Section I— The Valiant Little Tailor
Contracts are magical documents. They can seize the infinitely complicated and uncertain future, and reduce it to manageable contingencies. With the right incantations, they can transform reality with mere words, erasing material matters, or changing them into energy, or money. Contracts can shift and apportion risks. They can establish dominion, forcing obedience. Or they can conjure illusions. They can even alter the past. They weave spells, ancient in origin, that bind civilizations together.
There’s a less flamboyant way to describe this species of dreary, boring, and intimidating documents. They are promises crafted to be enforceable through the legal system.
I know something about contracts, having read, drafted and/ or amended tens of thousands of them.
Contracts are all about commitment—an intent to be bound in a very specific way.
The spells cast by lawyers, like the spells of wizards, must be precise in order to work—deviating not too far from ancient and arcane incantations that have been tested and refined through countless battles, but still in keeping with the demands and priorities of the insistent present moment. Contracts have to pass certain tests, otherwise they fail under the law.
There has to agreement between two parties, starting with an offer, followed by an acceptance. There has to be a meeting of more than one mind, with all those involved clearly talking about the same thing. There has to be value exchanged, “Consideration”, to use the technical term, something worthwhile to both, to demonstrate the parties have stopped to consider the implications of their promises.
A promise can serve as sufficient Consideration, as long as it is exchanged for something of value, even if it is only as insbustantial as another promise. Sometimes the Parties throw in an extra dollar on top of their mutual promises, and they recite they recognize the extra dollar as sufficient Consideration, and they assure each other it has actually been paid. But most of the time, despite what the Parties have written in the Recitals, the dollar without the mutual promises isn’t sufficient value to motivate anyone, and most of the time, the dollar isn’t even paid. Like the old adage about gifts, it’s not the price that counts, but the thought.
Contracts use story magic. They might begin by reciting an actual story. These “Recitals” are descriptive passages explaining the circumstances that brought the Parties to their endeavors. The Recitals might also discuss the aspirations of the Parties. I could have kicked off this essay with a “Recital” that ran something like this: Whereas, I had once held high hopes of being a successful author of comic books and other fantastical fiction, but became an attorney to earn a livelihood.
Sometimes, as the story unfolds, the Recitals are loaded with “Definitions”, terms that assign specialized meaning to capitalized words, the way I just did with the words Recitals and Definitions. “Parties” as used above, means the specifically named people or organizations bound by the contract.
The Definitions imbue the target words with a meaning for the contract alone, a meaning outside of ordinary usage—so they might contain all manner of smoke and mirrors and sleight of hand.
The story contained in the Recitals provides a context for interpreting the contract—a guide intended to aid in the resolution of conflicts that might arise, aimed at future decision makers—like successor parties. Or judges and juries.
The writers of contracts, like the writers of comic books and other fantastical fiction, are aided by having great imaginations. They should consider every possible situation in which things might go wrong, then develop contract language to favor the client in the event it actually happens. It is kind of like the tricks that fiction authors use in plotting. You know the hero will need a bit of cheese to play a trick in Chapter Ten, so you plant it, as innocuously as possible, inside his pocket in Chapter Two.
Contract writers aren’t limited to linear plots. They can work their magic using structures akin to choose-your-own-ending books. They can, with the agreement of the other Parties, make Amendments (post-signature changes) that shift the course of the narrative. They can even make retroactive Amendments. They can even correct a mutual mistake in the Recitations, a feat akin to adding flashbacks to a novel after it has been published.
In order to be effective, the Recitals must end with very specific incantations, something along the lines of “Now, therefore, the Parties Agree as Follows…” And then following those magic words, the Recitals must be incorporated into the body of the contract. Unless the Recitals are moved (and this can be done with the legalistic equivalent of a phrase that means “ditto”) from the preamble to main body, the Recitals serve as mere decorations, having no effect whatsoever on the way the contract is interpreted. That’s a trap for the unwary, a “Gotcha”, as later defined.
