The Law and Economics of Contract Interpretation

52 Pages Posted: 8 Nov 2004

See all articles by Richard A. Posner

Richard A. Posner

University of Chicago Law School; National Bureau of Economic Research (NBER)

Date Written: November 2004


Contract interpretation is an understudied topic in the economic analysis of contract law. This paper combines simple formal analysis of the tradeoffs involved in interpretation with applications to the principal doctrines of contract interpretation, including the four corners rule, mutual mistake, contra proferentum, and what I call the (informal but very important) rule of extrinsic nonevidence. Gap filling is distinguished, and the relativity of interpretive doctrine to the interpretive medium - jurors, arbitrators, and judges in different kinds of judicial system - is emphasized.

JEL Classification: K12

Suggested Citation

Posner, Richard A., The Law and Economics of Contract Interpretation (November 2004). Available at SSRN: or

Richard A. Posner (Contact Author)

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