Kevin E. Davis
New York University School of Law
June 1, 2010
NYU Law and Economics Research Paper No. 10-21
Economists often presume that the costs of drafting contracts are directly related to the ‘completeness’ of the contracts in question. This may be a reasonable presumption when contractual documents are drafted from scratch. But anyone who has drafted a contract knows that it is typically much easier to proceed by finding and copying an existing widely used document (“boilerplate”), even one that generates a very detailed contract, than to draft from scratch. This observation has important implications for debates about the optimal method of interpretation. This paper analyses the merits of alternative ways of interpreting contractual documents when parties use boilerplate. Legal practices such as gap-filling, the use of extrinsic evidence, uniform laws, and allowing parties to choose the method used to interpret their documents are examined. One notable finding is that it is not necessarily desirable to allow parties to choose the method of interpretation. The analysis highlights the potential importance of the stock of boilerplate available to contracting parties as a factor that determines the impact of contract law.
Number of Pages in PDF File: 25
JEL Classification: K12, L14
Date posted: June 1, 2010