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Coyle on Studying the History of a Contract Provision

posted by Mitu Gulati

The way many of us teach interpretation in Contract Law, there is little role for history (admittedly, this is just based on casual observation). The meaning of a clause is a function of the words that make up that clause.  The parties to the transaction are assumed to have drafted it to document the key aspects of their transaction, to balance risks and rewards blah blah.  If a dispute arises, we might have an argument as to whether a strict textualist reading of the words accurately represent what the parties really meant by them or whether we need to also examine the context of the relationship. What we do not ever do, however, is to delve into the history of the clause from before these parties contemplated using it – that is, of what prior drafters of the original versions of this clause might have meant in using it.

The foregoing makes sense in a world in which the contracts for each deal are drafted from scratch. But does anyone draft contracts from scratch?  What if we live in a world where 99.9% of contracts are made up of provisions cut and paste from prior deals; provisions that are assumed to cover all the key contingencies, but not necessarily understood (or even read)? In this latter world, where there are lots of provisions that the parties to the transaction never fully focused on (let alone understood), might there be an argument – in cases where there are interpretive disputes -- for the use of a contract provision’s history? Might that history not sometimes be more relevant than the non-understandings of the parties as to what they did or did not understand they were contracting for? (Among the few pieces that wrestle with this question are these two gems: Lee Buchheit's Contract Paleontology here and Mark Weidemaier's Indiana Jones: Contract Originalist here)

I’m not sure what the answer to the foregoing question is. But it intrigues me.  And it connects to a wonderfully fresh new body of research in Contract Law where a number of scholars have been studying the production process for modern contracts.  The list of papers and scholars here is too long to do justice to and I’ll just end up making mistakes if I try to do a list.  But what unites this group of contract scholars is that for them it isn’t enough to assume that contracts show up fully formed at the time of a deal, purely the product of the brilliant minds of the deal makers who anticipate nearly every possible contingency at the start.  Instead, understanding what provisions show up in a contract, and in what formulation, requires understanding the contract production process. (Barak Richman's delightful "Contracts Meet Henry Ford" (here) is, to my mind, foundational).

It is perhaps too early to tell whether this research will catch on and revolutionize contract law. I hope it does, but I’m biased.

One of my favorite papers in this new body of contract scholarship showed up recently on ssrn. It is John Coyle’s “A History of the Choice-of-Law Clause” (here). I have rarely found a piece of legal scholarship so compelling.  The paper is not only a model of clarity in terms of the writing, but it is brave. It is completely unapologetic in not only taking on an entirely new mode of research (a painstaking documentation of the historical evolution of the most important terms in any and every contract), but in coming up with a cool and innovative research technique for unpacking that history (this project would have been impossible to do without that innovation).

John has already written a series of important papers on Choice of Law provisions. (E.g., here, here and here). And, in part because these contract terms are so important to every transaction, he has received enormous attention from the practicing bar – from what I hear, law firms actually invite him to come and give talks to them about his paper and they ever revise their clauses based on his talks (for discussions of the real world relevance of his work, see here, here and here). I am envious. It must be so very exciting to have one’s research subjects want to learn from your research – plus, I imagine that talking to one’s subjects generates ideas for yet more research.  

John is able to show, from the point at which the clause began to be used over a century ago (I confess that I had not really even imagined a world in which these provisions were not ubiquitous), how the clause evolved and how certain phrases and words crept in and others disappeared.  He also documents how various law reform movements did (and did not) impact the drafting of the clause.  All in all, I suspect that any contract drafter who reads John’s brilliant new piece will come away with an altogether different perspective on the Choice-of-Law provisions she has been using.

From an academic perspective, the paper opens us all sorts of exciting and new questions starting with: Does the study of the history of contract clauses (or their evolution or paleontology) have the potential to turn upside down the traditional model of contract interpretation?  (and move us beyond the rather tired old debates about text versus context).

Selfishly, my favorite part about reading this article was that it gave me a half dozen new ideas for my own research projects.  Choice of Law provisions are used in contracts all over the world (and Mark Weidemaier and I are building a database of two centuries worth of sovereign debt contracts from every jurisdiction we can find where these loans have been issued -- and these provisions are in contracts in every jurisdiction we have come across).  It had not occurred to me though that there would be so many new insights to be gained from parsing the words in these clauses. In fact, I had previously just been coding these provisions in terms of the specific law mentioned  (e.g., New York or England) and had not paid any attention to the wording of the clause in question – such as whether the Choice-of-Law related to “interpreting” the contract or “construing” it or whether it applied to only contract disputes arising out of the transaction or also tort disputes (history suggests that these differences in phrasing can matter a great deal).  Based on just a quick skim of some old contracts, it turns out that there are some interesting wording differences in the Choice of Law provisions in Japanese sovereign bonds versus the German and English ones.  John's article has me wondering why.

Bravo, John!

Comments

Mitu: I am similarly enthused about the idea of bringing the history of contract drafting into 1L contracts, but how would you suggest incorporating this sort of history when teaching 1Ls, and what's got to give to make it happen? And what do you do about 1L contracts being a course that covers both contracts drafted by white shoe firms, with generations of accreted boilerplate guano, as well as contracts written on the back of napkins?

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