Policy Interventions via Contract Interpretation

Abstract

The paper addresses the various doctrinal and factual ways in which public policy considerations can influence the interpretation of contracts. This influence becomes especially relevant when there is an interpretive leeway due to vague concepts, gaps in the contract, or interpretive maxims such as the standard of a reasonable person. While its main advantage lies in its flexibility and its incentives for the drafting of the contract, its main disadvantage is the hidden way in which public policy interferes with private autonomy. This influence can in fact be observed and to a certain extent even normatively be justified as long as the intentions of the parties are not distorted.

Keywords: contract interpretation, contract construction, public policy, objective and subjective theory, standard of a reasonable person

JEL Classification: K12; K10