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For over a century, legal commentators have debated the relative merits of formal and substantive approaches to the interpretation of contracts; in recent years, the debate has increasingly been conducted in the language of the economic approach to contract law. While this new wave of scholarship has been relatively successful in relating the traditional debates over formalism to specific transactional and institutional problems such as imperfect information, it has been less productive in terms of generating useful legal or policy recommendations. This Essay proposes a different approach: one that focuses on private rather than public legal decisionmakers as its primary audience. In general, private lawmakers are better able to make practical use of the economic analysis of contracts, in part because the detailed information that is necessary to implement such analysis intelligently is likelier to be available at the individual level. Furthermore, there are many opportunities for contracting parties to choose between relatively formal and relatively substantive interpretive regimes. What is needed is a basic taxonomy of economic considerations that can serve as an organizing framework for parties choosing between form and substance when designing contracts. The later part of the Essay sets out such a framework.


Contracts | Law | Law and Economics