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first party did not know or have reason to know of the meaning attached by the other party. Such a fault principle, however, seriously undermines predictability and the contract’s function as an authoritative guide to the parties’ conduct both inside and outside of the courthouse. To find out its contractual rights, duties, and powers under the fault principle, a first party must worry itself about what meaning the second party attached to the contract term, what the second party knew about the meaning the first party attached to the contract term, and what the second party had reason to know about the meaning the first party attached to the term. This seems to be well nigh impossible without rights to discovery in litigation, if then. Consequently, parties will be hampered, prior to litigation, in performing as required and in settling disputes.
Moreover, because strong subjectivism dispenses with the question of ambiguity, it sends potentially all interpretive disputes to the factfinder. Jury verdicts generally are notoriously unpredictable. In a case involving a contract interpretation dispute, unpredictability probably is even more severe. Many contracts are long, complicated documents requiring great sophistication to parse them well. It is hard to imagine a jury succeeding in finding the parties’ intentions in these cases. Such unpredictability, again, hampers the parties outside the courthouse, before litigation commences. Subjectivism, in a phrase, is too litigationoriented. And it does not work well in litigation, either.
§ 6.2. Pluralism, Economic Analysis, and Conventionalism
This section considers three untidy questions that we should address as we reach the end of this study. First, what is the justification for objective contextual interpretation’s pluralist nature? Second, why does objective contextual interpretation reject economic analyses of contract interpretation? Third, what is the underlying basis for objective contextual interpretation’s theory of meaning?
§ 6.2.1. Pluralist and Monist Theories
Objective contextual interpretation is a pluralistic theory in three major respects. First, it holds that interpretation is contextual, such that contract interpretation, fiction interpretation, musical interpretation, and
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other kinds of interpretation may be different.33 Second, and more specifically, its justification depends on a balance of several goals and other reasons. Third, it identifies the elements that should be considered when performing each task in contract interpretation, and it requires that, when several are relevant and have conflicting implications, they should be weighed to reach a judgment. The objective contextual approach, however, refrains from supplying a meta-rule for assigning weights in the scales of justice. Consequently, different interpreters may disagree reasonably in a hard case. This approach, like the prevailing law, allows the interpreter discretion.
Some leading contracts theorists insist on a need for those who would balance to provide a single and determinate metric or meta-norm for assigning weights to norms. When criticizing Professor Melvin A. Eisenberg’s pluralistic approach to various contract issues, Professors Alan Schwartz and Robert E. Scott wrote:
The problem that pluralist theories without meta-norms pose are nicely illustrated in Melvin Eisenberg’s effort, which purports to solve the . . . problem by proposing overlapping sets of norms. Eisenberg recognizes that his theory lacks a metric that would tell the lawmaker just how to give the proper “weight and role” to each social proposition or value when conflicts occur. Since courts or legislatures are likely to be involved when the relevant social propositions or values arguably favor more than one type of litigant or interest group, pluralist theories such as Eisenberg’s tend to be least helpful when they are most needed.34
If we had a single determinate meta-norm for assigning weights to norms, we would transform contract theory and, by extension, contract law generally, into a monistic field. That is, contract law would have only one justification—that of the metric—which would ramify through the law. For example, we could pursue the goal of making contract law economically efficient and shun any other purpose whatsoever. Respected scholars
33See generally Kent Greenawalt, A Pluralist Approach to Interpretation: Wills and Contracts, 42 SAN DIEGO L. REV. 533 (2005).
34Alan Schwartz & Robert E. Scott, Contract Theory and the Limits of Contract Law, 113
YALE L.J. 541, 543–44 n.2 (2003) (footnotes omitted). See Melvin A. Eisenberg, The Bargain Principle and its Limits, 95 HARV. L. REV. 741 (1982); Melvin A. Eisenberg, The Theory of Contracts, in THE THEORY OF CONTRACT LAW: NEW ESSAYS 206 (Peter Benson, ed. 2001).
