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Bullshit--Professionally Speaking

posted by Elizabeth Warren

I don't get to post very often right now, but sometimes I can put on my academic robes and talk about a new piece of scholarship. And what better thing to talk about when wearing academic robes than bullshit?

Curtis Bridgeman and Karen Sandrik have written a new piece called Bullshit Promises. The piece focuses on contract language that is designed to make someone believe that something has been promised (e.g., a promise of a fixed interest rate highlighted in the contract) while buried somewhere else is another provision that takes away that right (e.g., reservation to change terms at any time).  The result is a "bullshit promise," something that will mislead--all within the bounds of current contract and tort law.  

The work plays off Harry Frankfurt's best seller, "On Bullshit," distinguishing lying (emphasis on false belief) and bullshit (lack of concern with truth). The philosophical difference is abstract (and only arguable) for me, but Bridgeman and Sandrik bring it alive as a critical legal distinction.  We contracts teachers are still teaching the old illusory promise  cases in which the promisor who gives with one hand and takes away with the other made no binding promise. The cases skirt actionable fraud, and the person who is misled is treated as a chump instead of a victim. Many of today's consumer contracts--credit cards, cell phones, mortgages, etc--have perfected the art of drawing attention to certain benefits of the contract while burying the tricks and traps elsewhere. 

Treat yourself to reading Bullshit Promises.  It is well-written and engaging, and it makes an important point about the shortcomings of consumer contract law.


Right - for example, this weekend I opened an offer from my credit card company with some checks attached. The offer advertised in large bold type a 0% rate for 90 days on the amount I borrowed by writing the check -- but, in small print at the bottom of the offer they "informed" me they would charge a 3% fee on the amount of the check on the day it was presented. So into the shredder for me, but you can imagine how someone could easily be fooled. Clearly a deceptive advertisement to me.

Somehow, Professor Warren, I get the impression that this has been a topic that has been on your mind for ...well...at least the last thirty days now... ;)

Thank you, btw, Professor, for accepting the appointment. We may not get many answers from anyone - but at least we can be relatively certain that the appropriate questions will be asked...

Some of the more educated Mortgage Servicing Fraud victims have developed rather interesting theories with regard to MSF and it's relation to the whole CDO/CDS mess... Granted, CDO/CDSs apply to much more than just the RMBS sector but the basis for the thinking is rather simple. If, by using servicers' abilities to control little things like payment histories, you can control which tranches and trusts are going to tank then why not hedge the bet and leverage as much as you can in CDSs against those tranches and trusts? Sounds a little like insider trading - just on a much larger scale...

It may help to explain why the larger shops - Merrill, Bear, Credit Suisse, Goldman Sachs, etc, purchased/own third party servicers - Wilshire, EMC, Fairbanks/SPS, Litton, etc. Not only does it keep the servicing fees in their own pockets - it also keeps the control there as well....

Those that have educated themselves on the relatoinship between CDS and Mortgage Servicing Fraud explain the concept much more eloquently but I think that gets the basic premise across...

This seems to have become the norm for federal legislation as well. Look at the wording of the TARP enabling legislation or the revisions to the FISA law.

Then, of course, there is the outright flouting of the law as done by presidential signing statements and the refusal of executive agencies to enforce existing regulations.

Why should it be unexpected that private firms would adopt such measures when the government sets them such a good example?

Haven’t read the art. yet but;

You know another good example might be Arbitration Clauses. I seem to remember reading several circuits coming out and saying that if there is a clause that says they can change the Arbitration Agreement that the Arbitration award can be voided or is not valid. Yes, no? Something like that??? BS right?

RE: "[i]We contracts teachers are still teaching the old illusory promise cases in which the promisor who gives with one hand and takes away with the other made no binding promise.[/i]"

teachers teach idealisms; the proof is that our environment is ready to fall off the cliff so, after 20 years of education, teachers haven't done much for the world.

one of the most damning definitions of a teacher is "a person who pontificates"; few teachers admit to this but perhaps their arrogance would challenged if colleges started to guarantee (via contract) future income streams.

John Dewey-- one of america's greatest american philosophers, noted that while teachers can tear things apart, they struggle to recompose knowledge in ways that build better societies. "contract laywers" suffer from this: they can write a whole lot of stipulations but are unable to prove that those stipulations are in fact achievable. perhaps "contract lawyers" should be given a "fiduciary responsibility" and be forced to predict the likelihood that the terms of a contract will be met as well as speculate on the justice of the terms.

for example, 50% of marriages end in divorce so why don't lawyers toss in a 5 year guarantee when making such contracts to show their faith?

thus, it seems to me that many contracts are written with future assumptions and expectations that don't make sense.

i.e. marriage contracts are routinely renegotiated so people can get divorced now instead of "at death."

Teachers are there to help keep the juices flowing to the brain (wish I had more of it). To me when a teacher "preaches", it's more of an example that shows the student how that teacher interprets and applies "whatever". The student takes what he or she hears and tries replicate it with his or her own interpretation based on experience. If experience is not there yet, at least they have jumping off point. Most of the time it's put to the back of the brain for use at a later date.

