Writing the Fine Print: The Economics of Legalese

24 Pages Posted: 2 Oct 2014

See all articles by Robert Cavender

Robert Cavender

Gettysburg College - Department of Economics

Date Written: August 10, 2012


The purpose of this paper is to provide a rational choice defense of the persistence of jargon-like "fine print" or "legalese" in contractual agreements. While common arguments for its continued use include creating artificial demand for lawyers, enhancing precision, or simple path-dependence, never has it been defended specifically for its costliness. In this paper I posit an alternative theory of the use of "legalese" in contracts whereby individuals writing contracts are engaged in a game where the threat to enforce the contract needs to be credible under a regime of costly enforcement. Legalese thus acts as a relatively less-costly signal that the writer of the contract is wealthy enough to afford a lawyer or educated enough to write like one, effectively intimidating the signer of the contract into being less likely to renege. Since in the long run both parties would prefer to be able to sign binding contracts, legalese serves as a second best way to make everyone better off.

Keywords: Game Theory, Law and Economics, Contract Theory, Signaling

JEL Classification: C7, K, D86

Suggested Citation

Cavender, Robert, Writing the Fine Print: The Economics of Legalese (August 10, 2012). Available at SSRN: https://ssrn.com/abstract=2503743 or http://dx.doi.org/10.2139/ssrn.2503743

Robert Cavender (Contact Author)

Gettysburg College - Department of Economics ( email )

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Gettysburg, PA 17325
United States
(717) 337-6670 (Phone)

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