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The Meaning of Contractual Silence: A Field Experiment

27 Pages Posted: 5 Jan 2010 Last revised: 15 Jul 2010

Yair Listokin

Yale Law School

Date Written: January 4, 2010

Abstract

The limited capacity of lawmakers to intuit the unstated wishes of contracting parties constitutes a daunting obstacle to the formulation of majoritarian default rules. This paper presents a field experiment that prices consumers’ unstated understandings of contractual silence regarding warranty and return policies for a good. Used iPods were sold via auction on eBay.com with randomly varying return policies. Some iPods came with a satisfaction guaranteed policy, others with an explicit warranty that resembled the default warranty of merchantability, and still other iPods were sold “as is.” Finally, a batch of iPods was silent regarding the return policy. Although the estimates are extremely imprecise, consumers appear to pay approximately the same price for iPods with silence regarding the return policy as they do for iPods with the explicit warranty that resembles the UCC default warranty. Silent iPods sell for less than iPods that are satisfaction guaranteed, and considerably more than iPods sold “as is” – though again a lack of precision precludes confident inferences. Consumers interpret silence in accord with silence’s legal meaning; the UCC framer’s “guess” about majoritarian warranty expectations is an empirically reasonable one.

Keywords: contract law, default rules, warranties, UCC, field experiment

JEL Classification: K12, L14

Suggested Citation

Listokin, Yair, The Meaning of Contractual Silence: A Field Experiment (January 4, 2010). The Journal of Legal Analysis, Forthcoming; Yale Law & Economics Research Paper No. 400; 5th Annual Conference on Empirical Legal Studies Paper. Available at SSRN: https://ssrn.com/abstract=1531306

Yair Listokin (Contact Author)

Yale Law School ( email )

P.O. Box 208215
New Haven, CT 06520-8215
United States
203-436-2567 (Phone)

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