Economics of Contract Interpretation

Abstract

The chapter surveys recent developments in economics of contract interpretation. First, we point out the relevance of issue of contract interpretation to contracting problems. We then introduce a general economic model of contract interpretation. It explains why parties write gaps and fairly general terms in contracts, how the court should interpret them, and whether courts should always enforce what contracting parties write. Moreover, we explain why there are contradictions in contracts.

Citation

Zhao, X. (2012), "Economics of Contract Interpretation", Zerbe, R.O. and Kirkwood, J.B. (Ed.) Research in Law and Economics (Research in Law and Economics, Vol. 25), Emerald Group Publishing Limited, Leeds, pp. 61-73. https://doi.org/10.1108/S0193-5895(2012)0000025007