The fundamental premise of Saggi's and Trachtman's analysis of this dispute is that the WTO TRIPs agreement should be viewed as an ‘incomplete contract’. Should multilateral treaties be analogized to incomplete contracts? What are implications of doing so for the proper approach to treaty interpretation? We have to begin with the theory of incomplete contracts, which is not really explained in Saggi's and Trachtman's report. As developed by Hart and Moore (1988), the notion of ‘incomplete contracts’ represents the intuition that, while a large number of possible future states of the world may affect the value and cost of performance of a contract, the transaction costs of the parties bargaining ex ante about the legal consequences of all of these possible eventualities are prohibitive. Therefore, taking account of transaction costs, we will expect ‘incomplete contracts’ to be efficient; these contracts generally will either provide various mechanisms for renegotiation triggered by the occurrence of certain future events or allow for the application by an adjudicator or arbitrator of default or background rules to ‘complete’ the contractual bargaining in the face of such eventualities. Equally important to contract theory is the problem of moral hazard: a party to a contract may have incentives to engage in behavior ex post the bargain that increases the riskiness of the contract to the other party. A classic example is insurance contracts.