Synergistic Teaching and Scholarship in Contract Law: Concepts and Metaphors

By popular demand or one comment from Matt Bodie, whichever is lesser!

Matt asks, apropos of the Manic Expressive post, whether I'm using a new book (I referred to doing a new prep).  The answer is "yes, but..."  I taught the first semester of the six-credit Contract offering at Wake Forest in the fall 2005, and Contracts II, the Sales portion of the first year curriculum at Tulane, in the spring 2007 (for common law students; I think the civil law students there take something called Obligations).  I used Knapp, Crystal, & Prince for Contracts and Keating for Sales.  The administration at Suffolk waited for three years before siccing me on the 1Ls (I have been teaching Unincorporated Business Entities and Securities Regulation), but the pressing need this year was for Contracts.  I'm using Hogg, Bishop, & Barnhizer for a number of reasons (Knapp, et al. is excellent and there is no shortage of fine contract law casebooks), not the least of which is that my colleague, friend, and suitemate, Carter Bishop, is right there for me when I want to brainstorm about something.

It's been interesting to return to teaching contracts since I've written five pieces since teaching at Wake on contract theory, and another three dipping into metaphor theory (as an means of getting at what I think of as the mystery of forward-looking judgment).   It's been almost impossible to teach the doctrine without organizing it in terms of my theoretical take, and I'm finding my theoretical take informed in almost every session of class preparation.  So I'm working in parallel tracks.  I'm  developing the classroom materials and teaching from them on one hand, and working the article in which I'm developing the theory behind what I'm doing, on the other.

Here's the opening paragraph of the extremely nascent article:

There is probably no better example of the gap between academic law and the practice than the very archetype of the law school experience: the first-year indoctrination in the law of contracts. Although the casebooks vary in their approaches, by early December, the typical student has been bamboozled by elements of doctrine that experienced practitioners know almost never come up over the course of a long career either as a transactional lawyer or as a commercial litigator. The unreality of the first-year contract law enterprise engenders questions like these:  why do clients and their lawyers spend so much time negotiating contracts that will never be litigated?  Why do so many contracts contain phrases that are no more than agreements to agree?  Why do so many contracts resort to weasel words and phrases that are no more than a means by which a present inchoate dispute might be punted into the future?  Why do we study consideration and offer-and-acceptance when those are rarely issues in the real world?  Indeed, it is a fair observation that only a tiny portion of the first-year contracts course involves the issue of contract interpretation, and practitioners know that the real world of contracts is almost exclusively about interpretation, and almost never about the vast majority of doctrinal issues – consideration, offer and acceptance, defenses, impossibility – studied in the course.

For an equally nascent take (and for a blog post far too long!) on how I'm approaching those questions, join me below the fold.  Comments are certainly welcome!

In many of the substantive areas in the traditional core curriculum of first year law school (torts, criminal law, constitutional law), the frame of reference is after-the-fact.  The facts are static, even if they have to be discovered.  They are a matter of the historical record, and do not change.  The task of litigants is to cast those facts as fitting (or not fitting) within the liability or guilt concepts provided by the law.  In contrast, the opportunity exists for contract lawyers to create private law before-the-fact that, in the event of an after-the-fact dispute, will govern the parties' rights, duties, and obligations.  The facts in the "before-the-fact" frame of reference are voluntary and dynamic, and affected by what lawyers and their clients do in framing the transaction. 

Nevertheless, "contract" is only one of many possible frames available when dealing with each other before the fact.  We might organize our voluntary interactions, transactions, and relationship on bases other than a contract, such as trust, love, power, ritual, or negotiation.  (See Figure 1.) "Thinking like a transactional lawyer" means imagining hypothetical future disputes, and then crafting contract language designed to having the client prevail if the hypothesized facts obtain.  Moreover, thinking like a lawyer wholly within the contract frame means viewing the hypothetical future disputes as real, and therefore as cost-laden, as the underlying present transaction itself.   One of the business lawyer's before-the-fact failure modes is failing to appreciate that the norms of the parties are based on something other than contract, and managing to overlawyer the deal to its demise.

