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Thursday, April 4, 2013

Contracts clauses in contracts class

I thought I might jump on the “classroom posts” bandwagon and blog a little about something I have been trying to do more of in my Contracts class – incorporate contract clauses in class discussions.  What I typically do is introduce a contract provision when I’m wrapping up a particular topic.  For example, when we finished up the section on substantial performance (and breach and conditions- it’s hard to talk about one without the other, IMHO), I asked my students about the meaning and effect of this provision:

“ TIME SHALL BE OF THE ESSENCE IN THE PERFORMANCE OF THE OBLIGATIONS UNDER THIS AGREEMENT. “

The phrasing sometimes throws off students – what’s this “of the essence” business? But they realize that the provision indicates that the timeliness of performance is important to the parties.  In other words, if the services are to be performed according to a schedule, they intend to stick to the schedule. More to the point, without such a clause, a court will probably not find a small delay to be a material breach.  With the clause, even a short delay may constitute a material breach - which brings me to substantial performance.   A material breach has legal effects, one of which is that a party who has materially breached has not substantially performed -- and so can’t recover expectations damages under the doctrine of substantial performance.  A material breach also excuses the other party’s performance. 

The clause illustrates how the different doctrines work together, and given the emphasis on “skills” teaching, underscores that doctrine and skills are really intertwined.  (I’m not sure how anyone can effectively teach skills without a good grasp of the underlying doctrine).  Another reason to introduce contract clauses is to help my students overcome the automatic response that most normal people get when they see boilerplate – glazed eyes, numbing sensation, urge to do something more exciting. My hope is that once they learn the legal meaning behind the legalese, reading a contract will be a more engaging and rewarding experience.

[Nancy Kim]

 

 

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Comments

Nancy: I was interested to see this post, as I’ve occasionally pondered, in an ill-informed way, how a law-school Contracts class might relate to contract drafting.

I could imagine building on your approach in one way—by informing students of the shortcomings in traditional “time is of the essence” provisions.

They leave a lot to be desired: They tend to be overbroad. They don’t specify what the consequences are of failing to meet a deadline. It’s commonplace for them to conflict with other remedies provisions. And they can be unfair. I’ve discussed these shortcomings on my blog, most recently in the following 2009 blog post: http://www.adamsdrafting.com/more-on-time-is-of-the-essence/.

So I recommend that drafters articulate more clearly and without resorting to jargon whatever concerns might otherwise prompt them to resort to a traditional “time is of the essence” provision.

I leave to Contracts professors the question of how one might acknowledge that approach in a Contracts class. After all, you probably have too much to cover as it is without seeking to incorporate elements of a course in contract drafting. It might be enough simply to note the shortcomings in the traditional formula and suggest that an alternative approach is available.

Ken

Posted by: Ken Adams | Apr 5, 2013 5:53:53 AM

Thanks for the post, Ken. The purpose of introducing the "time is of the essence" clause in the context of learning about substantial performance and breach is to illustrate how a term in the contract might help determine whether there was in fact a breach (and whether it was material). Of course, not all courts will abide by what the parties put in their contracts (this is true for contracts in general) but most courts will try to enforce the intent of the parties and such a clause indicates that the parties thought timing was important.

I'm not sure that I agree with you regarding leaving out time-worn (no pun intended) terms such as "time is of the essence," although I do agree that it is always more helpful to clearly specify what is meant by adding clarifying language (which doesn't mean omitting what you refer to as "jargon"). If the parties agree that a delay will be considered a material breach, they should have a "time is of the essence" provision (even if a court may not necessarily conclude that there was a breach or that it was material) because it indicates their intent (how important the parties thought the timing of services was). Put another way, if most parties insert time is of the essence provisions when they think timing of services is material to the contract, the absence of one may lead a court to interpret time as NOT material. Additional language would be desirable to clarify what the parties meant ( but even then, a court may not enforce it).

In any event, my purpose in introducing the clause in class is to let students know what it means in the context of the law since it is a clause that they will run across in practice.

Nancy

Posted by: Nancy | Apr 5, 2013 8:48:51 AM

Your practice can be extended one step further by taking a clause discussed in class - time-of-the-essence, force majeur, no-oral-modifications, whatever - and adding it on to one of your essay exam questions. Ask students to explain the purpose of such a clause and whether (and how) it would change their analysis or the outcome.

Posted by: otto | Apr 5, 2013 4:54:25 PM

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