In Bullshit Jobs: A Theory, David Graebe, anthropologist and an early founder of the Occupy Wall Street movement, recounts the rise in the last century of “bullshit jobs”: occupations that serve no socially useful function, and instead cause soul-crushing psychological suffering to those forced to take on such work. Graebe contends that as much as forty percent of all jobs in the world are bullshit, which he defines as:
a form of paid employment that is so completely pointless, unnecessary, or pernicious that even the employee cannot justify its existence even though, as part of the conditions of employment, the employee feels obliged to pretend that this is not the case.
Graeber catalogs five different species of bullshit jobs: flunkies, goons, duct tapers, box tickers, and taskmasters. He indicts all “corporate lawyers” as falling into the “goons” category.
Goons are “people whose jobs have an aggressive element, but, crucially, who exist only because other people employ them.” He even goes so far as to say that if somehow all corporate lawyers were wiped off the face of the earth, “the world would be at least a little bit more bearable.” The fundamental underpinning of Graeber’s thesis is that the best way to tell if someone has a bullshit job is if that person admits it.
But throughout the book, Graeber recounts the experiences of only two lawyers: a tax litigator in Sydney, and a friend from his teenage years that gave up a career as a poet and a musician to be a corporate lawyer on Wall Street. He freely admits that his observation that “I’d never known a corporate lawyer who didn’t think his or her job was bullshit” is in fact “a reflection of the sort of corporate lawyers that I’m likely to know: the sort who used to be poet-musicians.”
Rather than attempt to refute Graeber myself, it’s all too easy to use the Google to find someone else to do it:
Let’s test it out. What if we take this fellow’s advice and eliminate all the BS (i.e., “corporate” law) jobs?
Eliminate All Contracts. Now, neither money, things, nor services move. Or, if they do, then disputes run rampant, but without a court system (a bastion of BS), we are presumably left with beating each other with clubs to resolve our disputes.
Or, use contracts, but make the business folks handle them without any legal assistance. First. There is nothing efficient about that. Just try it. Second. Without a legal system, you’re quickly back to the same result – people beating each other with sticks. In this case, even if you had a legal system, it would soon be so backed up (even by today’s standards) that you might as well not have one.
In one deft swoop, we’ve managed to bring all modern economies to their knees.
In high stakes transactions in which vast sums of wealth are exchanged in return for ownership in ongoing complex businesses, mergers and acquisitions (M&A) contracts are an oft-overlooked source of clever legal craftsmanship. With so much value and risk embodied in these transactions, counsel for both parties—sought after specialists in these pressure-filled transactions—play a tense game of textual jab and parry, each trying to minimize risk and maximize leverage for their clients. In doing so, they often create compelling contract language readily amenable for use in non-M&A contexts.
more than a simple “entire agreement” integration clause is required to effectively disclaim reliance on extra-contractual statements;
buyer should be required to disclaim reliance on extra-contractual statements; and
a simple “except in the case of fraud” disclaimer at the end of an exclusive remedies provision is unacceptably vague and imbued with risk that most practitioners would not accept if they understood the implications.
These are worthy guidelines in the licensing and technology transactions context as well. Virtually any transaction in which one side is selling something of significant value (including high-dollar technology licensing or acquisition agreements, IT outsourcing agreements, and enterprise SaaS solution terms) would benefit from the clarity and certainty that comes with limiting the remedies and risks of the parties to the four corners of the contract.
After all, it’s not uncommon for a breach of contract claim to be accompanied by a fraud claim, as a matter of course. As Mr. West ably points out:
Fraud and negligent misrepresentation claims have proven to be hard to define, easy to allege, hard to dismiss on a threshold, pre-discovery motion, difficult to disprove without expensive, lengthy litigation, and highly susceptible to the erroneous conclusions of judges and juries. And ironically, it may be the one alleging the fraud that is the actual ‘fraudster’—not the person against whom the fraud is alleged.
This dynamic is no less applicable in the technology transactions context.
When a big technology implementation project fails, the customer’s lawyers will pretty much always try hard to find opportunities to accuse the vendor of having lied.
…
Litigation counsel know that jurors typically won’t understand whatever technology is involved. (In fact, the customer’s lawyers might well try to exclude any prospective juror who knows even a little about the technology.)
That can make it hard for customers to win such cases on garden-variety ‘technical’ grounds such as breach of contract or breach of warranty. Judges and jurors absolutely do get it, on the other hand, when it appears someone lied or cheated.
Consequently, technology counsel for both sides should consider the following drafting points, in furtherance of making the written deal the entire deal of the parties. First, consider establishing the sole remedies for breach of warranties, and make such remedies available to the buyer regardless of whether breach involves “intentional, reckless or negligent misrepresentations.” Consider including language such as, “Vendor is not asserting the truth of any warranty set forth in this Agreement; rather the parties intend that if any warranty proves untrue, Buyer will have the specific rights and remedies set forth in this Agreement and no other.”
Second, consider including disclaimers of reliance on extracontractual statements. Here’s an example: “The parties have voluntarily agreed to define their rights, liabilities and obligations respecting this Agreement and [insert subject matter] exclusively in contract pursuant to the terms of this Agreement, and each party disclaims that it is owed any duties or is entitled to any remedies not set forth in this Agreement.”
