Finding a Happy Medium: Teaching Contract Creation in the First Year
Deborah A. Schmedemann*
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Educational experiences oriented toward preparation for practice can provide students with a much-needed bridge between the formal skills of legal analysis and the more fluid expertise needed in much professional work. In addition, . . . practice-oriented courses can provide important motivation for engaging with the moral dimensions of professional life — a motivation that is rarely accorded status or emphasis in the present curriculum.1
Introduction
Notwithstanding casebooks and television depictions of lawyers, most lawyers do not operate in a win-or-lose, all-or-nothing, black-or-white world. Rather, most operate in a world of compromises, middle grounds, shades of gray. Thus, new lawyers need to know how to come to and express compromise. Teaching contract creation — a set of a skills culminating in contract drafting — in the first year of law school can serve this purpose very well and promote students’ development into well-rounded lawyers.
Making the case for teaching contract creation in the first year of law school, this essay addresses the following questions: (1) How are contracts, as a genre of legal writing, somewhat similar to yet also significantly different from expository writing, such as office memos and appellate briefs? (2) What are the distinctive elements of learning, and hence teaching, contract creation? (3) What might a contract-creation unit in a legal writing or other first-year course look like? (4) What are the developmental benefits for students of a contract-creation unit early in law school?
1. Contracts as a Genre of Legal Writing
At first glance, a contract does not look much like a piece of expository legal writing, such as an office memo or appellate brief. The typical contract reads more like a set of directions or spare descriptions of a series of events than an expository paper. A contract has no citations, includes numbers — such as quantities, prices, and dates — and graphic elements not used in analytical writing, and features two signatures rather than one. It is meant to be consulted, not read from beginning to end. It pertains to the future, rather than the past. The contracting parties, not lawyers, comprise its primary audience.
First glances can be deceiving; contracts, at least fairly substantial contracts, are in some ways similar to memos and briefs. First, many contracts have standard components, as do some types of expository writing.2 Second, good drafting resembles good writing. A contract’s prose should be clear, simple, precise, consistent, and concise.3 Many contracts should be written in plain English.4 As with terms of art in expository writing, some contract concepts, such as representations, covenants, conditions, and discretionary authority, are critical and thus phrased in a very specific manner.5 Third, contracts are imbued with legal meaning, even if citations and legal rules do not appear, because contract provisions, in combination with applicable legal rules, have legal significance as the contracting parties perform under the contract and in the event disputes arise. Fourth, as in expository writing, a contract embodies a narrative, a story of what is to happen pursuant to the contract.
This text-to-text comparison of contracts and analytical writing derives from the contrast in how analytical writing and contracts are created. According to George Kuney:
In the litigation model, one extracts rules of law from cases or statutes, examines a given set of facts, spots the issues, applies the law to the facts, and reaches a conclusion. . . . At every step of the way, one is dealing with “givens”: facts that have already happened, laws that have already been made by legislators and courts . . . .
Transactional lawyering is different. It involves understanding the parties’ deal and then translating the business terms into a transactional structure that uses contract, commercial, and other business law principles to govern the parties’ relationship. . . . . [N]othing, or at least very little, is “given.” . . . [T]he attorney is creating the structure and provisions along the way in a manner that creates the most benefit for the client by harnessing applicable law and allocating risk and reward.6
Often, at least in complex transactions, lawyers are involved in structuring the deal7 and, most important for purposes of this essay, negotiating the terms of the deal.8
2. The Elements of Contract Creation
What should — and can — students learn about contract creation in the first year of law school?9 One approach10 is to emphasize one key concept — the notion of contingency — and work through the process of creating a contract, in four more or less distinct stages.
Contingency, the Key Concept: A contract is about a series of contingencies: will the parties enter into a contract at all, which depends on their ability to come to a mutually satisfying agreement; what may or may not happen during the contract transaction; and what occurs when a particular event does occur, which largely depends on what the contract specifies about that contingency. Some events are desired: payment for services rendered or goods produced and delivered. Others are problematic, such as delay, supply difficulties, and adverse economic or political events.
