June 09, 2011
Contracts Roundtable: The problem with Contracts
Posted by Gillian Hadfield

The questions Erik poses in his opening post focus a fair bit on the question of whether and how people introduce transactional perspectives in the first year Contracts course.  My own sense is that while it is important to broaden the first year focus beyond litigation, the problem is not the absence of transactional issues.  Nor is it the absence of more sophisticated materials about the financial crisis or economic analysis of law or international perspectives or even statutes that regulate contracts.  It is the absence of sustained opportunities to practice the actual application of legal reasoning to develop advice for a client--whether it is advice about whether breaking off a relationship could trigger a claim for breach or what the options are to resolve a dispute.   I'm wondering if other people have observed this in their first or upper year classes. 

Frankly, I only found this out when some accidental diagnostics were introduced in an upper year course.  I designed an Advanced Contracts course in the mid-90s that was intended to give students a fair bit of economic theory they could use to develop richer arguments in contracts cases.  For example, I gave them materials about sunk costs, opportunism and the economics of franchising and then I gave them a case study--based on an actual case with disguised parties and documents--involving the renewal of a franchise contract.  I had assumed they would use the theory to develop sophisticated arguments for how to interpret the renewal provision which stated that the franchisees were entitled to renew for a ten year period provided they executed "the form of franchise agreement then in use."  But the case study was introduced using an experiential teaching method:  I just gave students, who were working in teams, a narrative describing the history of the relationship, the story of what was happening (at renewal the franchisor was seeking to double the royalty rate to bring it into line with the rate now implemented for new franchisees in the system), and copies of the original letter agreement, original franchise agreement with the renewal provision and the proposed new agreement.  The franchisees were approaching a lawyer for advice about whether to sign (with the added details about failed negotiations with the franchisor to keep the royalty rate at existing levels and the decision by the clients to stop paying their royalty fees or sign the new agreement--the prior having now expired.) The assignment was "advise the client."

What I found out what quite shocking, frankly, for a first-year contracts professor who assumes--as I think we all assume--that the students who have completed a first year course know how to do "basic" legal analysis and are ready for sophisticated approaches (such as when we introduce transactional and theoretical materials.)  I discovered the students--who were excellent and highly motivated--really had no clue what the job was that they were expected to do.  They could write beautiful memos reporting on legal research about good faith or cases enforcing renewal provisions; they might even think to go find out whether there were franchise regulations that impacted the exercise of renewal powers.  But they didn't really understand how to figure out what the client needed or how to dig into the facts, and potential facts (what will happen if the franchisees continue not to pay?) to give advice--sign, don't sign; pay don't pay, etc.  In fact, without my having put a flashing light over the language of the renewal clause the vast majority of student teams didn't even realize that the major question they needed to figure out was what they thought that language meant and how it might impact their client's situation.  I've taught that case probably 8 times now over the past 15 years--exactly the same materials--and I would say that even now only a small minority wade through the fog to see what they need to work on.  Most (this is a case early in the course) do what they were taught to do in first year Contracts:  they spot 15 different issues, specifically differences between the original and the renewal agreement, and provide a sentence or two about each.  They don't weigh the issues, decide what might matter most to the clients; they don't make judgments.  They say things like "the test for good faith is a fact-based inquiry and the judge will decide."  Really.  Most strikingly even if they look at the renewal language they read it once and say "oh, well the client's stuck--they have to sign the new document to renew and the new document has a 10% royalty rate." 

When I dig into their mode of reasoning to find out why they "miss" the interpretive issue (the "form" of agreement--does that mean the boilerplate that makes a franchise system consistent? or does it include the substantive commercial terms that can vary across outlets without affecting the consistency of franchise presentation to the customer or the cost of monitoring or supervision?) they look at me blankly; it's as if they didn't realize that interpretation was anything different for a lawyer as it is for anyone else.  They read it; it says execute the existing agreement; what else is there to say ?  They don't read carefully.  In fact, in the most recent experience teaching this case, several groups of students told me they didn't realize that interpreting a contract meant identifying specific words or clauses for interpretation--they thought you interpret "the contract" as a whole. 

