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The Law and Economics of Contract Interpretation

Contract interpretation is an understudied topic in the economic analysis of contract law. This Article 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 m istake, contra proferentum, and what I call the (informal but very important) rule of "extrinsic nonevidence." Gap filling is distinguished, and the relativity of interpretive doctrines to the interpretive medium-jurors, arbitrators, and judges in different kinds of judicial systems-is emphasized.

I. Introduction

There is now a large economic literature on contracts and contract law, but the ...

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