Author: Lawrence Cunningham


Trump as Litigator-in-Chief and Other Real World Stories

Donald Trump (credit: Business Insider)

Donald Trump (credit: Business Insider)

Miriam Cherry and I are thrilled to announce release of our new book, CONTRACTS: A REAL WORLD CASEBOOK.  We spent the last decade ripping cases from the headlines to show students how classic cases and principles that seem dusty still control today’s contract disputes they hear about.  Seeing the old and the new together engages students and we hope contracts teachers will consider this book.

We pulled this together after years of bringing contracts in the news into our classrooms, onto this blog, into a Cambridge U paperback and now, formally into a casebook that’s both fresh and familiar.  For example, thanks to our country’s litigator in chief, the litigious Donald Trump, students tomorrow morning can work out how ancient principles on liquidated damages control current events, as Jennifer Taub explains over at Slate.

Trump shows up in our casebook multiple times, though we omitted a few stories I’ve written on his legal foibles simply to avoid too many encounters.  But below is a reprise of one I wrote a few years ago that did make the cut.  In our casebook, we turned this example into a problem and then excerpted the relevant case precedents, such as the Kel Kim case discussed below along with the classics Taylor v. Caldwell and Krell v. Henry.  Skimming it and comparing it what we put in the casebook gives a sense of our process which, above all, was fun, and the students can tell.  Read More


Contract Interpretation 2.0: Not Winner-Take-All But Best-Tool-For-The-Job

In a centuries-old debate among contracts scholars, one group supports a presumption favoring a text-centered approach to the interpretation of a written agreement — the plain meaning taken from the four corners — while opponents urge a broader understanding of context — what the parties intended and the circumstances of their negotiation. The contending positions have so hardened that, in a jarring juxtaposition my new Essay will reveal, recent academic classifications of the same state laws are exactly opposite to each other: contextualists classify certain states as contextualist that textualists say are textualist!

Yet despite the persistence of acute polarization, the author also documents — and applauds — promising trends in the literature toward hybridization and compromise, a search for factors to guide the selection of interpretive tools rather than putting some off limits or setting up default rule presumptions. While scholars have thus long obscured a common-sense reality, a new wave of research is making it clearer to all sides that text and context are both useful, depending on the details of different jobs.

More modern, advanced, and sensible, this new view of contract interpretation replaces a stubborn “winner-take-all” approach to the debate with a flexible and practical “best-tool-for-the-job” approach. To illuminate its importance and value — call it contract interpretation 2.0 — my new Essay turns to Warren Buffett’s contracting philosophy and practices. The famous investor and businessman is also a polyglot teacher, and his approach to contracts, especially acquisition agreements and employment arrangements, illustrates the imperative of using the right tool for the job.


Berkshire’s Prosperous Simplicity: Try It!

Berkshire Hathaway is simple. Though among America’s largest public companies, it is almost entirely self sufficient. It rarely uses intermediaries — brokers, lenders, advisers, consultants and other staples of today’s corporate bureaucracies. It’s interesting to ponder how and why, but as important to ask why is it so unusual — and what people are doing about it.

While American companies borrow heavily, Berkshire shuns debt as costly and constraining, preferring to rely on itself and to use its own money. It generates abundant earnings and retains 100 percent, having not paid a dividend in more than 50 years. Berkshire earns some $30 billion annually — all available for reinvestment. In addition, thanks to its longtime horizon, Berkshire holds many assets acquired decades ago, resulting in deferred taxes now nearing $100 billion. These amount to interest-free government loans without conditions.

The principal leverage at Berkshire is insurance float. This refers to funds that arise because Berkshire receives premiums up front but need not pay claims until later, if it all. Provided insurance is underwritten with discipline, float is akin to borrowed money but cheaper. At Berkshire, float now runs another $100 billion, which it uses to buy businesses that continue to multiply Berkshire’s value.