Contracts have to conform to very specific rules. They have to have special ingredients and use special words, otherwise the magic will prove ineffective. In folktales, and fantasy fiction, magic brings about results with dependable regularity, as if it were an alternate form of science, provided that the right conditions are met. Love potions with the right ingredients always produce love, in same way combining nitrogen and glycerin always produce an explosion. Sleep potions always produce sleep, in the same way combining sodium and chlorine always produce salt. Only the correct magic word will open the portal to Ali Baba’s treasure cave, or make the magic carpet take flight. With the right magic word or phrase or chant, it is as simple as flipping a light switch to complete an electrical circuit. The big difference is that magical potions and magic words in stories defy the rules of logic and the material world. The ingredients and the words are nonsensical, and produce their results when the ingredient of imagination is added.
Consider some of the ingredients used by the witches in Macbeth for their fortune telling brew:
“Eye of newt, and toe of frog,
Wool of bat, and tongue of dog,
Adder’s fork, and blind-worm’s sting,
Lizard’s leg, and owlet’s wing,—
For a charm of powerful trouble…”
Perhaps a bit of poetry is part of the magic.
Contracts that fail to use the right ingredients, or fail to meet the right conditions for their creation, will fail to produce the desired result. And rules of law, like the rules of magic in a story, don’t have to adhere to logic or the demands of the material world. Many don’t, having been brought about by effective lobbyists, as opposed to careful study, or by case law embedded in tradition and observed out of habit, even though the ruling no longer reflects current conditions..
What might have happened if the witches had neglected to add tongue of dog to their brew? Perhaps the witches wouldn’t have had the power to predict the future, and the future they predicted wouldn’t have happened, since it had been brought about by their predictions. All for want of tongue of dog.
Standardized contract clauses are shaped much like folktales. Familiar clauses and familiar stories emerge from oral traditions, steeped in the collective subconscious, then they appear in different written versions, changing according to social needs. Some contract clauses became legally iconic, and some folktales Grimmly so. Both proclaim important statements about cultural values, but those contained in contracts hide under the guise of the needs of markets, while those contained in folktales hide under the guise of metaphors.
Consider the folktale, “The Valiant Little Tailor”. The story kicks off with a classic incident about contractual deceptions.
An old woman walks the streets, advertising her jars of jam. She catches the interest of a tailor, who expresses great interest and invites her to the bargaining table, saying she will be able to unload her goods if she comes to him. The old woman has to climb three flights of stairs, unpack her goods, allow the tailor to unscrew every jar and sniff. She’s worn out by the time he offers to buy a mere 4 ounces. She can’t sue under the contract because everything that happened before was mere negotiation, and the Parties didn’t have a meeting of the minds on quantity until he made his actual offer. She had, in fact, been able to unload her goods, but she had to load them back up again. So, she accepted it, taking whatever she could get. Maybe if she had been willing to fight, she might have sued for the value of her extensive efforts and time wasted. She might have even gotten some payment, using the principle of “estoppel”, a kind of action for seeking remedies for promises that look very much like contracts but don’t quite measure up.
The jam draws flies, trapping many, enabling the tailor to kill seven with a single stroke. He’s so pleased with himself that he adopts the phrase as a trademark motto.
Seven with one stroke
Down the road, the tailor wants to impress a giant, hoping to further promote himself by association with such a high-visibility travelling companion. The giant can’t bring himself to take the puny guy seriously. He spews out belittling insults. They get into various contests involving strength. The giant squeezes a rock hard enough to make it pour out water. The tailor passes a piece of cheese off as rock, and squeezes out its whey. The giant hurls the rock into the far distance. The tailor bests the feat, this time substituting a captive bird for a rock. When the tailor shows off his girdle, embroidered with his proud boast, “seven with one stroke”, the giant interprets the phrase as meaning the way in which the little guy had killed seven men.
water from a stone
The parties could have avoided the misunderstanding by defining “seven” as being “seven flies”, though the valiant little tailor would later prove to be not so forthright.
