By WILLIAM J. HALLAN,
MRA Executive Vice President, COO and General Counsel
The most important word in law school is the word here. All first-year law students learn that good legal writing follows the I.R.A.C. method. Identify the Issue, state the Rule, Analyze the facts, and draw a Conclusion. Surprisingly, in law school, the conclusion rarely matters. Rather, it is detailed analysis that will merit the highest scores. While the approach may seem backwards, thinking like a law student can help retailers avoid costly conclusions.
Consider the following fact pattern:
Tom is a handyman and frequently performs odd jobs for Mark. They never use written contracts and all of their dealings are by oral agreements. One day, while fixing Mark’s front steps, Mark says to Tom, “I’d love for you to paint my fence. It’s probably about a $500 job, what do you think?” Tom replies, “yeah that sounds like it’s a fair amount, I’ll take a look.” The next day, Tom buys the paint, starts the project and finishes hours later. As Tom is cleaning up, Mark arrives and Tom asks to be paid. Mark refuses to pay Tom and says, “I didn’t agree to pay you $500, I was just talking out loud.” Does Mark owe Tom?
The issue is whether a contract was formed. The rule is that a contract requires an offer*, acceptance**, and consideration***. Like John Grisham, and for the sake of brevity, we’ll set aside other rules that may or may not apply, such as the statute of frauds****, because what really matters in law school is the analysis. In other words, what happened here?
The best law students will argue both sides. Here, it’s hard to make the case that Mark’s comment was an offer. He didn’t express certainty on the price and he asked Tom for input as to whether the amount was appropriate. Moreover, Tom’s response was hardly a sufficient acceptance. He agreed to take a look at the project and one might conclude that he needed to confirm with Mark on the specific terms of the deal in order to accept the offer. On the other hand, the parties always made their agreements orally, thus, a court may look to the parties’ prior conduct and course of dealing.
For law students, concluding whether Mark owes Tom is irrelevant. What matters is the factual analysis in relation to the legal rules. However, the real world is exactly the opposite and the conclusion is the most important consideration.
Take for instance another fact pattern that may hit closer to home:
Ellen operates a retail shop that specializes in custom baby gifts. A customer comes in asking to order monogrammed bottles for her best friend’s surprise baby shower. The bottles must arrive by June 8; the customer gives Ellen a firm deadline and pays a $100 deposit. Ellen contacts her bottle supplier and provides the details for the monogram via email. She states that she needs the bottles by June 6 (giving herself a few days cushion). On June 3, there is a major hurricane and the supplier’s warehouse is damaged. Ellen calls her supplier to check in to see if the bottles will ship in time. The supplier calls the problem an “act of god” and states, “They are working on it and will do their best to get the bottles out the door.” By June 6 the bottles haven’t arrived, Ellen is worried and calls the supplier again. The supplier explains that the bottles were shipped that day and will arrive on June 10. Ellen is furious and claims that she will not pay for the late bottles.
While a law professor will want to know whether this scenario is covered by the Uniform Commercial Code or common law, whether time was of the essence, and whether Ellen requested and received adequate assurances, all Ellen wants to know is whether she must pay for the late bottles.
Law school questions always fall in the gray area and the facts usually support contradictory conclusions.Similarly, the real world consists of shades of gray.Parties may neglect to memorialize their agreement in writing, or may leave important terms out of their contracts only to discover the error when the deal falls apart.
To avoid those treacherous shades of gray, think like a law student in your business dealings. Your contracts or purchase orders should plan for the deal to both succeed and fail. Agreements should be in writing, and include all essential contractual elements such as price, quantity, term and damages (if applicable). Ellen could have saved herself some heartburn by using a purchase order that has clear performance, delivery and terms.
If you plan for the conclusion, the analysis (even for a first-year law student) should be the easy part.
