Control of Standard Terms in Consumer Contracts in Vietnamese Law: Lessons Learnt from European Experiences

Abstract

Nowadays, standard form consumer contracts are so ubiquitous in the modern society that a person virtually cannot participate in ordinary life without them. However, the major disadvantages of standard form contracts are that they lack meaningful consent, and they are unfair to the detriment of the adhering parties. Accordingly, this research ultimately aims to evaluate to what extent is Vietnamese law effective in constraining traders from drafting oppressive standard terms to the detriments of consumers, while at the same time, maintaining the utility of standard form contracts in rationalizing the contracting process. The author shows that the primary strategy of Vietnamese law to address the inherent problems of standard terms has been repeatedly confined to procedure-based schemes which merely aim to guarantee the informed consent of the parties. However, it is obvious that the risk of overreaching in standard form contracts lies not only in the negotiation process but also in the substantive terms contained within the agreement. The conventional assumption that procedural fairness automatically guarantees substantive fairness can be significantly challenged in the light of new insights from behavioural sciences which reveal the real and true image of consumers. Certainly, the model of highly competent and rational contracting parties underlying classical contract law does not accurately reflect the decision-making process of consumers. As consumers systematically suffer from cognitive biases, they are unable to sufficiently understand most standard contract terms regardless of whether they have been given adequate information. Therefore, although procedure-based solutions are greatly appreciated when addressing the issue of a lack of meaningful consent from the consumer side, on their own they cannot completely negate unfair contract terms. Drawing on the European experiences, it is argued that an effective control of standard terms unquestionably demands a different approach which looks far beyond the paradigm of classical contract law. First of all, the control scheme must follow a hybrid approach which not only guarantees the procedural fairness of the contracting process, but also directly polices the substantive unfairness of contractual contents. Underlying this regime is a clear policy that while traders are granted fairly unconstrained freedom to unilaterally draft “law” governing their transactions with consumers, their standard terms will only be enforceable as long as they are not unfair to the detriment of consumers. Secondly, once the consumers’ right to substantively fair terms is ensured, it is equally significant to consider the effectiveness of the available mechanisms which consumers may utilize in exercising their rights. For this purpose, the control scheme must go beyond the classical model of traditional private litigation to establish adequate collective or administrative mechanisms to combat unfair standard terms.