Definitions in a contract can be tricky things, like sweet smelling, sticky jam, traps for the unwary, sometimes called “Gotchas”, a frequently used term, but one frowned upon as a matter of formal legal usage. A Gotcha can take the form of an obscure rule or law, or a deftly hidden contract phrase, the meaning of which is not apparent until the trap is sprung. The parties can assign any meaning to any word by simply agreeing. You can have a contract that talks only about flies, but it can define the word “fly” as meaning “a fly and/or a man”. A “Duck” could be defined as a “Cygnus”, but if you don’t know that a Cygnus is a swan, you might find yourself with contract for a waterfowl that sort of looks like a duck, sort of walks like a duck and sort of quacks like a duck, but for purposes of the contract, it won’t be a “duck” unless it is the fabled ugly duckling.
Later in the tale, a king wants to entice the valiant little tailor into killing two giants. The king offers his daughter’s hand in marriage. To sweeten the pot, he throws in a dowry of half his kingdom as bonus Consideration, since the princess is a bit of a shrew, as demonstrated by the end of the tale.
Given to murder, mayhem, robbery, ravaging, and arson, the giants clearly presented a problem. But the King’s overly generous offer is made to the tailor alone, instead of being widely advertised, where it might catch the attention of any number of able-bodied giant slayers. Obviously, the King’s intent has more to do with getting rid of the tailor than the giants. It might have something to do with the way all of the king’s soldiers had been completely cowed by the tailor’s girdle, and a boast that any reasonable person would consider mere puffery, coming from one so small. It seems the King is angling to get a good result for himself, no matter how any confrontation between the giants and the tailor might end. A Recital about this detail in the contract between the King and the tailor might provide guidance on the intent of the parties if a dispute arose later on.
The tailor didn’t have to accept the offer. Prior to acceptance, the parties are free to banter back and forth until they find terms pleasing to them both. The tailor could have held out for three quarters of the kingdom. Or he might have just sauntered off without accepting any terms or making any promises, but still intending to face the giants. This way, he would be free to back out at the last minute if the giants proved to be too fearsome. If he decided he could pull off slaying them, he could still collect by just performing the task, taking advantage of what lawyers call a Unilateral Contract, something akin to claiming a reward. If the tailor failed to kill any of the giants, he wouldn’t get the girl or the goods, but he wouldn’t be in breach either.
Instead, the tailor absolutely guaranteed he would kill the giants. His promise, exchanged for the King’s promise, contained enough Consideration to create a legally binding contract.
There’s comfort to be had in certainty, even though the way the contract actually plays out over time might end up favoring one side or the other. The actual value might go up or down, but the parties know exactly what they’re going to get out of the deal.
Suppose before the tailor has a chance to fulfill his end of the bargain, one of the giants has seized both the king and the princess, thereby drastically increasing the value of the services. Maybe the tailor’s guarantee hadn’t specifically included a rescue —but there’s no way for him to collect on the contract without those additional services. The tailor would still be bound to his contract price, though now it seems not so outrageously generous. Or maybe the market has moved in the opposite direction. Suppose both giants catch pneumonia, becoming too sick to put up a fight– easy pickings for even one of diminutive stature. If the tailor delivered, the King would have to as well.
The tailor made an absolute guarantee, which is contractually foolhardy, but so is hunting giants. Certainty is certainly a valuable thing, and lawyers crafting a contract for the buyer will want the kind of assurance the tailor made—the absolute, unequivocal promise to deliver a very specific result. However, canny lawyers never make that kind of commitment about their own services. There are limits to the craft. Almost every court trial has a loser. The best trial attorney I ever knew once said, “I can assure you I will win this case nine times out of ten, but I can’t guarantee in what order.”
The tailor might have made a lesser promise for a lesser fee, like committing to battle as well as the best giant killer, so that putting up an optimal fight will earn his fee, whether he kills the giant or not. Not even the best of the best always win when battling giants. Or he might have promised to battle with “average to better than average skill”, a vaguely deceptive lesser standard that translates into “only average skill”. Or he might have promised to use best efforts to kill the giants, which means he gets paid without killing any giants because he tried very, very hard.