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who do normative economic analyses of contract law, such as Schwartz and Scott, pursue such monism.35 Their criticism in effect insists that Eisenberg should transform his pluralism into monism if his theory is to compete well with an efficiency theory.
Monism might be appealing because it promises elegance in contract theory; if successful, it would provide consistent, complete, and determinate norms to govern all contract disputes. Monism, however, has serious drawbacks. Schwartz and Scott, in an article largely devoted to contract interpretation, can pursue their monism only by restricting the domain of contract law to a subset of all contract disputes as conventionally understood—firms selling to firms. They exclude firms selling to individuals, individuals selling to firms, and individuals selling to individuals.36 They assign disputes involving firms selling to individuals to the domains of consumer protection law, real property law, and securities law. They assign disputes between individuals and firms to the domain of employment law. And they assign disputes between individuals and individuals to the domains of family law and real property law.37 Schwartz and Scott’s efficiency theory of interpretation is not intended to apply to the excluded disputes.
The problem here is that decidedly contractual disputes arise between firms selling to individuals, individuals selling to firms, and individuals selling to individuals—disputes involving offers, acceptances, mistakes, unconscionability, material breaches, etc. If these kinds of disputes are to be treated differently depending on the identities of the parties as firms or individuals, there will be unequal treatment across domains in relation to common contract issues. If these disputes are to be treated the same, and the same as disputes between firms and firms, however, there is no point to carving up contract law’s traditional domain. The change proposed by Schwartz and Scott would involve an unwise radical restriction of contract law’s domain: In effect, it seems, they would shrink the domain to fit the theory in order to achieve theoretical elegance or something similar.
Pluralism in contract law can be somewhat messy, as is democracy. Pluralistic contract law, however, can have the decided advantages of governing all contract disputes with the same rules (subject to minor variations
35Schwartz & Scott, supra note 34, at 544. See also STEPHEN A. SMITH, CONTRACT THEORY
(2004); Randy E. Barnett, A Consent Theory of Contract, 86 COLUM. L. REV. 269 (1986).
36See Schwartz & Scott, supra note 34, at 544.
37Id.
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when justified) and can produce equal treatment under the law. Most important, a pluralistic contract law respects all relevant normative and other considerations. The contractual freedoms, the security of transactions, non-arbitrary dispute settlement under the Rule of Law, and administrability, all are important considerations. None should be sacrificed due to the theoretical desiderata of monism. One could add economic efficiency to the mix and delete inconsistent goals. Efficiency then would have less than conclusive weight due to the great importance of Rule of Law values and administrability. If we include these values, economic efficiency turns out to be part of a pluralist theory; efficiency presumably would be outweighed by Rule of Law and administrability considerations in some circumstances. And there is no meta-norm here either. There is no justification, however, for excluding any legally relevant normative consideration, and especially not to do so to achieve theoretical elegance. So we are led to pluralism.
In addition, no meta-norm could capture the ebb and flow of weight as we vary the facts of a case hypothetically. As we wrote elsewhere in relation to a simple negligence case:
[A]ssume that a motor vehicle left the road and damaged a storefront. In a tort action, the fact that the operator had an epileptic seizure at the moment looms large, all else being equal, as a reason to find that the motorist was not negligent. The fact of the seizure seems less weighty, as an exculpatory reason, when it turns out that the motorist did not take anti-seizure medication that day. Not having taken anti-seizure medication, in turn, is crucial if the motorist had a history of epilepsy and was under a doctor’s orders to take the medication regularly. It shrinks in significance, however, if the motorist had not had a bout of epilepsy for many years. In the same context, the mere fact that an epileptic was operating a motor vehicle probably is insignificant, but gains salience if the motorist’s medical history includes many epileptic seizures even while properly medicated.38
Weight here is not a property of a norm. Rather, legal norms make facts relevant as concrete legal reasons, as the negligence standard makes each of the hypothetical facts in this illustration relevant. Weight is a property
38 STEVEN J. BURTON, JUDGING IN GOOD FAITH 55–56 (1992) ((example drawn from Hammontree v. Jenner, 97 Cal.Rptr. 739 (Cal.App. 1971)).