Document Type


Publication Date



This essay is a response to Ian Ayres's, "Regulating Opt-Out: An Economic Theory of Altering Rules," 121 Yale L.J. 2032 (2012). Ayres identifies an important question: How does the law decide when parties have opted-out of a contractual default? Unfortunately, his article tells only half of the story about such altering rules. Ayres cares about rules designed to instruct parties on how to get the terms that they want. By focusing on such rules he ignores altering rules designed instead to interpret the nonlegal meaning of the parties' acts or agreement. This limited vision is characteristic of economic approaches to contract law. Valuable as they are for identifying the incentives, intended or unintended, that legal rules create, they tend to overlook other functions of contract law.

The essay develops these points by applying the interpretation-construction distinction to Ayres's theory. It distinguishes between two categories of altering rules, "juristic" and "hermeneutic." Juristic altering rules are designed to help parties get the legal outcomes they want, though as Ayres points out, such rules also might attempt to slow parties with extra transaction costs. Hermeneutic altering rules condition legal change on the nonlegal meanings of what the parties say and do. Their application therefore requires a broader form of interpretation. The essay identifies the connections between each type of rule and more general principles and purposes of contract law. And it argues that attention to hermeneutic altering rules can fill in some of the gaps in Ayres's account, such as explaining why juristic altering rules often specify sufficient but non-necessary means of effecting a legal change.