Contract Interpretation Enforcement Costs: An Empirical Study of Textualism Versus Contextualism Conducted Via the West Key Number System

Abstract

This Article sets forth an empirical study of a central issue in the judicial and academic debate over the optimal method of contract interpretation: Whether “textualism” or “contextualism” best minimizes contract enforcement costs. The study measured enforcement costs in twelve ways. Under each of those measures, there was no statistically significant difference in the level of interpretation litigation between textualist and contextualist regimes. Accordingly, the study finds no support for either the textualist hypothesis that contextualism has higher enforcement costs or the contextualist counter-hypothesis that textualism has higher enforcement costs.

The study herein was conducted via the West Key Number System. It is the second study of contract interpretation enforcement costs that I have completed employing that tool. In a prior article, I presented the first study and discussed how to use the Key Number System for empirical research generally. This paper expands on the analysis of the Key Number System from the earlier article. It also addresses how the complexity and confusion in the interpretation caselaw create challenges for empirical work concerning contract interpretation.

Keywords: Contracts, Interpretation, Empirical

JEL Classification: K12