Last year, at the end of my upper year course, one student said to me:  "You know, before I took this course, I had no idea WHY we read all those cases in first year."  To him, it seemed like an unnecessarily roundabout way of conveying the rules.  He didn't realize that the cases were about the construction and possibilities of argument--even though, of course, his first year classes had involved lots of hypothetical and socratic dialogue.  But what he needed for his first year exams was a quick hit list of rules to rapidly tick off issues--so all that argument was just for show, I guess. And of course throughout the course, all he saw were facts taken as fact; not "facts" that could be spun together in multiple ways to present different issues, different arguments, different outcomes.  He didn't realize that the majority of legal work involves working with what 'facts' could or might or should look like; he thought it was knowing the rules and how they would handled nicely packaged facts that were (no longer) contested.

So that was the wake up call for me:  our students come out of first year in our traditional courses, maybe, with an ability to spit out a set of rules (a contract must have consideration to be enforceable; the parol evidence excludes the use of extrinsic materials beyond the four corners of the document) but they haven't learned how to "DO" contract analysis.  (Is it a good strategy to pose the consideration issue? How can we argue this document is "integrated" and how strong will the counterarguments be?) My own view, then, is that in first year we need to introduce methods to move students beyond a set of rules to an orientation to the basic tasks of legal analysis.  Yes, this should include transactional frameworks, but that's besides the point.  The first year course should not be loaded up with new "stuff"--lots of exposure to real contracts, transactional negotiations, materials on the financial crisis, even my beloved economic analysis of contracts.  It should focus on actually teaching students to do what we need them to be able to do in order to make use in upper years of those more advanced materials and insights:  basic legal analysis in the context of advising a client on the basis of a presentation of mutable facts, uncertainty, multiple issues and strategic options, etc.  I think we flatter ourselves in our traditional classes when we say that our existing methods do a good job of teaching students to "think like a lawyer" and the basics of legal analysis and doctrine.  They don't in my view.

That's why I"ve redesigned my first year course to involve extensive use of teams and situated problem-solving throughout the semester (students earn 40% of their first year grade in my course from team-based problems completed and graded and discussed throughout the course.)  I"ll discuss the details of that course in future posts (or you can look at my recent article Equipping the Garage Guys in Law--Maryland Law Review 2011) but for now I'm interested in whether other have experience with intentional or accidental diagnostics about what students actually take away from our traditional first year course in Contracts.  What do you know about what students are actually taking away from first year courses?

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Contracts Roundtable: the capsule approach
Posted by Usha Rodrigues

Thanks to Erik for organizing this Roundtable.  Unfortunately, his introduction triggers angst and guilt in me, reminding me of how much more I want to be doing in Contracts.  I'm eager to hear from our other participants . For now, though, I want to address 2 of Erik's questions:

  • Does this course need to fill a special role in the first year curriculum?
  • How do they make your innovations work in an often larger sized first year required course?

As to the first question, I think that Contracts should function to introduce 1L students to law as a mechanism for private ordering, and lawyering as a way to achieve that end.  As to the second question, at Georgia Law our first year sections are 80+ students.  My innovations have accordingly been easy to implement. 

I use 3 class sessions to introduce students to the idea of transactional lawyering. These sessions tend to be a lot of fun, and they break up the monotony of the semester.

Session 1: invite in an alum who practices in transactional law to talk about her job.  I had a VP from Chik-Fil-A this past semester.  Students love real lawyers. Have to miss class for a conference?  Don't cancel class, find an alum.  The development office will be happy to help.