Here's the fundamental first year contracts problem.  The predominant approach to contract law (even when the casebook acknowledges and tries to organize around the transactional context in which contracts are created) is the reading of "after-the-fact" cases largely organized by the concepts through which Langdell sought to make the body of contract dispute law coherent in the nineteenth century.  Most contract law casebooks still bear the mark of Langdell's system of classification, whether or not that particular attempt at conceptual coherence accurately represents the place of contract law in the world of human interaction.  It fails to account for the four different perspectives by which actors (plaintiffs, defendants, judges, and scholar-observers) deal with the concepts, and does nothing to isolate contract law as only one of many before-the-fact frames.  Moreover, the primary perspective of the Langdellian approach is that of scholar-scientist-observer, trying to impose its particular approach to coherence on the system as a whole.  I see that as Ptolemaic; it may be coherent, but it fails to account for so much even when limited to the after-the-fact assessment of contract disputes!

We are seeing the development of contract "skills training" that does indeed take account of the before-the-fact frame of reference, and that is nothing but positive.  Nevertheless, it does not take account of "contract (or contract lawyer) as deal killer."  If contract were the only possible before-the-fact frame, we could explain transactional lawyering as nothing more than anticipating the after-the-fact legal effects of the before-the-fact legal causes.  But we can't.  There are others of fashioning voluntary relationships, and they neither invoke the concepts and language of contract as a set of propositions, whether or not they are coherent.  My thesis is that explains the surfeit of metaphoric approaches to contract law:  among others, relationships (Macauley and MacNeil); communities (Bernstein); engineering (Gilson); thing (Leff); plan (Bridgeman); organization (Smith); social artifact (Suchman); ritual (Lipshaw).

I have come to believe that the primary source of the failure of explanation in contract law (as reflected in the unreal exercise that is the first year of instruction) is precisely this tension between, on one hand, the ideal that there be conceptual coherence in the doctrine, and, on the other, two realities: (a) that we not only think by way of metaphors that are the source of the doctrine when we encounter "after-the-fact" disputes, but also (b) that the social institution of contract law is itself best understood metaphorically.

As to the first of the realities, thinking in metaphor.  Though Steve Winter and I differ on some fundamental issues about the possibility of concepts that do not arise from metaphor, I think his work applying metaphor theory to the law provides a wonderful insight.  Traditional propositional analysis is the equivalent (metaphorically speaking) of constructing a box or a container in which things are in or out.  Take, for example, the chestnut case of Batsakis v. Demotsis, which deals with the question whether courts will inquire into the adequacy of consideration in an exchange.  There are two legal propositions at work here.  One proposition says that courts will not police the adequacy of consideration.  Another proposition says that gross inadequacy of consideration (such that it shocks the conscience) may support a finding of fraud, duress, or oppressive conduct.  I give my students two examples of middling cases:  (a) the condominium for which I turned out to have grossly overpaid because of the need to do far more renovation work to make it habitable than I expected, and (b) a "rent-to-own" contract in which a low-income person commits to pay $2,500 for a $900 sofa.  Which proposition applies in each case? The problem is that the analog, continuous world does not divide up into neat little boxes in which it's clear that my condo purchase falls on one side of the line, in the box that is labeled "free market, you pays your money and you takes your chances transaction," and the rent to own falls on the other in the box labeled "exploitation."  Langdellian classification works like this.  You look at all the cases and propose inductive propositions that reduce them to their common elements.  "A binding contract is one in which there is a promise supported by consideration.  Courts inquire only as to the presence of consideration and not its adequacy."  The answer in each case is either "yes" or "no."  

The analog world, as to which we think not just in deductive or inductive terms, but also process cognitively by way of metaphor, however, looks something more like the figure below.   We have concepts of "bargain," on one hand, and "exploitation," on the other, and these arise from physical events in the world, and for which we have clear and unambiguous prototypes.  We conclude, in each case, how close the salient aspects of the circumstance in question meets the prototype.  The question is whether we even look to the proposition in that process.  My suspicion is that we do not.  Notwithstanding how we have defined a bargain in propositional terms (an "exchange") or how we have defined exploitation in propositional terms ("shocks the conscience"), we turn not back to the proposition but to examples of the proposition.

As to the second of the realities, the social institution itself, the practical implication of the theoretical assessment likely falls in the advanced portion of the transactional skills curriculum.  It's one thing to know how to kill a deal by creating the ideal contract; it's another to learn the judgment not to do it.  We need to return to the "before-the-fact" frame of reference in Figure 1.  Here's an anecdote, but it is typical of a business lawyer's experience.  Friends of ours who lived in the Chicago area owned a small house in a resort area in northern Michigan.  He was the CEO of a large corporation.  They decided they wanted to knock down the house and rebuild, hired an architect, got zoning approval, and came to an oral understanding with a builder in the area who not only had done many projects with the architects, but had successfully completed a much larger house for one of our friends' cousins.   The builder gave our friends his standard four-page contract, which they proceeded to give to their lawyer in Chicago for review.  The lawyer not only marked it up, but also added a fifteen-page addendum, including a lengthy "Certificate of Limited Warranty."  Our friend called to tell me that the builder had received the markup, called her, and was "freaking out."  Indeed, shortly thereafter, he refused to take the project if the Chicago lawyer continued to represent our friends.

