Friday, November 19, 2004
Most contracts teachers know that the connection between the theories we propound and the things that lawyers do in the business world can be a little tenuous. In a new paper, Contracts, Contingency and Lawyers as Leaders: Moral Philosophy in Complex Business Transactions, Jeffrey Lipshaw (Senior V.P., Secretary, and General Counsel of Great Lakes Chemical Corp.) argues that pragmatic accounts of law do not line up with the realities of practice in sophisticated transaction, and he turns to philosophical models—particularly that of Kant—for a better account.
In this article, I argue that the prevailing literature on contract theory does not adequately address the way real_world lawyers address uncertainty in complex business transactions. I attribute this to the constraints imposed by thinking in legal models, the dominant tendency to turn to economics for analysis and normative prescription, and the focus on adjudicative issues of hindsight interpretation. Commercial uncertainty, and the law's response to it, is only a subset of the broader philosophical issue of contingency. As an alternative to prevailing thought, I trace philosophical approaches to contingency, utility and morality that have come down to us since the Enlightenment, and how those approaches reveal themselves in modern legal and management theory and practice. In particular, I criticize certain characterizations and applications of legal and philosophic pragmatism. While the leading proponents adopt the name legal pragmatism, I suggest that they have nevertheless opted for a dogmatic economic idealism. Successful business leaders (and lawyers) have a more subtle approach: they envision a world as they want it to be (as it ought to be) but are not consumed by the fact that things do not always work out as they should. I argue that lawyers who are legal or economic dogmatists, seeing the world only as they want it to be, or who are only pragmatic or empirical, and will only acknowledge the world as it is, will be far less effective in the highly contingent environment where contracts create more moral than legal markers. The most effective real_world deal lawyers will be prepared to deal with contingency and counsel their clients pragmatically, but with far more idealism than current proponents of the jurisprudence of legal pragmatism have acknowledged.