Department of Economics2024-11-0920028756-622210.1093/jleo/18.1.672-s2.0-0036256604http://dx.doi.org/10.1093/jleo/18.1.67https://hdl.handle.net/20.500.14288/9151I model the litigation of a contract containing a variable not observable by courts, hence nonverifiable, unless the rational and self-interested judge exerts effort. He values the correct ruling but dislikes effort. Judicial effort is discretionary. I show that effort cost is inconsequential-"always breach" is equilibrium for any effort cost. But there exists another equilibrium where a small breach rate is achieved even with significant effort costs. Maximal remedies for breach are not optimal. Because effort is discretionary, low effort cost increases breach. Pretrial negotiations can have a substantial negative impact on verifiability under arbitrarily small deviations from full rationality.EconomicsLawJournal Article175116100004Q39011