"Agreeing to Disagree": Filling Gaps in Deliberately Incomplete Contracts

Omri Ben-Shahar
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Omri Ben-Shahar: University of Michigan Law School

University of Michigan John M. Olin Center for Law & Economics Working Paper Series from University of Michigan John M. Olin Center for Law & Economics

Abstract: This Article develops a new standard for gap filling in incomplete contracts. It focuses on an important class of situations in which parties leave their agreement deliberately incomplete, with the intent to further negotiate and resolve the remaining issues. In these situations, neither the traditional no-enforcement result nor the usual gap filling approaches accord with the parties' partial consent. Instead, the Article develops the concept of pro-defendant gap-fillers, under which each party is granted an option to enforce the transaction supplemented with terms most favorable (within reason) to the other party. A deliberately incomplete contract with pro-defendant gap fillers transforms into two complete contracts, each favorable to a different party, with each party entitled to enforce only the contract favorable to her opponent. Under this approach, partial consent gives rise to a correspondingly intermediate burden of liability. The Article demonstrates that this regime promotes the interests of negotiating parties who enter agreements-to-agree. It also identifies various doctrinal practices that already incorporate the pro-defendant gap filling logic.

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