The Limits of Bargaining Power as an Interpretive Aid

Abstract

This is a short response to a recent essay by Omri Ben-Shahar ("A Bargaining Power Theory of Default Rules," 109 Colum. L. Rev. 396 (2009)). It is part of a broader forthcoming analysis of contract interpretation.

Professor Ben-Shahar argues that evidence of bargaining power should inform courts when they fill contractual gaps. I make several observations in response: (1) a significant portion of Ben-Shahar's argument applies not to gaps but to other kinds of contractual questions, and it has less force for gaps; (2) reliable evidence about bargaining power is often unavailable; (3) contracts should not be interpreted, generally speaking, based on an analysis of how parties have divided contractual surplus, because an intent regarding general surplus division does not follow from evidence regarding specific surplus divisions; and (4) even when one party is strong enough to apparently dictate terms, there is no good general reason to allow it to dictate specific terms ex post. In principle, my analysis is not meant to refute Professor Ben-Shahar's general line of reasoning but to suggest that bargaining power, though important theoretically, is unlikely to be useful as an independent interpretive aid in contract law.

Keywords: contracts, interpretation, gaps, bargaining power

JEL Classification: K12