Saturday, April 24, 2010
Can a Discussion of Contract Theory Up Front Allay the Usual First-Year Angst About Consideration (and Everything Else)?
Posted by Jeff Lipshaw
After a fair amount of writing on contract theory, I've been assigned to teach contracts next year (for the first time since I taught the first semester of the full year offering at Wake Forest in 2005). I have been fiddling with the essay that follows, and asking myself whether its attempt to allay first year angst, and particularly that angst that seems to appear just after the second or third case on consideration, might actually allay angst. I invite comments.
Welcome to law school and to the year we will spend together learning contract law.
The law of contracts falls under the general category of "private law," meaning that agencies of the government (courts, legislatures, etc.) do not necessarily set rules for legal or illegal conduct (as, say, in criminal or environmental or civil rights law), but instead enforce the obligations of individual parties to each other. Tort law deals with non-voluntary obligations - the private rights of one party to seek recompense from another for a relationship that it's likely neither party ever wanted. Our relationship in a tort case, for example, arises from the fact that you hit me with your automobile, or the product you manufactured and sold to me was dangerously defective. Intentional torts aside, normally when there's an injury giving rise to a tort claim, we didn't mean for it to happen.
Contract law deals with enforcing the rights of the voluntary agreements of private parties. It is a subject with which many law students struggle. The subject matter is probably unlike almost anything you have studied; the classic "Socratic" method of teaching (remember Kingsfield in The Paper Chase taught contract law) can be disorienting; and there is a certain unreality to the whole enterprise. I'm going to tell you here why I think that's so, and I will repeat it when we get together for the first time.
The approach to the study of law through the reading of assembled cases, still the predominant method of instruction, and particularly in the first year, is something invented at Harvard by C.C. Langdell in the late 1800s. The teaching through cases, however, was about something more than instruction. The view of the great pioneers, Langdell and Samuel Williston, for example, was that law could be approached as a science - that the underlying principles of the law existed "out there" and could be discerned, as a botanist discerns the structure of a plant, by examination of the raw material, namely, judge's opinions. But think about what that means. We're pretty sure, in the physical sciences, there is indeed a coherent and regular structure waiting to be discovered. We are probably less sure about that in the social sciences. Whether it's true about "the law" is, in my mind, very much an open question.
Nevertheless, we still tend to teach subjects in the law in the way Langdell and others envisioned it: that there is a coherent structure out there waiting to be found. Moreover, our hope is that coherent structure is correct, that it leads to the right or just results. So the traditional course in contract law is to proceed through a series of cases that reveal to us how the law sees the formation, enforceability, execution, interpretation, breach, and recompense regarding private agreements.
But there's a troubling paradox in that presumption of coherent structure. As one noted contract law scholar has observed: "participants within the legal system use private law as an instrumentality to their subjective ends, while scholars try, objectively, to make sense of it as a system. Put another way, how can the legal result in a particular dispute be discoverable as a truth statement and, hence, constitutive of an objectively correct result, when parties themselves approach the law not as a matter of truth but as argumentation in favor of their preferred outcome." We'll explore this idea over the course of the year, but I think it's key to the usual "lost at sea" feeling that first year students have about the law generally, and about contract law specifically.
[UPDATE: I'm persuaded by a number of the comments, here and offline, to tone down the angst aspect. Jeremy Telman has an alternative and thoughtful pedagogical approach over at Contracts Prof Blog - suggesting he benefits from not having a "systematic" approach to contract theory. As I mentioned to Jeremy in an e-mail, my systematic theory (if you call it that) is that you really can't find a systematic theory within the doctrine. But the way the doctrine itself is presented presumes a systematic theory. That's the real dilemma. Anyway, the essay continues after the break.]
Case law arises when judges try to resolve disputes in which the parties have a stake in the action. Each party wants to argue that its position is the just and correct one. The law isn't the reality of the underlying transaction - it’s how someone who sees the transaction goes about making a model of it. Sometimes a particular model matches the reality well and sometimes it doesn't. Sometimes the model matches our intuition about the underlying game is really played, and sometimes it doesn't. Most importantly, sometimes one model gives an advantage to one person over another.
I suggest to you that learning contract law is a little bit like learning a game or a sport for the first time in at least two ways. First, you watch the sport and kind of think you understand it but in fact it has all sorts of rules and customs that turn out to be arbitrary, and you just have to learn them, not because there's a deep reason for them, but because they are the rules and customs. There's no inherent reason why you can't move a knight in chess along a diagonal, run to third base after you hit the ball in baseball, or receive a pass in soccer if you are the only offensive player between a defender and the goalie. We will see rules like that in contract law.