Context and Comparison: To succeed in creating a contract, a lawyer11 must first know both the factual and legal context of the deal. Acquiring this information entails interviewing the client, learning about the industry, and engaging in legal research. The more specific to the type of contract at hand the legal research is, the more effective it is. In coming to understand the context of the deal, the lawyer should discover one or more possible approaches to a particular topic, one of which may well be to state nothing about the topic. Each possibility should then be compared to the others to develop a set of best to worst options, based on legal and non-legal factors. This analysis may be captured in a piece of expository writing, such as an office memo or advice letter.
Compromise: A contract involves the agreement, in some form, of the contracting parties. When the disparity in bargaining power between the parties is great, the weaker party may in essence acquiesce to the terms presented by the stronger party. In many situations, the agreement reflects compromise: a middle ground between the two parties’ positions on a topic, a mix of pro-buyer and pro-seller terms. Coming to that compromise involves negotiation: the reciprocal sharing of information, expression of both parties’ goals and interests, discussion of legal and business rationales for one approach or the other, then ultimately coming to agreement on a package of terms.
Crafting the Contract: Writing the contract begins during the compromise process. The parties may present language for consideration on some topics and agree on specific language. For other topics, they may agree on concepts but not specific language. Some topics may not be discussed at all because the parties expect the contract to contain more or less standard language. Expressing all of these terms in writing is what most call contract “drafting”; a better term, reflecting the difficulty of the task and the attention to detail it requires, is contract “crafting.” Often, one lawyer will craft a proposed contract for review by the other party, and the lawyers may engage in several rounds of edits until the language is fully formed.
Checking the Contract: A contract must be carefully checked before it is considered complete. One list of criteria includes lawfulness, accuracy, balance, comprehensiveness, foresight, practicality, precision, comprehensibility, aptness of style and tone, and aesthetics.12
3. Teaching Contract Creation in the First Year
A contract-creation unit can be designed various ways and housed in various first-year courses.13 This part describes two units I have taught: a negotiated-contract unit in a first-year skills course and an adhesion-contract unit in a contracts course. Both simulate legal practice, but take different approaches: the deal-negotiation unit is a four-week exercise with several performances; the adhesion-contract unit is a semester-long exercise with fewer performances.14
Deal-Negotiation Unit: Negotiated contracts are taught in the second semester of William Mitchell’s first-year skills course, Writing & Representation: Advice & Persuasion (WRAP). WRAP encompasses the standard elements of a legal research and writing course15 and also includes interpersonal skills, which we call “representation.” WRAP is an adjunct-based course, with homerooms of twelve or fewer students, taught by a writing professor and a representation professor. Full-time faculty coordinators also teach large-section classes.
The deal-negotiation unit in WRAP16 takes four weeks. To provide nonlegal context, students receive several documents, such as notes of a conversation or a letter describing the potential deal and some background information on the industry, taken from a reputable Internet source. The documents indicate what the legal issue is. A homeroom of a dozen students is divided in two, with half of the students representing the seller of goods or services, the other half representing the buyer. The documents indicate what the legal issue is.
Over several weeks, to acquire the legal context of the deal, students research the legal issue in cases; statutes; familiar types of commentary, such as treatises and periodicals; and formbooks. They then prepare advice letters setting out the legal rules, the options the client should consider, and the student’s evaluation of the options. The writing professor evaluates and scores the advice letters.
Shortly after turning in their advice letters, students engage in simulated negotiations of the contract on which they have been working. A week before the advice letters are due, students receive the buyer’s or seller’s confidential handout, which includes further directions and confidential information. These handouts inform the students of the topics they will negotiate: the legal issue and several mostly numerical topics, such as price, quantity, and duration of the contract. The confidential information covers additional facts about the client’s situation as well as the client’s degree of interest in concluding the deal. For each side, there are two versions of confidential information: in one, the client is very motivated to come to a deal; in the other, the client is much less motivated because it has other good options.
In preparation for the negotiation, and shortly after they turn in their advice letters, students write negotiation plans, which cover (1) the theory of the negotiation; (2) the client’s goals, the other party’s probable goals, and the parties’ mutual interests; (3) information to obtain, reveal, or not reveal; (4) pertinent legal rules and the client’s legal positions; (5) the lawyer’s negotiating authority; (6) the client’s best alternative to a negotiated agreement; and (7) the opening proposal. In addition to negotiating, students watch other students negotiate. The representation professor orally critiques each negotiation and provides written comments and a score shortly thereafter.
