Ben-Shahar and Strahilevitz, ‘Interpreting Contracts via Surveys and Experiments’

Abstract:
Interpreting the language of contracts is the most common and least satisfactory task courts perform in contract disputes. This article proposes to take much of this task out of the hands of lawyers and judges, entrusting it instead to the public. The article develops and tests a novel regime – the ‘survey interpretation method’ – in which interpretation disputes are resolved though large surveys of representative respondents, by choosing the meaning that a majority supports. The article demonstrates the rich potential under this method to examine variations of the contractual language that could have made an intended meaning clearer. A similar survey regime has been applied successfully in trademark and unfair competition law to interpret precontractual messages, and the article shows how it could be extended to interpret contractual texts. To demonstrate the technique, the article applies the survey interpretation method to five real cases in which courts struggled to interpret contracts. It then provides normative, pragmatic, and doctrinal supports for the proposed regime.

Ben-Shahar, Omri and Strahilevitz, Lior, Interpreting Contracts via Surveys and Experiments (January 25, 2017). University of Chicago Coase-Sandor Institute for Law and Economics Research Paper.

4 Comments to "Ben-Shahar and Strahilevitz, ‘Interpreting Contracts via Surveys and Experiments’"

  1. haward soper's Gravatar haward soper
    27 January 2017 - 9:26 am | Permalink

    What? We are going to ask the people who voted for Trump and Brexit what an interbank co-workout agreement might mean? This sounds like a really hot idea. Why not go the whole hog and just set up a TV reality show?

    Maybe I will read the paper but this sounds like one of the worst ideas I have ever heard

  2. Lior's Gravatar Lior
    5 February 2017 - 3:46 pm | Permalink

    No, haward soper. The paper proposes nothing of the sort because that would indeed be a terrible idea. It proposes surveying consumers to determine their interpretations of consumer contracts. For contracts between sophisticated parties, like the one you describe, it proposes systematically surveying sophisticated participants in the pertinent industries to aid courts in resolving interpretation questions. The paper suggests that method is an improvement over courts using anecdotal evidence to determine trade usage.

    The invocation of Trump in a post where you misrepresent an argument that you can’t be bothered to read and then attack the caricature with hyperbole was beautifully done.

    • Haward's Gravatar Haward
      6 February 2017 - 7:13 am | Permalink

      Thanks for the clarification. It doesn’t help much. I flew to Saville yesterday along with around 180 others on the same flight. I guess we were all consumers and we could all be asked what we thought of Clause 7.3 of the British Airways Conditions of Carriage. However, when I last studied contract there were two parties and I find the conceptual difficulties in weighing a survey against the opinion of the single commercial partner impossible. I still think a reality show would be better. It wouldn’t provide better data but it might, at least’ entertain.

      Regarding surveying commercial entities I’d suggest engaging with the literature on qualitative research. That will show random sampling to be impossible and that business people are reluctant to engage. That’s before you decide on the question. The idea that this can be accomplished with ease would amuse trial lawyers who have to find ways of digging this material out. You would end up with multiple pages of background to the transaction to explain the question and scaled answers would be useless. It’s wholly impractical. Expert opinion is expensive but valid since open challenge can be undertaken and research carried out into the expert’s view. That’s difficult with a survey; which should really only form part of the background.

  3. Lior's Gravatar Lior
    6 February 2017 - 4:17 pm | Permalink

    Thanks. Those are sensible criticisms. The argument is that the airline can pretest its policies on a representative sample of its consumers to determine how those consumers would understand the pertinent language if they read it. So while it’s true that there are two parties to the contract, under our proposal the airline would be able to discern the counterparties’ interpretation ex ante. Under the status quo, unsophisticated consumers often have a very hard time discerning ex ante what the terms they are ostensibly consenting to actually mean. We think that’s a problem, one that creates bad incentives for firms that draft boilerplate.

    I don’t think the paper claims that the process can be accomplished “with ease.” The proposal is that contract interpretation law follow a move made in trademark law decades ago. The use of consumers surveys in trademark cases isn’t universally beloved, it generates costs, and methodological disputes do arise. But wise firms test their marks in advance to minimize litigation exposure. When disputes arise both parties usually hire experts to survey consumers, and the cases generally settle based on what the expert reports indicate. I think that’s a plausible model for data-driven contract interpretation too. There are, of course, differences between trademarks and contracts, and the paper tries to dig into the question of whether those differences are more significant than the similarities.

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