Second, rules in a game can be arbitrary, but they usually need to be coherent. In other words, the rules need to fit together and not contradict each other. What we will see as we study contract law is that many times the rules of contract law are NOT coherent; they do contradict each other.
So we find ourselves playing the contract game, and frustrated as hell when the game rules seem to be both arbitrary at times and not coherent at times. Arbitrary: did the offeree accept the offer in exactly the terms proposed by the offeror? (Under "classic" approaches to contract law, if not, it is an ineffective acceptance.) Not coherent: Was this an enforceable contract or a gratuitous promise? (Under "classic" approaches to contract law, this requires that there be something called "consideration" and there are at least three or four different rules, not always consistent, for making that determination.) (In England, barristers are not allowed to sue clients for their fees. Why?)
I am going to propose a working hypothesis that I hope dispels some of the usual "first year contracts class" angst, but it means engaging in some hard thinking about both the practice and theory of law. Here’s the proposition in theoretical terms: The reason we get frustrated is that when we play (i.e. practice) the contract law game, like any game, we very much want it to be coherent. But in reality the contract is an attempt to model an understanding in language. As the psychologist and cognitive scientist Steven Pinker observes, reality is continuous and flowing, but language is digital. Our thoughts and understandings contain pictures and concepts and metaphors, but, by and large, the medium of contract law is words and sentences. Moreover, reality presents us with situations all the time that appear to our minds as paradoxes and contradictions that the digital medium of language doesn't seem to be able to resolve.
In short, contracts, besides being games we play, are models of something else. In physical science, two physicists each propose a model of an atom. Physicist Alice’s model looks like a solar system, in which the electrons revolve around the nucleus. Physicist Bob’s model looks like a pomegranate, with the electrons stuffed into it like seeds. Some models are better than others; some models conflict with each other; the beauty of many models lies in the eye of the beholder. If we are using the pomegranate model to explain the atom, talking about orbits and quantum jumps isn't going to make a lot of sense. We will see similar conflicts in the way contract law wants to characterize (or, in my words, model) the underlying transactions. Does any contract act as a perfect model of the underlying transaction? The answer to that seems intuitive - like any other kind of model, a lot is going to depend on the complexity of the thing it's trying to model! And if it's a perfect model of a really complex thing, maybe it's not a model any more!
I’ll propose just one example of the theory and practice implications of the model problem, and then we’ll begin the course. This is going to involve three “hypotheticals” (hypotheticals or “hypos” are stories law professors invent to demonstrate a problem or a distinction).
Hypothetical #1: You have been accepted to the Ginormous State University Law School. The school demands you pay your tuition before you start class as the way of demonstrating that you plan to attend. You send a check to the school for $35,000. Do you have a legally binding and enforceable contract to attend the law school?
Hypothetical #2: You have always been an admirer of the Ginormous State University Law School, and have amassed a great fortune. You send a letter to the dean, stating that you intend to endow a professorial chair in the amount of $3,500,000. Immediately after sending the letter, you have second thoughts. Do you have a legally binding and enforceable contract to endow the chair?
Hypothetical #3: In Hypothetical #2, the dean receives your letter and, knowing that the endowment will permit $175,000 per year to be drawn for the payment of salary, hires the renowned contracts professor William Sammiston, who moves to Ginormous City and takes up his duties. You have had second thoughts about endowing the chair. Do you have a legally binding and enforceable contract?
Hypotheticals 1 and 2 have clear answers under a model of contract law often called the “classical view.” The model turned out not to accord with at least some legal scholars’ and judges’ intuitions when applied to Hypothetical 3, at least in part because the model’s results seemed to be arbitrary and unjust. The result was that they proposed a new model. Which model is the law? Are they mutually exclusive? Could both models be the law at the same time? If we apply the new model in Hypothetical 3, are we then also required to keep the system coherent by applying it in Hypotheticals 1 and 2?
To make matters even more confusing, not only are judges looking for the right model, but often one model gives an advantage to one side or the other. The clients in the dispute would like the law to see the issue the same way they do. So the lawyers in the case argue that, if the judge has a choice of models, the one that ought to be applied is the one that favors the lawyer’s client! And it helps in that argument to show that the application of the model isn’t arbitrary and is coherent!
In law school, you will learn hundreds, if not thousands, of rules and models. Your practice will require that you know how to work within them, and your technical success as a lawyer will depend on your skills in recognizing and applying them. You’ll find, however, that the frustrations caused by the imperfect match between language and reality don’t end in law school. From time to time, you and your clients will continue to be frustrated as hell when the rules that seem to apply to your situation also seem arbitrary and incoherent. That’s when you will step back and consider the theory as well.
And now we will dig in.