There is a bias that skews the priorities of contract writers, and it is so subtle, many become home-blind to it. Parties must have real losses, or “damages” before they can use a court of law to get paid. That is the context in which most contracts are seriously scrutinized and interpreted, when one side or the other has been harmed by a breach.
Even if there is an outrageous breach, but no damages, the contract won’t create a right of recovery. Suppose the tailor contracted to kill the giants, but only sat around eating jam and swatting flies, while a more capable giant killer came along and did the deed without being promised a princess and half the kingdom. He killed the giants just to hone his skills. If the King were to sue the tailor under the contract, he’d lose for lack of damages, were he not King.
The capacity for unbounded pessimism is a wonderful gift for writers of contracts and writers of fiction—though it can be a crippling handicap for those who want to go out and face the real world, as opposed to sheltering in deep contemplation all the disasters that might yet be. It is a good way to drive yourself crazy. Or to sabotage a deal.
The right of recovery in a contract action requires real losses. The facts surrounding the real loss and the way the contract language interacts with them will also determine who wins and who loses in a contract dispute. Slight nuances in the wording, or in the actual facts may bring about drastically different results. If you try to anticipate every possible risk, your task will never end, for the world is rigged for uncertainty, and there are an infinite number of ways for things to go afoul. You might try to narrow the contingencies down to the ones with the potential for the biggest losses, or the ones most likely to actually happen. You could address them with great specificity, but then you also run the risk of letting your opponents know about issues they might not have considered, opening up a new front on what is already a multi-front war. You could end up with a very long contract that dwells on nightmares. Still, there is a benefit to battling it out and apportioning risks before there are actual losses, as opposed to trying to hide the issue with cunning words or obscure legal principles. It depends on what kind of relationship you have, or are trying to build, through the contract.
The King in our story had a hidden agenda. He was just as interested in getting rid of the tailor as getting rid of the giants. He might try to create increased the tailor’s motivation by requiring payment of a fixed sum if the tailor shirks his contractual obligations. Now, here’s another instance where the contract practitioner has to use the right magic words to bring about the intended result. If the King labels the required payment a “penalty”, it won’t be enforceable, because it violates the general principle that breaching parties only have to pay actual damages. Real losses are what matters. But there is a way around this, using the correct incantation. You could say, “The parties both agree that in the event of a breach, actual damages would be speculative and uncertain, and difficult to calculate; therefore, the parties agree that ten thousand pieces of gold is a reasonable amount, payable as liquidated damages.” Now this kind of clause is generally enforceable, while a penalty generally isn’t, even though the substance of the two is pretty much the same. Only the name is different. But that is what magic is all about.
When the little tailor showed up with two giant corpses, each stabbed through the heart with the tailor’s swords, the king decided to retroactively amend the contract to add a new condition. Parties can do this, if they agree. Perhaps the tailor could have demanded satisfaction right then and there, since the contract had been performed. But the tailor accepted the retroactive amendment, which now additionally required his capturing a unicorn. Maybe the tailor knew he was on shaky ground, since he hadn’t actually directly killed the giants himself, but rather tricked them into killing each other. Arguably, that could still have qualified as contract performance—but the fact that he planted his swords after the giants were already dead is pretty clear evidence that what he actually did was not exactly what the parties mutually understood and intended. And he’d have to sue the King, who ultimately controlled the courts. The King might not have been in a position to renege on his promise, given that the King’s army had already been terrorized into submission by the valiant tailor’s trademarked girdle. Both sides compromised with a retroactive amendment rather than risk a confrontation.
Consider a possible meaning of “The Valiant Little Taylor”, which seems to be about magic, with giants and a unicorn, but it is more about playing games with words and exploiting ambiguities to gain position, wealth, and power. It seems a metaphor for the practice of contract drafting, the reality of which is ordinary, tedious, and boring, like the stitching together of garments. But here there is very lawyerly craft on display, reimagined as gloriously heroic, something akin to slaying giants, capturing unicorns, and marrying a princess, albeit a shrewish one. One might suspect that there’s a Recital somewhere, deftly obscured by trickery or lost in a forgotten prior version of the tale, that defines “tailor” as “lawyer”.