Abstract: This paper shows that “one-sided” terms in standard contracts,
which deny consumers a contractual benefit that seems
efficient on average, may arise in competitive markets without
informational problems (other than those of courts). A onesided
term might be an efficient response to situations in which
courts cannot perfectly observe all the contingencies needed for
an accurate implementation of a “balanced” contractual term
when firms are more concerned about their reputation, and
thus less inclined to behave opportunistically, than consumers
are. We develop this explanation, discuss its positive and normative
implications, and compare them to those of informationbased
explanations for one-sided terms.