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A Consequential Approach to Interpretation and Interpretive Risk: Rethinking Judicial Intervention from Contracts to the Chrysler Bankruptcy
(2010)
  • Juliet P Kostritsky
Abstract
Abstract When contracts remain ambiguous or incomplete, courts and scholars must confront the inevitable question of when intervention in private contracts is justified. To deal with the unresolution or residual uncertainty, the Austrian economists and the new textualists suggest that any intervention would be a fool’s errand. Their position amounts to an unvarying posture that any party asking for an additional term or a broad interpretation will always lose. Recognizing that there is an interpretive risk in all contracts, the court should adopt an interpretive methodology that parties would be willing to adopt and that would enhance the willingness of both parties to engage in exchanges. To achieve that goal, courts as interpreters should focus on how the interpretation adopted would increase or decrease interpretation risks (costs) over time to different classes of transactors. By tailoring and applying interpretive rules, courts can (and do) promote increases in net welfare in a range of cases and contexts examined in this article. If the prospect of adding a term or even overriding a term would prevent opportunistic behavior or catastrophic consequences to both parties, then courts can intervene in a way that maximizes surplus and would be preferred. The essay concludes that the same economic considerations informing contract interpretation should be applied outside the contracts context to the interpretation of federal statutes in the Chrysler bankruptcy in a way that had been neglected by the Second Circuit.
Keywords
  • interpretation,
  • statutory interpretation,
  • contract interpretation,
  • textualism,
  • economics
Disciplines
Publication Date
Spring 2010
Citation Information
Juliet P Kostritsky. "A Consequential Approach to Interpretation and Interpretive Risk: Rethinking Judicial Intervention from Contracts to the Chrysler Bankruptcy" (2010)
Available at: http://works.bepress.com/juliet_kostritsky/18/