American corporations tend to design acquisition programs using strategic plans administrated by an acquisitions department. They rely heavily on intermediaries such as business brokers and investment bankers, who charge fees and have incentives to get deals done; firms also use consultants, accountants and lawyers to conduct due diligence before closing. Read More


Coming Soon: “The Warren Buffett Shareholder”

Why do 40,000 shareholders regularly go to Omaha, Nebraska, for the Annual Meeting of Berkshire Hathaway, the company Warren Buffett built? We asked 45 famous recurring visitors to ponder this question and compiled their responsive essays into a book.

The Warren Buffett Shareholder: Stories from Inside the Berkshire Hathaway Annual Meeting,” due out April 20, is the result.

Never before have the shareholders of a public company undertaken to write a book about their experience, notes famed investor Mario Gabelli. But, then, Berkshire and Buffett are famous for being sui generis.

Featured authors include Jason Zweig, Jack Bogle, Robert Hagstrom, Bob Miles, Tom Gayner, Si Lorne, Prem Jain, Bob Denham, Tom Russo, and other best-selling authors, renowned investors, and sage advisers.  [Full by-lines below.]

In the book, these astute observers discern what bonds Berkshire shareholders together, a combination of economic rationality and intellectual community, and delineate the values.

“Smart and engaging” is how the book is described by legendary financial journalist Carol Loomis, which we’d say is just like the shareholders it describes.

Having published 15 books, 60 research articles, and 200 shorter pieces, and edited scores of other works, it is a joy to say I have never had so much fun working on a publication as I have on this book.

I am looking forward to sharing these insights come April 20.  Thanks to all our wonderful contributors, a “Who’s Who” in corporate life:


Charles T. Akre is the Managing Member, Chief Executive Officer, and Chief Investment Officer of Akre Capital Management, LLC in Middleburg, Virginia.

Keith Ashworth-Lord is Managing Director of Sanford DeLand, an asset management firm based in Manchester, England.  Keith is the author of Invest in the Best.

Phil & Beth Black are co-owners and operators of The Bookworm, Omaha, Nebraska, which they founded in 1986.

John C. Bogle is the Founder of Vanguard, based in Valley Forge, Pennsylvania. Jack is the author of many books, including The Little Book of Common Sense Investing.

Patrick T. Brennan, CFA, is the Founder and Portfolio Manager of Brennan Asset Management, LLC, a concentrated value investing firm based in Napa, California.

Randy Cepuch is the author of A Weekend with Warren Buffett and Other Shareholder Meeting Adventures.

Stephanie Cuba is a real estate consultant based in New York City, and serves on the board of Brooklyn Excelsior Charter School and the advisory council of the Montefiore Medical Center/Einstein College of Medicine.

Lawrence A. Cunningham is a Professor at George Washington University, Founding Faculty Director of GW in New York, and a Director of Constellation Software Inc. Larry is the author of many books, including Berkshire Beyond Buffett.

Robert E. Denham is a Partner in the Los Angeles office of Munger, Tolles & Olson, LLP, a law firm which frequently represents Berkshire Hathaway. Bob is also a member of the boards of directors of Chevron Corporation; The New York Times Company; FEMSA; and Oaktree Capital Group.

Thomas S. Gayner is a Director and Co-Chief Executive Officer of Markel Corporation in Richmond, Virginia. Tom is a Director of Cable One, Colfax, and Graham Holdings; and Chairman of Davis Funds.

Joel Greenblatt is the Founder, Managing Principal, and Co-Chief Investment Officer of Gotham Capital, New York City, and a Director of Pzena Investment Management, Inc. Joel is the author of several books, including The Little Book that Beats the Market.

Robert G. Hagstrom, CFA, is the Senior Portfolio Manager of the Global Leaders Portfolio at Equity Compass Strategies, an asset management affiliate of Stifel Financial Corporation. Robert is the author of The Warren Buffett Way.

Raymond Buck Hartzell is the Director of Investor Learning and Operations at The Motley Fool, based in Alexandria, Virginia.