After the negotiation, students craft several contract clauses. Most of the clauses derive from the negotiation; thus students craft a clause on their legal topic and several clauses on the non-legal topics. If two students do not agree on one or more topics during their negotiation, the representation professor provides terms to write. In addition, students craft a clause they did not negotiate—providing for mediation in the event of disputes under the contract.17
In the final stage of the unit, students submit their clauses for marking and scoring by the representation professor. Equally valuable is the reaction of the classmate who represented the other party to the contract. Thus, students exchange their clauses and discuss the following questions: (1) Is the content what you expected, based on your negotiation (or your representation professor’s directions)? (2) How does this draft protect the interests of the drafter’s client? (3) How does it create potential problems for the drafter’s client? (4) What two specific improvements might be made in the draft clauses?
This unit involves many skills: research; legal and factual analysis; expository writing; negotiation, including structured preparation; crafting contract language; and critiquing contract language. Some of the skills are taught in other units, of course; several are unique to this unit. The transactional setting of this unit sets it apart from the dominant litigation setting of the first-year curriculum.
Adhesion-Contract Unit: I have also taught contract creation in my contracts course. Having taught both doctrinal and skills courses for over twentyfive years, I find the line between the two rather hazy, which is a good thing. As students learn doctrinal law in skills courses from the problems they are assigned to work on, doctrinal courses are places for teaching skills related to the course’s subject matter.
The adhesion-contract unit occurs in the second semester. By then, students have studied contract formation and grounds for avoidance of contracts; the spring semester focuses on contract interpretation, breach, and remedies.
An adhesion contract is a “standard form contract prepared by one party, to be signed by the party in a weaker position, . . . who adheres to the contract with little choice about the terms.”18 The drafter typically is the seller of consumer goods or services; the consumer must accept the seller’s contract to obtain the goods or services.19 Thus the contract-creation process appears to be very different than the negotiation setting, in which two parties interact to come to a compromise. In an adhesion contract, compromise is present at only a minimal level: the drafter must envision the reactions of consumers to various terms and present a contract that is acceptable enough to its consumers for them to enter into the deal.20 In some situations, consumer legislation sets the outer limits of a permissible contract.21
Our study of adhesion contracts began with distribution of a seemingly simple contract pertaining to an unremarkable consumer transaction — boarding a pet. The contract was an actual contract developed by a trade association and used by the kennel where I board my dog.22 The students’ role was to act as the lawyer retained by the trade association to answer members’ questions about specific situations covered by the contract. Throughout the semester, students explored various parts of the contract in response to scenarios I provided, none of them farfetched. For example, a pregnant dog delivered her puppies while at the kennel; a dog was injured on the grounds of the kennel before he had been checked in. The contract clearly and appropriately governed some scenarios, but problems arose as to other scenarios. In the latter situations, students tried to write clearer or more appropriate provisions. Through this process, the onesidedness of some provisions became apparent, and students considered more balanced provisions. This project lasted throughout the semester, from conditions and promises to breach to excuse for non-performance to remedies.
With this background, students completed a take-home exam, which involved another adhesion contract — rental of a beach cottage for a summer vacation. Again students were presented with an actual contract, which consisted of three documents: the main contract, notices required by law, and cottage rules. Again, an unremarkable scenario was presented. When students applied the contract to the scenario, most realized that the contract provisions were too rigid and unfavorable to the renters, who were valued repeat customers. The troublesome provisions were framed as compelled by law, so I provided the state statute, which in fact permitted but did not require the troublesome provisions. In the final step, students revised the troublesome provisions and explained their revisions.
* © Deborah A. Schmedemann 2008. Professor, formerly Associate Dean for Skills and Clinics, at William Mitchell College of Law. I began teaching in 1982 and have spent most of my teaching time with first-year students, teaching Contracts and coordinating and teaching our firstyear skills course. Many of the ideas stated here have grown out of collaborations with colleagues on the William Mitchell faculty, including Chris Kunz, Ken Kirwin, Ann Iijima, and Mehmet Konar-Steenberg; many thanks to all of them.
1 William M. Sullivan et al., Educating Lawyers: Preparation for the Profession of Law 88 (Jossey- Bass 2007) [hereinafter Carnegie Report because the study was undertaken by The Carnegie Found. for the Advancement of Teaching].
