The Mythology of the Complete Contract – Rational Actors in Practice

If you have any doubt about why rational actor theory so naturally lends itself to at least one academic view of the law, consider one practitioner’s implicit adoption of that standard in a popular practice guide.

Business Law Today is the ABA Section of Business Law’s practical journal (the more scholarly work is found in Business Lawyer, which is edited by the students at the University of Maryland Law School).  The November/December 2006 edition features an article entitled “When Boilerplate Gets Hot:  The Saga of a Business Lawyer Who Glossed Over the Language,” written by Darren Van Puymbrouck, a partner at Schiff Hardin LLP in Chicago and Christopher J. Zinski, a former Schiff Hardin partner now the general counsel at PrivateBancorp Inc.  Mr. Van Puymbrouck is no small potatoes lawyer; according to his biography, “[f]or two decades, Darren VanPuymbrouck has represented clients in a wide range of complex product liability, contract, UCC, fraud, RICO, insurance, pharmaceutical, securities, and real estate disputes in state and federal courts throughout the country. He employs an aggressive and focused approach to help define and achieve his clients’ litigation goals as efficiently as possible.

And so it was that I, as a former business litigator and a former deal negotiator, was struck by the rational actor ex ante approach to complex business agreements advocated by Messrs. Van Puymbrouck and Zinski in the article.  This is not a happy tale.  Charlie, an unfortunate but heretofore wildly successful deal lawyer in a big firm, discovers, under the tutelage of his far more careful litigation partner, Tom (channeling Judge Posner’s view of the world), just how badly his contract failed to anticipate those nasty, nasty state contingencies.  This was, as Tom would have said were he in full law and economics mode, an incomplete contract.

But I wondered, as Charlie prepared, on Tom’s advice, to advise his clients how badly he had messed up, (a) just how helpful Tom’s advice had been, even if one were to accept the implicit rational actor model of the world, and (b) how that might translate in a standard of care if Charlie’s client happened to read this article and thought perhaps there was malpractice in them thar hills.

More below the fold.