On the Unexpected Use of Unenforceable Contract Terms: Evidence from the Residential Rental Market

Abstract

Thisarticleexplorestheprevalenceofunenforceableandmisleadingtermsinresidential rental contracts. For this purpose, the study analyzes a sample of seventy residential leasesfromtheGreaterBostonAreaintermsofMassachusettsLandlordandTenantLaw. The article’s findings reveal that landlords often use deceptive—as well as clearly in-valid—provisions in their contracts, and regularly fail to disclose the vast majority of the mandatory rights and remedies that the law bestows upon tenants in their leases. Building on psychological insights and on survey evidence, the article suggests that this drafting pattern may significantly affect tenants’ decisions and behavior. In particu-lar,whenaproblemoradisputewiththelandlordarises,tenantsarelikelytoperceivethe terms in their lease agreements as enforceable and binding, and consequently forgo validlegalrightsandclaims.Therefore,thearticleexpectsthatsuchclauseswillpersistas long as monitoring and enforcement mechanisms do not sufficiently deter landlords from using such terms in their contracts. In light of this evidence, the article discusses preliminary policy prescriptions.