33 Pages Posted: 2 Aug 2007
In 1988, Frederick Schauer advanced the proposition that formalism was really about power. Requiring a formal approach to the interpretation of a given text vests more power in the creator of that text than does an approach that gives the later decision maker more interpretive latitude. In the context of contract law, Schauer's observation means that a formalist approach to interpreting a contract will shift power from those who interpret it to those who created it. A strict approach to the parol evidence rule, a recognition of the "plain meaning rule," or severe restrictions on the use of trade usage, course of dealing, or course of performance in contract interpretation shifts power from the interpreting agents (usually the courts) to the parties who made the contract. Several commentators have called for a more formal regime for contract interpretation in business contracts. Such a change from the status quo, it is urged, will result in a more efficient commercial system. But lacking is persuasive empirical evidence that commercial actors actually want such an approach in a broad range of contracts, that such an approach will "cause" people to take more care in making or reading contracts, or that a more formal approach result in decisions that better resemble what the parties actually intended. Moreover, a vast number of "commercial contracts" are, in fact, adhesion contracts where one party drafts the agreement on a take-it-or-leave-it basis. The dynamics of assent in such contracts differ very little from what we find in "consumer contracts." Bringing a more formal interpretative regime to these contracts will change nothing except to vest yet more power in the drafters. After considering the state of the empirical evidence for a more formal approach to interpretation, the article considers how such an approach would actually work within Article 2 of the Uniform Commercial Code. The article concludes by arguing that the case for requiring more formality in contract interpretation has not been made, that such a move could well be counterproductive, and that a regime of greater formalism may even endanger the system of voluntary compliance with contract obligations that is so essential to modern commercial life.
Keywords: Contracts, formalism, neoformalism, sales, UCC
JEL Classification: K10, K12, K20
Suggested Citation: Suggested Citation
Woodward, William J., Neoformalism in a Real World of Forms. Wisconsin Law Review, Vol. 2001, No. 3, pp. 971-1005, 2001. Available at SSRN: https://ssrn.com/abstract=1004021