Academic

Klass on Contractual Implicature

By Lawrence Solum

Gregory Klass (Georgetown) has posted Regulating Information in Contractual Relationships on SSRN. Here is the abstract:

While much has been written about how individual rules of contract law impact parties' sharing of information, we do not yet have a general theory of the legal regulation of information in contractual relationships. In his recent article, Taking Information Seriously: Misrepresentation and Nondisclosure in Contract Law and Elsewhere, 92 Va. L. Rev. 565 (2006), Richard Craswell starts in on the project of providing one. This essay critically examines Craswell's arguments and discusses what such a general theory should look like. One of my central theses is that such a theory should keep apart two regulatory approaches: the use of scientific methods to study the informational effects of individual transaction elements, and interpretive approaches, which take as their object the meaning and veracity of such elements. The essay also discusses legal liability for implicit misrepresentations and the role of everyday interpretive norms in the law of misrepresentation in general.

The essay first summarizes what I take to be Craswell's central claims about information sharing, summarized by his rejection of the quantized view of information. I then discuss the similarities and differences between the two contract doctrines that are most obviously designed to regulate information sharing: nondisclosure and misrepresentation. This lays the groundwork for a detailed analysis of Craswell's claims about the law of misrepresentation. Craswell uses Grice's theory of conversational implicature to explain of how separate pieces of information can be bundled together in a single speech act. I argue that Craswell wrongly assumes (contrary to Grice's theory) that it is difficult to divorce implicit misrepresentations from the potentially beneficial speech acts that contain them. This error leads Craswell to overstate the similarities between misrepresentation and nondisclosure. The last part of the essay distinguishes two regulatory approaches, which I label causal-predictive and interpretive. Causal-predictive regulation, which Craswell advocates broader use of, employs the methods of behavioral economics to mandate how transactions should be structured. The law of misrepresentation, I argue, uses a fundamentally different method, one that focuses not on causation but on meaning and veracity. I make some general observations about the proper scope of these different regulatory approaches, their relative merits, and the prospects for combining them in the ways Craswell recommends.

And from the text:

the theory of conversational implicature is not merely an account of conversational etiquette: it also describes the rules that determine a speech act?s meaning in context. The rules? interpretive function comes to the fore in the case of implicit meanings. When an act?s literal meaning appears to violate one or more maxims, a sort of general Principle of Charity requires that we look for an implied meaning to bring the speech act into conformity with those rules. Consider again the argument that Organ?s silence implicitly represented that there was no news. The Cooperative Principle required (so the seller?s argument would go) that if there was any important news, Organ respond to Girault?s question. More precisely, if there was news, the failure to respond violated the first maxim of quality: make your contribution as informative as required. In the context of the question, it was therefore reasonable to interpret Organ?s silence as representing that there was no news ? bringing his behavior into apparent conformity with the conversational maxims. The Gricean maxims are not simply guides to how to behave in conversation. They determine what is said, the meaning of a speaker?s words or actions in context.

Now here is the important point. As Craswell observes, Grice?s maxims themselves involve a sort of conversational cost-benefit analysis.32 If Organ?s silence implicitly represented no news, it was because the question was so salient, the news so important, that if there had been news, his silence would have violated at least the maxim of quantity. Because the benefits of such news were so clearly worth the costs of an answer, no answer implicitly communicated no news. This is not to say that silence was the most efficient means of sharing ? or purporting to share ? that information. In the context, a short, express statement would have been less ambiguous. But, if the seller?s interpretation of the silence was correct, it was the method the parties apparently chose, and was within the range permitted by the maxims of quantity and quality. And that is enough to create a presumption that the communication was relatively important and reasonably effective. The cost-benefit analysis built into the rules of conversational implicature provide separate grounds for a presumption both that the parties? chosen form of communication was effective enough to get the point across and that it contained information important enough to warrant any interference it might be expected to cause.

Great paper!  Highly recommended.

Full post as published by Legal Theory Blog on May 05, 2008 (boomark / email).