And third, for any fraud-related carveouts to the disclaimers, avoid reliance on the all-too-simple “except in the case of fraud.” As Mr. West demonstrates, fraud can be a great many things; and as such, the term should be defined, so as to avoid ambiguity. One possibility is to define fraud to mean false statements with respect to the set of express warranties in the agreement. Here’s an example: “Nothing in this Agreement will operate to limit the liability of Vendor to Buyer for fraud in the event Vendor is finally determined to have willfully and knowingly committed fraud against Buyer, with the specific intent to deceive and mislead Buyer, regarding the warranties of section [x].”
From the perspective of the buyer, such measures make the warranties and the express remedies the focal point of the negotiations. Buyer’s counsel will seek to make those warranties and remedies as specific and as concrete as possible, recognizing the value that comes with stable and predictable contract language.
Finally, both sides are equally served by a robust integration and merger clause, and a choice of law and forum clause that captures not just contract claims but tort claims as well (eg “This Agreement and all related disputes will be governed by the laws of ___”).
In New York, clauses providing for the agreement to be “governed by” and “construed in accordance with” a particular law have been construed as applying only to disputes concerning the agreement itself, and not to all disputes arising out of the relationship; whereas choice of law clauses applying to controversies “arising out of” or “connected to” the contract are construed to include tort or fraud claims. In California, “governed by” is construed as encompassing all causes of action arising out of or related to the agreement, including tortious breaches of duties arising out of the agreement.
These drafting measures are by no means foolproof. Motivated litigants can always discover new ways of convincing juries to look beyond the text of the contract. Nevertheless, adoption of these measures should go a long way towards ensuring that the parties’ written deal really is the entire deal.
First published in the Spring 2020 edition of New Matter, the quarterly journal of the Intellectual Property Section of the California Lawyers Association.
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The intended audience for this post is licensed and practicing lawyers, not laypersons seeking legal advice for their situation. If you are not a lawyer, hire one before using or relying on any information contained here. This post is: (1) informational only and not intended as advertising or as solicitation for legal services, (2) not intended to render legal advice to you, and (3) not a substitute for obtaining legal advice from a qualified attorney to assess your exact situation. The information here is subject to change and may not be applicable or correct in your jurisdiction. The views and opinions expressed here are Sean’s alone and do not necessarily represent the positions of Sean’s present or former employers, law firms, or clients.
The basic assumption of our daily work as lawyers is that generally, people will follow the terms of an agreement, and that compliance is the default mode of operation. A widespread normative aversion to intentionally breaking contracts is a fundamental societal assumption. This assumption informs our work as lawyers in negotiating and drafting agreements.What if this was not a valid assumption? What if we lived in a world where contract compliance was a simple matter of dollars and cents?
Efficient breach theory states that an economically rational actor will comply with or perform a contract only if the costs of breach exceed the costs or gains of compliance. If a party can calculate with reasonable certainty the losses arising from breach, including compensation for damages to the counterparty that may be payable under the terms of the contract, and weigh that against a measurable gain that exceeds those predicted losses, the breach-efficiency advocates would say that breach in this situation is socially beneficial.
In other words, breach is a good thing. Yes, you intentionally walked away from your obligations, but your conduct is rational—and certainly should not be considered socially undesirable, or subject to any kind of punitive or social sanction. You made a reasonable cost-benefit analysis, or so the theory goes.
Efficient breach theory has its detractors, unsurprisingly.
Efficiency is not generally regarded as a sufficient ground for the law to permit, and indeed encourage, such an apparent wrong. There are no analogous doctrines of efficient conversion or efficient theft, for example.
When Alice contracts with Betty, Alice expects Betty to perform. She doesn’t expect Betty to either perform or pay damages to Alice if Betty chooses not to perform. Likewise, Betty’s own natural and customary understanding of this transaction is that she is promising to perform. Both expect that an obligation has been made and will be honored.
The essential purpose of a contract between commercial [parties] is actual performance and they do not bargain merely for a promise, or for a promise plus the right to win a lawsuit ….
Nevertheless, imagining a world without the moral compulsion to honor contracts can be an interesting thought experiment. What if the efficient breach theory became the prevailing view, such that the normative aversion to intentionally breaking contracts did not exist? In what ways would the practice of law change? How would we be impacted as lawyers?
If the societal sanctity of one’s word completely falls away, and if every clause in every contract may be freely broken as the result of a cold cost-benefit analysis, the psychology of those charged with drafting and negotiating agreements would change. If we lived in such a world, it’s not difficult to envision liquidated damages clauses becoming more common and more readily enforced.
Imagine a world where breach events would be reduced to a monetary value that must be paid on demand. Businesses would press the case that they must be allowed to fix a dollar value to noncompliance, especially for confidentiality and similar affirmative obligations, so that the costs of breach are not subject to dispute and subsequent adjudication. Breach must be efficient, after all.
