Contracts as Systems

A contract is much more complex than its individual terms would suggest. Yet contract scholars have traditionally taken a reductionist approach to the study of contracts. According to “contractual reductionism,” a contract can be understood through each of its constituent terms. Recent scholarship, however, has begun to challenge contractual reductionism’s term-by-term view of contracts. Building on this work, this Article provides the first application of complex systems theory to contracts, arguing that a contract is a complex system that is greater than the sum of its terms. A complex system is a system that is composed of a large number of components that interact in a nontrivial manner. Complex systems theory is an interdisciplinary field of study that has been used to analyze a broad range of complex systems including living organisms, cities, economies, technology systems, and ecosystems. One of the key findings of complex systems theory is that complex systems exhibit a surprising degree of similarity and common behavior across diverse contexts – a finding that holds when extended to contracts. To provide a framework for understanding and analyzing a contract as a complex system, the Article models a contract as a complex system using concepts drawn from complex systems theory. The Article then uses this model to demonstrate that contract systems exhibit many key properties observed in other complex systems. The Article ends by discussing how a complex systems approach to contracts informs contract design, interpretation, and analysis. The Article makes three primary contributions. First, the Article extends the scholarship challenging contractual reductionism through the first application of complex systems theory to contracts. Second, the Article models a contract as a complex system and identifies key properties of contract systems. Third, the Article shows how complex systems theory can be used to improve the design, interpretation, and analysis of contracts. The Article’s findings have significant implications for lawyers, judges, and legal technology companies.