Ingrid R. Hendershot, CFA, is the Founder, President, and Chief Executive Officer of Hendershot Investments, Inc., Bristow, Virginia. She is the Editor of Hendershot Investments, a quarterly newsletter for long-term investors.

Mark Hughes is the Director of Equity Research at Lafayette Investments in Ashton, Maryland.

Prem C. Jain is the Elsa Carlson McDonough Chair of Accounting and Finance at the McDonough School of Business, Georgetown University, Washington DC. Prem is the author of Buffett Beyond Value.

Thomas Johansen is a Professor in the Department of Economics, Finance, and Accounting, Fort Hays State University, Hays, Kansas.

Steve Jordon is a Business Reporter for the Omaha World Herald, where he has worked since 1967.

David Kass is a Clinical Professor in the Department of Finance at the Robert H. Smith School of Business, University of Maryland.

Vitaliy Katsenelson is the Chief Executive Officer and Chief Investment Officer of Investment Management Associates, Inc., a value investment firm based in Denver, Colorado. Vitaliy is the author of The Little Book of Sideways Markets.

Karen Linder is President and Chief Executive Officer of Tethon 3D, a 3D printing company, and Principal of Linseed Capital, a private investment firm. Karen is the author of The Women of Berkshire Hathaway.

Simon Lorne is Vice Chairman and Chief Legal Officer of Millennium Partners, New York City. A former partner of Munger, Tolles & Olson, Si also serves as chairman of the Alternative Investment Management Association.

Thomas J. Manenti retired in 2018 as the Chairman and Chief Executive Officer of MiTek Inc., a Berkshire Hathaway company based in St. Loui, where he had worked since 1977.

Jeff Matthews retired in 2017 as the General Partner of Ram Partners LP, where he had served since 1993. Jeff is the author of several books, including Pilgrimage to Warren Buffett’s Omaha.  

Tim Medley is a Partner at Medley & Brown, a financial advisory firm in Jackson, Mississippi, and a Director of the Sequoia Fund, Inc.

Robert P. Miles is an Executive in Residence at the College of Business Administration, University of Nebraska Omaha. Bob is the author of several books, including The Warren Buffett CEO.

Olza M. (Tony) Nicely is the Chairman and Chief Executive Officer of GEICO, a Berkshire Hathaway company, where he has worked since 1961.

Shane Parrish operates the

Daniel Pecaut  is the Chief Executive Officer of Pecaut & Company, an investment firm based in Sioux City, Iowa. Daniel is the co-author, with Corey Wrenn, of The University of Berkshire Hathaway.

John Petry is the Founder and Managing Member of Sessa Capital LLP. He serves on the board of the Success Academy Charter Network.

Laura J. Rittenhouse is the Chief Executive Officer of Rittenhouse Rankings, Inc., an investor communications and coaching firm, and author of several books, including Investing Between the Lines.

Francois Rochon is the Founder, President and Portfolio Manager of Giverny Capital based in Montreal, Canada.

Jim Ross is the Manager of the Hudson Booksellers store at Eppley Field in Omaha.

Thomas A. Russo is the Managing Member of Gardner Russo & Gardner LLC, serving also as General Partner of Semper Vic partnerships.

Andrew Steginsky, CFA, is the ‎Founder and Managing Director of ‎Steginsky Capital LLC in New York.

Macrae “Mac” Sykes is Senior Research Analyst, Gabelli & Company in Rye, New York.

Phil Terry is the Founder and Chief Executive Officer of Collaborative Gain, Inc., which runs leadership programs, and of Reading Odyssey, a lifelong learning nonprofit organization.

Charlie Tian is the Founder and Chief Executive Officer of  He is the author of Invest Like a Guru.

Whitney Tilson is the Founder and Chief Executive Officer of Kase Learning, through which he teaches seminars on value investing, entrepreneurship and worldly wisdom. He was a contributor to Poor Charlie’s Almanack.

Bruce N. Whitman is the Chairman, President, and Chief Executive Officer of FlightSafety International, a Berkshire Hathaway company, where he has worked since 1961.

