Contractual Incompleteness: a Transactional Perspective

Recent scholarship in the field of contract law has concentrated on contractual incompleteness—that is, on the fact that except in the simplest and most basic transactions, contracting parties do not work out all of the relevant details and contingencies of their relationship at the outset. The reasons for incomplete contracts are varied. Sometimes parties deliberately leave terms unresolved, trusting future negotiations or social norms to fill in any problems that emerge. Other times, they leave terms unresolved without realizing they have done so, in part because they devote limited attention or resources to their negotiations and in part because contracts are expressed in ordinary language with all its ambiguities. In any event, it is routine for contracting parties not to focus on the fact that their agreements contain interpretative gaps until after a difference of opinion arises. Most of this recent scholarship has focused on the question of what courts should do when faced with the problem of enforcing an apparently incomplete contract. For example, the literature on default rules addresses the question of what terms courts should apply when the contract is silent on a particular issue, the literature on the battle of