2 See Scott J. Burnham, Drafting and Analyzing Contracts 215-34 (3d ed., LexisNexis 2003).
3 See Charles M. Fox, Working with Contracts: What Law School Doesn’t Teach You 65-81(PLI 2002); Thomas R. Haggard, Contract Law from a Drafting Perspective — An Introduction to Contract Drafting for Law Students 24-38 (Thomson West 2003).
4 See Burnham, supra n. 2, at 271-96.
5 See Tina L. Stark, Drafting Contracts: How and Why Lawyers Do What They Do 95-156 (Aspen Publishers 2007).
6 George W. Kuney, The Elements of Contract Drafting with Questions and Clauses for Consideration 24 (2d ed., Thomson West 2006).
7 As needed, the lawyer may identify legal issues, prepare an opinion letter, or conduct due diligence investigations. See Fox, supra n. 3, at 33-63.
8 Id. at 4. Contract negotiation is a much-studied process. For a recent example and extensive bibliography, see Gregory A. Garrett, Contract Negotiations: Skills, Tools, and Best Practices (CCH Inc. 2005).
9 Among the textbooks covering the material set forth in this part are Susan L. Brody, Jane Rutherford, Laurel A. Vietzen & John G. Dernbach, Legal Drafting (Little, Brown & Co.1994); Charles R. Calleros, Legal Method and Writing (5th ed., Aspen Publishers 2006); Elizabeth Fajans, Mary R. Falk & Helene S. Shapo, Writing for Law Practice (Found. Press 2004); Roger S. Haydock & Peter B. Knapp, Lawyering: Practice and Planning (2d ed., Thomson West 2003); Stefan H. Krieger & Richard K. Neumann, Jr., Essential Lawyering Skills: Interviewing, Counseling, Negotiation, and Persuasive Facts Analysis (3d ed., Aspen Publishers 2007). See also Louis Kaplow & Steven Shavell, Contracting (Found. Press 2004) (approaching contract creation from an economics perspective).
10 Cf. Charles C. Lewis, Help Your Associates Learn to Draft Contracts — the Right Way, 15 Bus. Law Today 25 (Jan.–Feb. 2006) (interviewing the client, planning the transaction, negotiating the terms, putting the terms on paper).
11 The allocation of responsibility between lawyer and client varies widely. This discussion assumes that the lawyer is involved early in the deal.
12 Deborah A. Schmedemann & Christina L. Kunz, Synthesis: Legal Reading, Reasoning, and Writing 475-85 (3d ed., Aspen Publishers 2007).
13 Contract creation could be taught in a torts or property course, focusing on a tort or property subject involving contracts, e.g., an exculpatory clause or a lease. However, the focus likely would be on the legal rules, more than the contract-creation process.
14 See Jay M. Feinman, Simulations: An Introduction, 45 J. Leg. Educ. 469, 471-75 (1995). The major elements of a simulation are facts, role, collaboration, and product.
15 WRAP covers research in commentary, cases, statutes, and rules of procedure. The major writing projects are office memos, advice and demand letters, and motion practice memoranda. WRAP is followed by Writing & Representation: Advocacy, taken in the second or third year of law school; Advocacy covers trial and appellate litigation.
16 This unit is described in Deborah A. Schmedemann & Ken Kirwin, Transactional Skills Workshop in Teaching the Law School Curriculum 270-71 (Steven Friedland & Gerald F. Hess eds., Carolina Academic Press 2004). My colleague, Ken Kirwin, and I spoke about this unit at the 2005 Association of Legal Writing Directors Conference.
17 This clause reflects Minnesota’s strong preference for alternative dispute resolution. See Minn. Stat. §§ 572.31-.40 (2006) (providing for civil mediation); Minn. R. Prac. Dist. Cts. 114 (providing for use of some form of alternative dispute resolution in nearly all civil cases). 18 Black’s Law Dictionary 342 (Bryan A. Garner ed., 8th ed., West 2004).
19 Id.
20 A seller in a position of significant power over its prospective consumers may write very one-sided terms, sometimes unconscionably so; such a contract may be voidable by the consumer. See Williams v. Walker-Thomas Furniture Co., 350 F.2d 445 (D.C. Cir. 1965).
21 See E. Allan Farnsworth, Contracts § 22.1, 308-11 (4th ed., Aspen Publishers, 2004).
22 For a dose of realism, I showed students a picture of my dog LeRoy (but decided not to have him come to class).