Session 2: Negotiation session.  Confession: My colleague Alex Scherr guest-teaches this class.  It involves splitting the class into buyers and sellers and giving them a simple fact pattern.  Then they pair up and negotiate a deal.  The instructor solicits about 10 different outcomes that he puts up on the board for the class to see.  The results vary enormously, and show students the importance of negotiating skill, the anchoring effect, and negotiation strategy.

Session 3: NDA.  Yes, I actually teach this one.  I distribute a simple University NDA and divide the class in two.  Half represent a company with technology the university is interested in, half represent the university.  I have them issue spot silently for 5 minutes, and then discuss in groups.  Then I put all of the issues up on the board: how is confidential information defined?  Who is covered?  How can the information be used?  How protected must the information be? 

Tip: schedule one of these the day the 1Ls have a brief or memo due in Legal Research and Writing.  Teaching veterans know that students have often pulled all-nighters, and a traditional Socratic class on those days can be downright painful. Plus,they'll love you for it.

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Fresh Stories for Contracts
Posted by Lawrence Cunningham

Experienced teachers know that drawing on current events stimulates student interest, yet our contracts course does not make this easy. To make it easier, my latest book, Contracts in the Real World: Stories of Popular Contracts and Why They Matter, tells 45 stories intended to bring this subject alive for a modern audience.     

I love old contracts cases as much as the next professor, and judging by their regular appearance in all standard casebooks, we profs love them quite a bit. But students hate them and have a hard time appreciating how cases like the following are relevant to their lives:  

* the sale of a silk mercer’s business circa 1773 England

* payments for itinerant farming circa 1834 New England

* a delayed rail transport for a mill’s crank shaft circa 1854 England

* musty gambling loans circa 1859 Buffalo

* the destruction by fire of a London theater circa 1863

* sailing ships lacking radio call letters plying for Liverpool circa 1864

* mistakes about bovine reproductive attributes circa 1887

* ₤100 rewards to those catching the flu despite using screwball medicine circa 1893 England

* damages for delay delivering marble for a mausoleum circa 1885

* salmon fishermen using nets off Alaska circa 1902

* an exclusive marketing license for fashions circa 1917

* experimental skin grafting surgery on a young boy’s hand circa 1929

* a bridge to nowhere circa 1929

This list could be doubled or tripled in length, but you get the idea.  Students are not often stimulated by such musty, dusty tales, most of which were chosen for our classroom lessons by people like C.C. Langdell, Sam Williston, or Arthur Corbin—all born in the 19th century and dead for generations! 

Freshen it up, I say, and I’ve developed a systematic effort to do so—not eliminating these relics, which do remain valuable, but showing starkly, fully, and entertainingly, how they relate precisely to today’s world. This brings modernity into the contracts texts and classroom.  How about these:

 * poet Maya Angelou’s Hallmark greeting card contract (formation in exclusive license deal)

* a lawyer’s boasts on “Dateline NBC” (offers)

* whether corporate internet privacy policies are contracts (mutual assent)

* effects of construction surprises in demolition of building damaged on 9/11 (duress/pre-existing duty rule)

* Kevin Costner’s pending fight about sculptures for his Dunbar ranch (conditions)

*Donald Trump’s effort to delay loan repayments due to financial crisis (impossibility)

* Bernie Madoff’s Ponzi scheme’s effect on divorce settlements (mutual mistake)

 * Sandra Bullock’s recent fight over construction of her Texas mansion (restitution)

* fan breaches of Washington Redskins season ticket contracts (damages)

* Paris Hilton’s recent dispute about hair product endorsement deal (consequential damages)

* whether cell phone service early termination fees are valid (liquidated damages)

* Wal-Mart’s recent defense against employees of foreign suppliers (third-party beneficiaries)

These stories, mostly culled from the recent news, all pivot on the dusty/musty cases, but are much more interesting, accessible and relevant to students.  Also appearing in the collection of 45 stories are those involving the following additional characters or topics:

* novelist Clive Cussler (good faith)

* rapper 50 Cent (palimony contract)

