ABSTRACT
This article asks two questions that the recent pandemic makes especially salient. First, should courts consider some facts unavailable to parties at the time of contract but which plausibly would have altered their contract design? I argue that they should take new information into account when doing so would realize a principle of risk-sharing that was implicit in the contract with respect to unassigned risks. The pandemic and the problems it created for contracting parties helps to show how courts are situated to vindicate risk-sharing in ways that are implied but cannot be fully detailed by parties at the time of contract with respect to poorly conceived contingencies. Risk-sharing should be operationalized differently in hindsight than at the drafting stage because many, if not most, parties would want courts to use information that has come to light in the course of performance.
The power of hindsight poses a second question for courts. Should courts consider public policy pursued by regulators during or after an unforeseen contingency like the pandemic? I argue that they should do so only sparingly. Paradoxically, courts should be less attentive to public policy enacted after a contingency has arisen if it does not squarely address how an agreement should be enforced. While courts are clearly bound by any new statutes or regulations that impose boundaries on contracts, in the context of interpretation, courts should be more attentive to public policy predating the crisis. It is more appropriate for courts to flexibly decipher regulatory norms drafted without specific knowledge of the relevant contingency because the drafters of those regulations could not have enacted rules more clearly on point.
Bagchi, Aditi, Retrospective Risk Allocation (May 27, 2022). Law and Contemporary Problems, volume 85, no 2, 2022.
First posted 2022-06-02 16:00:20
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