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Interpretation and Construction in Altering Rules

Gregory Klass

Georgetown University Law Center

October 19, 2012

Georgetown Public Law Research Paper No. 12-153
Georgetown Law and Economics Research Paper No. 12-038

This essay is a response to Ian Ayres's, "Regulating Opt-Out: An Economic Theory of Altering Rules," 121 Yale L.J. 2032 (2012). Ayres identifies an important question: How does the law decide when parties have opted-out of a contractual default? Unfortunately, his article tells only half of the story about such altering rules. Ayres cares about rules designed to instruct parties on how to get the terms that they want. By focusing on such rules he ignores altering rules designed instead to interpret the nonlegal meaning of the parties' acts or agreement. This limited vision is characteristic of economic approaches to contract law. Valuable as they are for identifying the incentives, intended or unintended, that legal rules create, they tend to overlook other functions of contract law.

The essay develops these points by applying the interpretation-construction distinction to Ayres's theory. It distinguishes between two categories of altering rules, "juristic" and "hermeneutic." Juristic altering rules are designed to help parties get the legal outcomes they want, though as Ayres points out, such rules also might attempt to slow parties with extra transaction costs. Hermeneutic altering rules condition legal change on the nonlegal meanings of what the parties say and do. Their application therefore requires a broader form of interpretation. The essay identifies the connections between each type of rule and more general principles and purposes of contract law. And it argues that attention to hermeneutic altering rules can fill in some of the gaps in Ayres's account, such as explaining why juristic altering rules often specify sufficient but non-necessary means of effecting a legal change.

Number of Pages in PDF File: 15

Keywords: contract, interpretation, construction, default, legal history, theory and process, public Law, legal theory, rhetoric

JEL Classification: K00, K12, K19

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Date posted: October 21, 2012 ; Last revised: November 8, 2012

Suggested Citation

Klass, Gregory, Interpretation and Construction in Altering Rules (October 19, 2012). Georgetown Public Law Research Paper No. 12-153; Georgetown Law and Economics Research Paper No. 12-038. Available at SSRN: http://ssrn.com/abstract=2164419 or http://dx.doi.org/10.2139/ssrn.2164419

Contact Information

Gregory Klass (Contact Author)
Georgetown University Law Center ( email )
600 New Jersey Avenue, NW
Washington, DC 20001
United States
HOME PAGE: http://www.law.georgetown.edu/curriculum/tab_faculty.cfm?Status=Faculty&Detail=2165
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