Something big didn't happen at the American Law Institute's annual meeting on Tuesday: Consumers didn't get screwed. At least not yet.

After sharp pushback from 24 state AGs, consumer advocates including Sen Elizabeth Warren, more than a dozen trade groups and even some stalwart business champions, the elite and highly influential group of 4,000-odd judges, legal scholars and lawyers postponed its draft restatement on consumer contracts.

Don't let the boring 'draft restatement' name fool you. This is important stuff.

Here's how Georgetown Law professor Adam Leviton, who specializes in bankruptcy, commercial law and financial regulation, explained the stakes: “It opens the door for businesses to use contracts to abuse consumers in basically any way they want,” he wrote in the Credit Slips blog. “The restatement would do away with the idea of a 'meeting of the minds,' as the touchstone of contract law for consumer contracts, and allow businesses to impose any terms they want on consumers, even if the consumers are unaware of the terms and haven't consented to them.”

We're not just talking about slipping in a mandatory arbitration clause. Online businesses could also toss in things like privacy waivers that would allow them to use facial recognition technology or track consumers' internet browsing and then sell their personal information.

The ALI members didn't actually vote against the restatement. Per Gupta Wessler's Deepak Gupta, who attended the May 21 meeting in Washington, D.C., “There was no up-or-down vote on the whole project, or even on any of the substantive provisions beyond the definitions section,” he tweeted. “But it was apparent from the nature of the debate and a series of close procedural votes that the project was highly controversial.”

As a result, Gupta said, the restatement will be put on hold until next year's meeting (unless ALI leaders opt to take action sooner).

The ALI—for mere mortals who are not members—was founded in 1923 by legal luminaires including Chief Justice and former President William Howard Taft. Judges Benjamin N. Cardozo and Learned Hand were among its early leaders.

The group's first project was to “address uncertainty in the law through a restatement of basic legal subjects that would tell judges and lawyers what the law was.”

These restatements have continued over the years, covering wide swaths of the law, such as torts, corporate governance, employment law, property and unfair competition.

What the ALI says matters: the restatements, while not binding authority, are widely cited from the U.S. Supreme Court on down. As recently as Monday, both the high court majority and dissent in Herrera v. Wyoming invoked ALI's restatement on judgments.

The consumer contracts restatement, which was launched in 2014, is headed by Omri Ben-Shahar of the University of Chicago Law School, Florencia Marotta-Wurgler of NYU School of Law, and Oren Bar-Gill of Harvard Law School, who serve as its so-called reporters.

ALI makes the undertaking sound rather ho-hum. “This restatement reports on the law as it is. Because the common law of contracts is developed at a state level, the law is rarely identical from state to state and the decisions do not always precisely line up one with the other,” wrote Proskauer's Steven Weise, who has been working with the trio of law professors on the project. “The reporters review the law, identify the baseline rules, and 'restate' the law as a set of coherent and consistent rules.”

So it shouldn't be all that controversial, right?

Wrong.

In a May 20 letter, 24 state attorneys general—including the usual suspects like New York's Letitia James and California's Xavier Becerra, but also AGs from red states including Kentucky, Mississippi and Idaho—laid out their objections.

The AGs note that Americans spent a stunning $514 billion in online transactions in 2018. Most of the purchases were covered by standard form contracts drafted by online retailers and presented to consumers on a take-it-or-leave-it basis.

But these contracts have huge built-in asymmetries when it comes to the sophistication, resources and information of each side.

“These asymmetries give rise to a tension in the law between two competing objectives: how to encourage efficient and streamlined contracting practices between consumers and businesses, while also protecting consumers from blatantly unfair contractual terms,” the AGs wrote.

One key is balancing the doctrines of mutual assent and unconscionability. It's a legitimately hard task, especially since consumers aren't big fans of reading contracts.

The draft restatement all but throws out the notion of mutual assent. Consumers “should be presumed to have assented to whatever terms the business included in the contract, provided the barest notice requirements are met,” per the AGs.

If mutual assent is out the window, that leaves unconscionability as a consumer shield. But rather than bump the protection up, the draft restatement introduces an “untested concept of salience—namely, whether a 'substantial number of consumers' would factor a specific term into their purchasing decisions—that has never been applied by any court,” according to the AGs.

“And despite the central role substantive unconscionability plays,” the AGs continued, “the draft restatement declines to expand what is currently a very narrow legal doctrine. Both procedural and substantive unconscionability, moreover, are litigation defenses, and the reality of consumer litigation is that few consumers have the incentive, time, or resources to bring suit.”

The AGs argue that they “see no cause to abandon the mutual assent doctrine due to changes in commerce and technology.” Moreover, they said, gutting mutual assent “will encourage a veritable race to the bottom, as market forces will drive businesses—which will know they can bind consumers to all but the most odious terms—to draft standard form contracts with egregiously self-serving terms.”

It's true, consumers (myself included) aren't very diligent about reading through an online retailer's terms and conditions. It's easy just to check the “I agree” box. But to render even that small protection meaningless would be tantamount to open season on consumers.