercise autonomy in a meaningful way when they are not actually capable of deliberating about the terms to which they are agreeing. As for being cooperative, there is no relationship. Digital contracts are completely one-sided.”

So what can be done to combat this?

“Speedbumps,” Frischmann says, referring to measures that can cause friction in the contracting process to better protect the user. Physical road speedbumps represent a useful analogy, because while they make things slightly more inconvenient for the user, they are deployed strategically where other values are at stake, like the safety of children playing outside.

“People tolerate speedbumps,” Frischmann says, “because they serve a social purpose. Friction in digital contracts is similar.”

With respect to improving digital contracting, there are multiple measures that can be taken that inherently have such friction, but not all of them are always appropriate.

Completely Automated Public Turing Test to Tell Computers and Humans Apart (CAPTCHAs), for example, are a type of friction-in-design that serve a useful social purpose (security) and have become normalized and tolerated, but some CAPTCHAs are ableist and others may generate proprietary data.

Where he sees the most beneficial friction existing is in comprehension, which in software form could be completing a task or passing a test to prove an individual understands the agreement.

Comprehension is the basis for one of Frischmann’s proposed alterations to contract law. Currently, the oft-criticized concept of informed consent is utilized. He argues it should be replaced with demonstrably informed consent, in essence requiring entities to further show that people truly comprehend what they are agreeing to.

“Right now, individuals assent to contracts, going along with terms someone else insisted upon,” he said. “But assenting to terms is very different than being informed and consenting. To demand demonstrably informed consent shifts the burden on the provider to generate evidence showing in fact a person understood and agreed.”

In the recent Disney case, for example, demonstrably informed consent would have required not just clicking an agreement when signing up for Disney+, but that Disney somehow explained to an individual that if they sign up for a free trial, they cannot take the company to court, and further generating reliable evidence that the individual understood that. If that were the case, perhaps the individual would not have signed up.

“Or, they may not have ever gone to the Disney park if they had [signed up],” Frischmann said.

This proposed change in contract law, along with the various potential methods of engineered friction in digital contracts all circle back to the same goal: slowing down contracting where it affects people in ways they do not understand.

“You can’t have digital contracting built like a highway, where it’s all as fast as possible all the time,” Frischmann said. “For our digitally networked environment, it needs to be built like a neighborhood.”