To me contract law is an evolving "thing". Thing about humans is that we are always pushing the limits and that is why "law" is an evolving entity. You can't make things better if you don't know how and where it came and in what progression. You also have to be taught how to reason and apply (Socratic Method maybe). When teachers "preach", it is the manifestation of applying knowledge. Some people call it wisdom. Some call it reasoning. Either way its a skill that needs to be taught or shown to a student.

As for contract law, "Stipulation" to me means "both agree". (A truly uneducated and naive definition at that) I have had the opportunity to see truly great contract attorneys work and decipher contracts. "This language came about in the 80s or mid 70s". "This is enforceable but that has be held to be unenforceable", that kind of thing. It is an Art form.

Just my 2 cents.

"When teachers 'preach', it is the manifestation of applying knowledge. Some people call it wisdom. Some call it reasoning."

As I noted, the wisdom of teachers hasn't done much for the environment, war or poverty.

Nietzsche was an interesting teacher; he noted that most academics weren't about wisdom but simply writing about other peoples writing.

"It is an Art form."

and art isn't very useful for survival.

War and Poverty were around before contract law, and will be there if they ever left (now we are really talking some BS here), the same with Professors. In todays environment, knowing something about contract law even at a remedial level could greatly increase your odds at a positive outcome or avoiding a "pitfall". Just think what kind of advantage you would have if you were taught by the best. Common! We are talking Harvard here! Unfortunately Shawn "contracts" are part of todays wilderness. Adapt and overcome and that's no "BS".

RE: "War and Poverty were around before contract law, and will be there if they ever left"

agreed. that's why I think contract law is nothing great. it's simply something we do to keep ourselves busy.

RE: "knowing something about contract law even at a remedial level could greatly increase your odds at a positive outcome"

the problem is that your contract isn't a God so what happens in the world trumps whatever you put down on paper.

RE: "Just think what kind of advantage you would have if you were taught by the best"

that's marketing speak. evolution supposedly created mankind without taking a single college course... or because of a contract.

Ever meet Lea Brilmayer? Remember Bob Cover?

Brilmayer really believed in teaching contracts from first principles. Maybe all of you K teachers do. "The purpose of contract law is to keep the wheels of capitalism turning," she said, almost every class. Pareto optimal exchanges, and all that. In discussing skeevy parties trying to pull a fast one, she always asked, "Who are the future defendants of the world rooting for?" The implication being, the credit card companies of the world didn't really want consumers to get taken by fine print in a particular case, because then no one would ever want a credit card again.

That's why I asked about Brilmayer. Reason why I asked about the late Bob Cover is that he was very concerned with mythology and law. Mythology meaning, narratives we tell ourselves to give a legal regime legitimacy. They may be true, false, or something in between. But we believe them, and so we obey the law.

See where I'm going with this? When it comes to consumer contracts, the "wheels of capitalism" argument is mythology that's just plain myth. Or, in other words, bullshit.

Almost every consumer contract is a contract of adhesion. Pareto, my ass. So if the myth is false here, we enforce these things why again?

Einstein searched in vain for the one unifying principle that could singularly and completely explain the ultimate nature of the material universe. In that spirit one wonders whether a similar principle might not be discovered which explains the fundamental architecture of ultimate political, financial and cultural power in every society. I cannot help but think that a major component of it, if not it's central mechanism might not just be the creation, dissemination and overall control of BULLSHIT. Political lies, commercial lies, social lies, religious lies, legal lies, seem to be the ultimate power sources which truly configure every last aspect of our lives. Those in control of the BULLSHIT rule the world. And, methinks, that's no bullshit(kindly forgive the vulgarity).

When it comes to consumer transactions, there ought to be a law...However, you may want to forgive the overreaching financial institution or consumer products company in making illusory promises to its consumer customers since the practice of making non-deal deals in the financial sector and in large commercial transactions is more the norm than the exception. Occasionally, there is a Nigerian Barge non-deal deal that ends up sending someone to jail, but it takes an Enron disaster to get people's attention. Leaving room in a deal for the parties to later argue that nothing was really agreed upon seems to be more satisfying than really reaching an agreement. If things work out, it does not matter. If they don't, everyone has a good legal reason to litigate and dispute the terms of the transaction.

While clarity, predictability, and agreement on the terms in agreements is something commercial law should support, the difficulty of getting to an agreement often results in the parties quite happily executing an agreement that includes enough inconsistent language to get everyone to sign with confidence that there is room to force a renegotiation or to simply disclaim the obligation if it becomes necessary to do so.

So, if the deal finds itself before a judge, he or she can just accept the fact that a lot of money is involved in a dispute that a law professor may call illusory and that the parties will privately admit was intended to be so. Parsing through the consequences of this approach can be challenging. Whether the difficult time the insurers and insured had in actually getting the policies on the World Trade Towers into final form before disaster struck seems more common than not. Even in final form, was it one event or two? How could that question have required so much litigation?

Hello Prof. Warren... It was just yesterday that I shared a seat next to you on your flight from DC to Bos.( I was the only one w/o a laptop open!). Just wanted to say "thanks" for all you are doing on behalf of the consumer and taxpayer. I was hoping to get a word in edgewise, but you type and multi-task too fast. Great job with Jon Stewart.......BTW I've been in the financial services industry for 34 years and know a little bit about dealing with the public knee cap to knee cap..... Washington should talk to some American on that basis......

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