John R. Wingender is a Professor and Chairman of the Department of Economics and Finance at the Heider College of Business, Creighton University.

Jason Zweig writes The Intelligent Investor column for The Wall Street Journal. He is the editor of the contemporary edition of Benjamin Graham’s classic book, The Intelligent Investor.


Major Contracts Symposium at GW

qtq80-Sh2bmhDivergence and Reform in the Common Law of Contracts is the title of this year’s GW Law Review Symposium and anyone interested in contracts and/or comparative law will want to join us for it on  Saturday November 19.  Here is a summary from the official web site for the event (RSVP here):

This Symposium continues a tradition of biennial conferences that began at the University of Sheffield, UK in 2011, followed by a conference held at the University of Edinburgh in 2013. But this 2016 Symposium is not your grandfather’s contract law. Instead, this conference takes a 21st Century approach to comparative issues in contract law, examining the most pressing controversies, debates, and challenges currently shaping the United States and United Kingdom’s shared legal tradition in the area of common law contracts.

Symposium papers from the previous two gatherings have been published as books by Cambridge U. Press and Oxford U. Press; papers from the current symposium will be published in the GW Law Review.

Topics include: Comparative Law and Reform; The Share Economy; Remedies; The State of the Interpretation Debate; Good Faith; and Consumer Contracts

Participants include:

Miriam Cherry, St. Louis U.

Lawrence Cunningham, GWU

Larry DiMatteo,  U. Florida

Hon. Lord Hodge, UK Supreme Court

Martin Hogg, Edinburgh

Geraint Howells, City U. Hong Kong

Judge Barbara Keenan, 4th Circuit Court of Appeals

Judge Carlos Lucero, 10th Circuit Court of Appeals

Blake Morant, GWU

James Nehf,  Indiana U.

Robert Stevens,  Oxford U.

Matthias Storme, KU Leuven

Rolf Weber, U. Zurich






Advice on Legal Book Publishing

Opinion Poll on Behalf of Younger Colleague Ready to Publish First Casebook in First Year Course.

Suppose offers of publication by the following publishers. What’s the order of ranking, assuming all terms are equal?

Aspen, Carolina, or West?

Please feel free either to leave comment or send me an email []


What’s Buffett’s Secret to Great Writing?

symposium-coverWe all write more than ever today, but do we communicate well?  As one group, corporate directors, pondered how to communicate effectively to shareholders, they  turned to the gold standard.  They wondered, what most distinguishes Warren Buffett’s annual missive to Berkshire Hathaway shareholders, and asked me, as a student of these writings for two decades, for the answer.

Clarity, wit and rationality are hallmarks to emulate, I said, along with how Buffett personally pens lengthy sections to read more as literary essays than corporate communications.

But, far more important, these attractive qualities are products of a deeper distinction with greatest value. Every Buffett communiqué has a particular motivation: to attract shareholders and colleagues—including sellers of businesses—who endorse his unique philosophy. Tenets include fundamental business analysis, old-fashioned valuation methods, and a long time horizon.

A recurring motif of Buffett’s writing is the classic rhetorical practice of disagreement. Buffett recites conventional wisdom along with multiple reasons why it is inaccurate or incomplete. He then differentiates Berkshire with themes like autonomy, permanence, and trust.

In a new article I wrote at the request of the National Association of Corporate Directors (available free here), I parse recent examples to show that Buffett’s dispatches often work on several levels simultaneously. Think of circles on a dartboard, with the bull’s-eye as Berkshire’s distinctive practices, which Buffett relentlessly explains. Surrounding that core explication, in concentric circles, Buffett lauds specific Berkshire businesses or personnel, contrasts their industry or competitors, and opines on related public policy debates.

By arguing in this artful manner, Buffett hones Berkshire’s corporate culture while answering rivals and critics alike. Leaving an unmistakable effect on the conglomerate’s millions of owners, managers, and employees, Buffett’s essays are a model of tone-at-the-top governance.

