Wednesday, September 9, 2009
The Third in a Series of Posts by:
Thanks to Professor Miller’s post on this blog, I became aware of the Goldberg v. (Paris) Hilton case, which fit nicely into this week’s discussions of uncertain expectation damages, reliance and restitution. In addition to discussing the case, I decided to use it as the basis for my first drafting exercise. Last year I asked students to draft a liquidated damage clause based on the Lake River v. Carborundum case from the casebook, in which Judge Posner invalidates a contractual remedy as a penalty. Because Judge Posner’s opinion steps through the math to show why the contractual remedy resulted in a windfall, the exercise did not allow for a great variety of solutions. The Hilton case was a considerable improvement in giving free reign to students’ creativity, while still inviting the predictable errors. The liquidated damages exercise requires not only an understanding of when such clauses are deemed unenforceable penalties, but also a grasp of the expectation, reliance or restitution damages of which the clause is supposed to be a reasonable estimate.
While students are quick to grasp the idea behind the liquidated damages clause, their substantive errors fall into three general categories:
1) writing a clause that does not actually liquidate damages. If the proposed clause simply describes the producers’ damages in a qualitative way, such as “all promotional expenses incurred at the time of the breach”, it does not provide the certainty of a fixed sum or a sum calculated according to an easy formula, which is the purpose of liquidated damages clauses.
2) choosing a very conservative amount to avoid unenforceability as a penalty – certainly one can make sure the LD clause is enforceable by using a fixed sum that will always be less than actual damages, but that isn’t very good advocacy for the client seeking the LD clause.
3) unhelpful recitals – it can be helpful to recite facts that support the fixed sum of damages in the LD clause, but only if those facts support the enforceability of the clause, by establishing the uncertainty of potential damages and the reasonableness of the estimate.
How, fellow teachers, might ask, does one grade 50 to 100 drafting exercises without consuming unreasonable amounts of time that could otherwise be spent on blogging and other key professorial duties? I have adopted several strategies to get students writing while preserving my own sanity. First, I have the writing exercises done in groups, not only to economize grading time, but because real-life lawyers typically collaborate on much of their writing, and it is never too early to learn to work with others. Second, I try to keep writing exercises extremely short, such as drafting a one- or two-paragraph contract clause rather than an entire agreement. Third, I provide limited written feedback in lieu of a grade, or in some cases assign a grade on a very simplified scale intended only to differentiate those who took the exercise seriously from those who did not. Reading and writing feedback for the 15 liquidated damage clauses in this instance took me about 3 hours total. Time well worth investing in the worthy goal of writing across the curriculum, while also reinforcing much of the material in remedies.
Professor Telman and I are on different topics at the moment, but will shortly be back in synch, at which point perhaps we can liven up the dialogue a bit.
[Posted, on Alan's behalf, by Jeremy Telman]