The more powerful companies would be in a position to enforce subservience to contractual obligations upon less powerful entities via imposition of liquidated damages assigned to every significant obligation in the agreement. Even if the rule remains that liquidated damages must be a reasonable estimate of loss, that “estimate” will be subject to negotiations or, even worse, one-sided terms of adhesion. And naturally, smaller companies or less powerful entities would lose those negotiations more often than not, especially given the resulting imbalance in legal resources caused by increased transaction costs.
For larger companies, compliance would hinge on cost-benefit analyses, on simply quantifying amounts due and payable. If breach can be considered a simple matter of wiring payment, then breach will be more commonplace for those who can afford it. See e,g,, Uri Gneezy & Aldo Rustichini, A Fine is a Price, 29 J. LEGAL STUD. 1 (2000) (daycare that started imposing a monetary fine for parents late in picking up their children saw an increase in dilatory behavior, not a reduction as predicted).
Smaller companies, without necessary resources, would consider non-compliance with even the most anodyne of contractual obligations to be unthinkable. In short, one possible characteristic of such a world would be the routine enforcement of liquidated damage amounts that are inevitably in excess of actual loss, and consequently a considerable transfer of power and leverage in favor of those already powerful.
[C]ontractual terms fixing damages in an amount clearly disproportionate to actual loss seek to deter breach through compulsion and have an in terrorem effect: fearing severe economic loss, the promisor is compelled to continue performance, while the promisee may reap a windfall in excess of his just compensation.
The obligation to return or destroy confidential information upon request (or at contract termination) is ubiquitous in confidentiality agreements. But in this era of distributed network computing and cloud storage, when nothing can ever be completely deleted everywhere, compliance with such a clause is illusory.
In complex, long-term contractual relationships, confidential information (usually defined quite broadly, and including “copies, analyses, descriptions” etc) is exchanged wide, often, and far, disseminated via and among countless individuals. Data resides simultaneously in emails and voicemails, in .doc, .xls, and .ppt files, in messages (eg Skype, Zoom, Slack), cloud folders, etc, and on multiple servers at multiple locations—some of which may be under the control of third parties (eg AWS, Salesforce, G-mail).
A truly effective deletion campaign would be either impossible or prohibitively expensive. And yet, return or destroy clauses are routinely accepted—even those with a requirement for a corporate officer to certify in writing that destruction has occurred.
It’s not uncommon for desperate and/or well-financed parties in litigation to pull any levers available. For such parties, a tempting target could be a claim for breach of a return or destroy clause—or even better, a claim for specific enforcement of such a clause. The e-discovery burden of defending such a claim, or complying with the clause, could force an unfavorable settlement.
The intended audience for this post is licensed and practicing lawyers, not laypersons seeking legal advice for their situation. If you are not a lawyer, hire one before using or relying on any information contained here. This post is: (1) informational only and not intended as advertising or as solicitation for legal services, (2) not intended to render legal advice to you, and (3) not a substitute for obtaining legal advice from a qualified attorney to assess your exact situation. The information here is subject to change and may not be applicable or correct in your jurisdiction. The views and opinions expressed here are Sean’s alone and do not necessarily represent the positions of Sean’s present or former employers, law firms, or clients.
In late April, Disney, owner of the Star Wars franchise, announced via Twitter that we should all celebrate May 4th as “Star Wars Day” by tweeting our favorite Star Wars memories using #maythe4th — with tweets powered by Disney Legal (emphasis added):
Celebrate the Saga! Reply with your favorite #StarWars memory and you may see it somewhere special on #MayThe4th.
By sharing your message with us using #MayThe4th, you agree to our use of the message and your account name in all media and our terms of use here: http://disneytermsofuse.com.
However, a few hours later, Disney Legal must have determined that mere use of a generic hashtag may not be sufficient to secure binding contractual assent, so they issued this supplemental addendum to the earlier “legal language”:
The above legal language applies ONLY to replies to this tweet using #MayThe4th and mentioning @DisneyPlus. These replies may appear in something special on May the 4th!
As this observer notes about the Disney terms (emphasis added):
Among other things, you agree to assign copyright to some of your materials to the Mouse, you agree to be bound by the laws of the State of New York, and to arbitrate any disputes between you and Disney—now and in the future. You agree to waive your right to seek any class action remedies as well. You agree that anything not covered by arbitration will be litigated either in Los Angeles or New York (not sure who chooses which coast). You agree that, no matter what Disney does or the harm it causes to you, their total liability to you cannot exceed a thousand bucks. You agree to receive “texts, calls or prerecorded messages [that] may be generated by automatic telephone dialing systems.” … [Y]ou contractually give up the rights to make “fair use” of ANY Disney product (such as singing the song from “Frozen” at your daughter’s birthday party), or to make any copy of a Disney product unless expressly permitted by Disney to do so …. You agree not to “interfere with any person or entity’s use or enjoyment of any Disney Product” including those of your kids. So no more taking toys away from your toddler under pain of mandatory arbitration in Los Angeles!
What would happen if the reply tweet dutifully contains the hashtag #Maythe4th and @DisneyPlus, as purportedly required to agree to the Disney terms, but also says, “Here’s my favorite Star Wars memory (but BTW I don’t agree to the Disney terms) …”?
