Contract law does not adequately account for the harms that we can inflict on third parties by joint agreement. Some terms are prohibited, and some third party interests are protected by independent causes of action. But a wide variety of material interests that are otherwise recognized in law may be burdened by other people's contracts. This Article proposes that ambiguous contract terms be construed to avoid harming third parties. In some contexts, courts already protect third parties in this way. The doctrinal rule that courts should construe ambiguous terms "reasonably accommodates this practice but does not invite it. Prevailing contract theory is affirmatively hostile to it. This Article locates the role of contract law in mitigating negative externalities within a broader institutional division of labor. Identifying the function of contract law helps justify an explicit interpretive principle that disfavors terms injurious to third parties.
Other People's Contracts,
Yale J. on Reg.
Available at: http://digitalcommons.law.yale.edu/yjreg/vol32/iss2/2