67 Am. U. L. Rev. 1673 (2018).

* Reef C. Ivey II Term Professor of Law, University of North Carolina School of Law.  J.D., Yale University; M. Phil., University of Cambridge; B.A., Harvard University.

** Ralph M. Stockton, Jr. Distinguished Professor, University of North Carolina School of Law.  J.D., University of Minnesota; B.A., Carleton College.

For comments on prior drafts, we thank Lisa Bernstein, Mitu Gulati, Bob Scott, and participants at the Conference on Contractual Black Holes at Duke Law School.

Contracts always present questions of interpretation. This is nothing new. What is new is the concern that courts lack the tools to resolve many of these questions. When text is unclear, courts look to context, examining extrinsic evidence for clues as to what the parties intended. But what if there is no evidence of context? Some contract theorists worry about these contractual “black holes” based on two assumptions. First, that ostensibly standard clauses may vary in ways that have escaped the notice of transaction participants and other market actors. Second, that contract law’s usual interpretive tools cannot help courts decide whether to assign different meanings to different versions of a clause. If true, opportunistic parties might exploit textual variation to achieve unexpected results.
This Article critically evaluates these assumptions. Drawing on multiple, hand-coded samples of commercial contracts, we first document widespread and problematic variance in ostensibly standardized choice-of-law and arbitration clauses. This finding provides empirical support for the concern about contractual black holes. We push back, however, against the claim that contract law must change to accommodate these findings.