* child actor from “Malcolm in the Middle” (infancy doctrine)

* AIG’s employee bonuses (excuses)

* Citigroup’s naming of the N.Y. Mets baseball field (termination)

* the rapper Eminem (interpretation concerning digital music)

* Golden Globes (parol evidence rule concerning telecast rights)

* ownership of the L.A. Dodgers (scrivener’s error)

* pop superrstar Lady Gaga (accord and satisfaction)

* Charlie Sheen / Warner Brothers (conditions, performance, waiver)

* “The Sopranos” (novel ideas and restitution)

* Rod Stewart (restitution after cessation)

* Conan O’Brien / “The Tonight Show” (various)

Four stories in the book will be more familiar to veteran contracts teachers, as they already appear in several leadings books:

* MLK and BU (bargain or gift, reliance)

* Pepsi and the Harriet jet (offers, jests)

* Michael Jordan paternity case (formation, consideration, fraud)

* Michael Jordan product endorsement case (lost volume seller)

* Baby M

My narrative reflects and develops an understanding of how today’s contract law bears on today’s problems—showing how yesterday’s contract law and yesterday’s problems recur in new guises. These stories identify the real world, contemporary social and business settings where ancient problems recur. 

These stories are about context, argument, possibilities, limits, alternatives, and deal with things people generally know about today—personalities, electronic transactions, internet exchange, cell phones—and dwell less on the archaic materials necessary to break through the ancient cases (transport and milling at the dawn of the industrial revolution, 19th century navigation technology). 

Many of my stories did not result in litigation or judicial opinions. This enables teachers to stress how most contracts are not litigated. It facilitates engaging skills of negotiation and problem-solving and the “transactional” perspective.  It’s easy to find the actual contract underlying many of these deals too, for those wishing to walk through such things.   My stories are stories, just like judicial opinions are, enabling those with a literary bent to challenge my telling or at least stress the influence of the viewpoints I adopt.

Students like and get all this. Pedagogy is much more effective.  And it is much more fun.  Of course, all of us have known that current events help learning and are more enjoyable. But it takes a lot of time to incorporate them into a teaching program in a systemic way. 

My book is an effort to do that.  Notably, I began writing most of the stories as blog posts that I’d use in daily teaching.  Now harnessed to the doctrinal terrain and linked to seminal cases, the book brings this course to life like no other device I’ve seen in 20 years of teaching this stuff.  To be published by Cambridge University Press in early 2012, I’m excited about this and I hope my fellow teachers of contracts will be too!

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Contracts Rountable: Introduction
Posted by Erik Gerding

Today we kick off a series of summer roundtables, in which we invite law professors to share their insights and innovations in teaching various business law courses. Today and tomorrow, we will focus on Contracts. In addition to Usha Rodrigues, we will be joined by Larry Cunningham (George Washington), Gillian Hadfield (Univ. of Southern California), and Claire Hill (Minnesota). Erin O’Hara (Vanderbilt) will be making some follow-up comments on the roundtable later in the summer.

We make no warranty (express or implied) as to what our panelists will write about. There are a number of different questions and topics they might talk about, including:

  • Do they expose the students to transactional lawyering in the course?
  • Can we start preparing students to solve problems in a planning mode in addition to a litigation mode in a first year course?  How do we expose students to the "creative" or "craftsmanship" aspects of contract law? 
  • How can we engage students in reading and interpreting (and perhaps even drafting) actual contracts and not just portions of contracts distilled in judicial opinions?
  • If they do introduce a transactional aspect into the course, how do they balance it with the traditional objectives of teaching case law (and perhaps U.C.C.) analysis and blackletter contract law? 
  • Does this course need to fill a special role in the first year curriculum?
  • What can professors do better in this course to prepare students for different types of legal practice?   
  • Do they bring the financial crisis and its contract law dimensions into the course?
  • How do they make your innovations work in an often larger sized first year required course? 

I am eager to read our panelists’ posts.

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