Wednesday, March 3, 2010
Yair Listokin presented his paper, "Bayesian Contractual Interpretation" at the Spring Contracts Conference at UNLV last week. Yesterday, the written version showed up in my e-mail via a Social Science Research Network notice. The paper is downloadable from the site here. Get it while it's hot; it's already climbed to #5 on SSRN's Top Ten. Here is the abstract:
Courts seeking the most likely intent of contracting parties should interpret contracts according to Bayes’ Rule. The best interpretation of a contract reflects both the prior likelihood (base rate) of a pair of contracting parties having a given intention as well as the probability that the contract would be written as it is given that intention. If the base rate of the intention associated with the simplest reading of the contract is low, then Bayes’ Rule implies that the simplest reading is not necessarily the interpretation of the contract that most likely captures the parties’ intentions. The Bayesian framework explains when default rules should be more or less “sticky” and helps define the appropriate role of boilerplate language in contractual interpretation.
The piece is fun in part because it applies the Bayesian framework to Cardozo's classic opinion in Jacob & Youngs v. Kent, a case we have mentioned on occasion on this blog, e.g., here, here and here. The popularity of the case meant that everyone at the conference had a strong opinion about what Cardozo was really saying and how Bayesian analysis, to which many of us were introduced at the conference, is properly applied to the timeless question of Reading v. Cohoes pipe.