A Study Of Implied Terms In Anglo - American Contract Law

The biggest advantage of law and economics is to provide a quantitative and analytical tool for the study of the legal system, which can minimize the costs of transaction in line with the principle of efficiency of law in the law-economists’eyes. The cost of transaction is the core of Kos’s theorem, Posner believes that because of the existence of transaction cost, one party may use opportunism to make the other fall into a "prisoner’s dilemma" in the process of signing and executing a contract. In order to prevent the opportunism and promoting trade, the court fills the loopholes in the contract according to Ulen’s minimized transaction cost formula:the cost of risk in distribution< actual loss caused by some future events x happening probability. The Anglo American law systems fill the missing terms by using the implied terms, while the continental law system fills the missing terms by using the supplementary explanations of contract. Posner provides a quantitative and analytical tool of the Law and Economics for the research of implied terms:the transaction cost of C=x+p (x) [y+z+e (x, y, z)], the court will analysis the consequences of different judgments after it made judgments. However, the economists pursue efficiency while the jurists pursue fairness in the eyes of the public, the society does not allow the jurists to play roles like economist, so the judges name their behavior that their parties would like to mean by inserting the implied terms which show "judges’strategies" in order to save the cost of explaining and convincing the public. The continental law system fill the loopholes of contract by assuming what their parties mean, it is similar to the implied terms in the Anglo American law system on the legislative principles, functions But the Anglo American law systems pay much more attention to case law while civil law to the statute law, different specifications are adopted in the process of filling the gaps in contract in two legal systems for different types of contracts. Therefore, typed contracts provide a new idea for our country’s judges.Part one, the effects of incomplete contracts and the traditional contract law. Due to the limited rationality, the transaction costs of contract, the impact of incomplete information, the modern contract law makes the adults conclude the incomplete contract quickly. Despite of the possible disputes caused by defects of the incomplete contract but it is in line with the demands of reducing costs, improving the efficiency in the modern society. The incomplete contract amends the principle of contract freedom in traditional contract law.Part two, the history and evolution of rules of implied terms. The implied terms can be divided into the legal implied terms, the factual implied terms, the customary implied terms. Apply the transaction cost formula of C=x+p (x) [y+z+e (x,y, z)] classification into the analysis of implied terms:(1) the parties use Ulen’s formula of minimized transaction cost:the cost of risk in allocation (x)> the cost of loss in allocation (z) probability of loss p(x)=> leaving the gap in saving transaction cost. (2) the parties save the cost of contracting (x), but the P (x) of lawsuits will increase, if the court is allowed to insert the implied terms for different types of contracts, it will save the cost (z) of information expenditure in finding out the facts and social cost (E) caused by misjudgment, and the case of a higher court provides a lower court with guidance for the party’s action, saving the cost of lawsuits (Y). In a word, the court minimize the transaction costs of the parties by adding to implied terms, adding to implied terms is a "trial strategy" shown by the judges for the efficiency logic of maximizing social benefits.Part three, the relationship between the implied terms and explicit terms. The judges identify their behavior as finding out implied meaning of the parties, so the search for the "implied meaning" of the parties is very important. Traditional theory holds that the fundamental difference between the meaning and the implied meaning lies in the difference in representation. But according to the classification standard of implied meaning of Germany scholar, Dieter Medicus and Marx’s view of nature, we think that the indirect representation of meaning matches with the characteristic of Marx’s philosophy of nature. Compared with the implied terms, explicit terms have priority, but explicit terms shall not exclude the mandatory statutory implied terms.Part four, a comparative study on the system of implied terms and the system of supplementary interpretation of contracts. We will assume "what the parties mean" in the civil law as "rule of qualitative judge strategy" through argument, so it has much in common with the implied terms of Anglo American law in the basic principles, value, function, but the system of implied terms of Anglo American law shows more respect for the representation of the meanings of the parties. According to the comparative analysis, we should apply different legislation in different cases to achieve fairness and justice better, typed contracts provide a new thought for filling flaws in contracts.