Who are contracts written for? Contract theorists are, in general, of two minds: contracts are either written for courts, who can levy formal sanctions for breach, or communities, who can use reputational sanctions to punish breach. Hwang’s article shows, for the first time, that there are audiences beyond courts and communities: rather, modern contracts must speak to multiple audiences, including regulators and future assignees. When contracts speak to many parties, they exhibit “contractual depth.” Contractual depth complicates both contract design and enforcement, and has important implications for theory and practice.

In advancing the theory of contractual depth, this article makes two contributions to the literature. First, it provides the first comprehensive theoretical account of how third parties—especially regulators—impact contract design. To do so, it uses original interviews with general counsel and other contract designers to show how a desire to comply with regulators affects the substance and structure of contracts. Second, Hwang contributes to the most important contract interpretation debate of our time: the parol evidence question. For decades, contract theorists have been split into two camps: textualists argue that courts should not use deal extrinsic evidence to interpret contracts, while contextualists argue that extrinsic evidence is critical to understanding parties’ intent. When contracts exhibit contractual depth, however, contextualism is necessary: it helps courts separate the layers of the contract that reflect parties’ interests from the other layers that parties have included simply for compliance or signaling purposes. 

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2019-20 Faculty Speaker Series

The Faculty Speaker Series at Loyola University Chicago School of Law brings distinguished legal scholars to campus to discuss current and emerging issues of law related to their areas of interest and expertise. All presentations will be held at the Corboy Law Center, 25 E. Pearson Street, Chicago.