There was nothing wrong with the contract our friends' lawyer was proposing; in the right frame (say, between a commercial developer and a large-scale builder), it would have been a typical contract negotiation.  The unreality in this context was the very idea that the risk allocation provisions of the proposed draft (including the so-called limited warranty), dependent on resort to adjudication for resolution, had value.  Indeed, because they caused a rift in the relationship between the builder and our friends, they may have had negative value.  Nevertheless, the lawyer did exactly what transactional lawyers applying a legal before-the-fact frame of reference are trained to do.

Stepping back, however, we can see that adopting the contract frame was only one of various approaches to the contingency and uncertainty.  The operative frame for the builder, working as he did in a small town, was "trust."  My assessment was that anticipating litigation (and therefore constructing complex risk allocation models in the contract) was the wrong frame to have predominated in the discussion; it was unrealistic to expect that post-construction dispute resolution had value.  Indeed, most of the remedies, it seemed to me, were non-legal.  The contract needed to provide that our friends tightly controlled the disbursement process so that the state of completion roughly matched the funds expended and lien waivers obtained.   It meant understanding how small residential builders actually worked and fitting a model of project supervision to the usual frame (at least in northern Michigan) of trust and the minimally necessary legal rights, rather than forcing the situation into an unrealistic frame of contractual rights, duties, and remedies.

The point for a well-seasoned business lawyer is not to ignore the "thinking like a lawyer" frame, but both to master its techniques and understand its limitations in expressing understandings or achieving results.  To propose an analogy, it is well known that Picasso was a masterful representational artist.  His pencil drawings were sublime.  Nevertheless, even having mastered the technique, he found it insufficient for the meanings he wanted to convey in his art, and he adopted different frames (albeit expressed in modes or styles of painting).  The task in the first year contract law class, it seems to me, is just the start of the process by we turn out a well-seasoned business lawyer.  We need to be explicit that it is only the beginning of a three-step process by which the student learns something first about competing concepts, frames, and perspectives in the "after-the-fact" frame, then how the transactional lawyer's "before-the-fact" frame might impact the "after-the-fact" frame, and then, finally, whether using contract law at all is the right answer, given the different possibilities that exist for dealing with uncertainty.

Comments

[Matt Bodie]

Wow -- a lot to think about here, which is why it's taken me a while to comment! I'm a fan of your framing here. I think it'd be a big step just to move from thinking about contracts in a litigation frame to a transactional frame. But as you point out, what we consider good lawyering (a thorough contract draft, covering the client's every need) might be overlawyering in the situation. In your builder example, I think it's an open question whether the lawyer made a mistake with the fifteen-page addendum. Obviously, the builder didn't like it, but maybe the builder was making the mistake -- or, at least, overreacting. In any event, I'm not sure "trust" is the appropriate frame for the transaction, even if the builder wanted that.

But moving beyond that example, I think you are right on about the Contracts course. I've been thinking that a "Contracts and Basic Business Transactions" course would make more sense it the first year. It would teach basic business & finance concepts, as well as provide more of a mix of common law and statutory contractual regimes. This change in approach could easily be joined with more of a focus on actual business lawyering. This article looks like a terrific place to start.

I have lots more to say on this, but I'd better post now, lest I wait another two weeks before finally saying something

[Jeff Lipshaw]

Thanks, Matt, for the kind words. On the builder example, I'm not suggesting one go defenseless. I just don't believe that the kinds of rights you set up in a contract to be litigated are a practical solution, and that's the kind of thing the Chicago lawyer added. Nor would I rely on trust. I would use a combination of a pretty simple contract, rigorous management of the project, and what I have in the diagram but don't explain in the post: "Golden Rule 2". Golden Rule 1 is the standard one; Golden Rule is "she who has the gold, rules." That is, you hold the money, and don't pay progress payments until you are satisfied. Far more efficacious than a litigation remedy.

[new balance]

We cannot always build the future for our youth , but we can build our youth for the future .