Stark, T L --- "Thinking Like a Deal Lawyer" [2005] LegEdDig 40; (2005) 14(1) Legal Education Digest 10

Thinking Like a Deal Lawyer

T L Stark

[1993] LegEdDig 86; (2005) 14(1) Legal Education Digest 10

54 J Legal Educ 2, 2004, pp 223–234

To teach our students to be deal lawyers, we must teach them to think like deal lawyers. The analytic skill that litigators use is different from the one that deal lawyers use. Specifically, litigators use the analytic skill that we teach in our first-year courses. There we teach students to take the law and apply it to the facts to create a persuasive argument. That argument is then memorialised in a brief or a memo or is otherwise used to sway another, be it the other party or the court. The paradigm is one in which the litigators seek a certain legal result by working backwards from the law to a static set of facts. The analytic skill of deal lawyers stands this paradigm on its head.

Deal lawyers start from the business deal. The terms of the business deal are the deal lawyer’s facts. The lawyer must then find the contract concepts that best reflect the business deal and use those concepts as the basis of drafting the contract provisions. The author calls this skill translating the business deal into contract provisions. It is the foundation of a deal lawyer’s professional expertise and problem-solving ability. Without it, negotiating and drafting are abstractions.

When learning the translation skill, students must learn not only the legal aspects of a contract concept, but also its business purpose. So the class studies the role of representations and warranties as a risk allocation mechanism. Because of the importance of the risk allocation concept, the class also looks at a more sophisticated example — a series of alternative representations and warranties that show how a buyer and seller might negotiate a ‘no litigation’ representation and warranty. The first representation is flat. It states as an absolute that the seller is not a party to any litigation and that there are no threatened litigations against the seller. This representation and warranty, of course, put all the risk on the seller. If there is even one threatened litigation, the seller is liable.

Students also see the subtleties of the translation skill in the exercise they work on after the basic skill is covered in class. Working in groups of three or four, they review an employment agreement deal memo that enumerates thirteen business points. After reviewing each deal point, they annotate the deal memo indicating how they would translate each business point into a contract concept.

The nub of the class discussion is that there are no easy answers in translating a business deal into contract concepts. It is not a mechanical skill. It is an analytic skill that students must learn and that we must teach if we are to graduate students who think like deal lawyers. Translating the business deal into contract concepts is only one aspect of thinking like a deal lawyer. The better deal lawyers are able to look at a transaction from the client’s perspective and add value to the deal. This means understanding what the client wants to achieve and the risks it wants to avoid. These skills are problem-solving skills and are an integral component of a deal lawyer’s professional expertise. They require a sophisticated understanding not only of substantive law, but also of business, the client’s business, and the transaction at hand.

As simple-minded as this might sound, in order to think like a deal lawyer, a lawyer must understand business and the business deal. For a deal lawyer, not knowing about business is akin to a litigator’s not knowing civil procedure and evidence. Business is the discipline-specific substantive knowledge — the professional expertise — that a deal lawyer must have to function effectively. Unfortunately, students generally have little opportunity to get a thorough grounding in business before they leave law school. For those students who intend to do deals, this deficiency puts them significantly behind the curve when they start to practise. In contrast, students who become litigators are much better prepared. We teach them not only the appropriate skills, but also discipline-specific substantive knowledge. Of course, Business Essentials does not completely solve the problem of students’ lack of business savvy. But it lets them make some progress. Further progress will depend on their future teachers’ abilities to sensitise them to business matters and the students’ willingness to continue learning on their own.