ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Monday, April 10, 2006

Writing v. Interpretation

Aab_28 A perennial battle in the contracts field is whether courts should enforce contracts "as written," or "interpret" them to get to the "real" deal the parties intended.  In a new article, On the Writing and the Interpretation of Contracts, forthcoming in the Journal of Law, Economics, and Organization, Steven Shavell (Harvard) takes the latter position.  Here's the abstract:

The major theme of this article is that the interpretation of contracts is in the interests of contracting parties. The general reasons are (a) that interpretation may improve on otherwise imperfect contracts; and (b) that the prospect of interpretation allows parties to write simpler contracts and thus to conserve on contracting effort. A method of interpretation is defined as a function whose argument is the written contract and whose value is another contract, the interpreted contract, which is what actually governs the parties' joint enterprise. It is shown that interpretation is superior to enforcement of contracts as written, and the optimal method of interpretation is analyzed.

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