Buffett’s essays are rich with history, putting current debates in broad context, and steeped in statistics, anchoring argument in data. Buffett contrasts and compares; jokes and quips; and prefers to praise by name but criticize by category. Even when confronting critics, Buffett’s essays avoid sounding defensive.

Above all, the work expresses who Warren is—a confident, astute and joyous capitalist. Yale University writing professor William Zinsser says that “Motivation is at the heart of writing.” Buffett loves Berkshire, his curated life’s work defined by unusual shareholders, adroit managers, and idiosyncratic principles. Munger has commented: “Warren’s whole ego is poured into Berkshire.”

More than the elements of style, such motivation is a gold standard worth aspiring to.

Download the full article free here.

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In 1996, based on a law review symposium they led together, Warren Buffett chose Lawrence Cunningham to compile his famous shareholder letters into the book, The Essays of Warren Buffett: Lessons for Corporate America, now in its 4th edition and sold worldwide in a dozen languages.


Berkshire’s Blemishes: Lessons for Buffett’s Successors, Peers, and Policy

Columbia University has published my most recent research paper, available free on SSRN (registration required): “Berkshire’s Blemishes: Lessons for Buffett’s Successors, Peers, and Policy.” Here is the abstract.

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Berkshire Hathaway’s unique managerial model is lauded for its great value; this article highlights its costs. Most costs stem from the same features that yield such great value, which boil down, ironically, to Berkshire trying to be something it isn’t: it is a massive industrial conglomerate run as an old-fashioned investment partnership. An advisory board gives unchecked power to a single manager (Warren Buffett); Buffett makes huge capital allocations and pivotal executive hiring-and-firing decisions with modest investigation and scant oversight; Berkshire’s autonomous and decentralized structure grants operating managers enormous discretion with limited second-guessing; its trust-based culture relies on a cultivated vision of integrity more than internal controls; and its thrifty anti-bureaucracy means no central departments, such as public relations or general counsel.

Delineating the visible costs of Berkshire’s model confirms the desirability of tolerating many of them, given the value concurrently generated, but also reveals ways to improve the model—a few while Buffett is at the helm but mostly for successors. Current reform suggestions include hiring a full-time public relations professional at headquarters and more systematically developing senior executives; suggestions for future reform include enhanced subsidiary compliance resources and separating the identity and personal opinions of top executives from the corporation and its official policy.

Besides helping Berkshire, the review and suggestions will help managers of other companies inspired by Buffett’s unique managerial model and policymakers who should study it. Implications for peers and policymakers include highlighting flexibility in corporate governance, the efficacy of the conglomerate form, and especially the value of strategies that produce long-term thinking among shareholders and managers alike.


Trump v. Mahr: Another Donald Contract Folly

(Credit: Ethan Miller/Getty Images)

(Credit: Ethan Miller/Getty Images)

In 2012, Donald Trump, flirting with a run for the presidency of the United States and criticizing its incumbent, Barak Obama, pressured the President to confirm his U.S. citizenship by publicly disclosing his birth certificate.

Despite Obama having done so, Trump sustained the pressure, posting a video on the internet on October 24, 2012—the last week of the election campaign—in which he offered to pay $5 million to Obama as consideration for the President publishing his college and passport applications and records.

Trump was serious, even suggesting charities, clarifying his goal of producing the information, and committing to pay within one hour. The offer also had a deadline: October 31, 20012 at 5:00 p.m. That hour having come and gone without Obama accepting, the offer terminated Obama’s power of acceptance.

On January 7, 2013, the comedian and political talk show host, Bill Maher, appeared on the Tonight Show with Jay Leno. After calling Trump a liar and racist, he characterized some of Trump’s public ramblings as “syphilitic monkey.” Then came what Trump portrayed as an offer: “suppose that perhaps Donald Trump had been the spawn of his mother having sex with an orangutan. . . . I hope it’s not true . . . , but, unless, he comes up with proof, I’m willing to offer 5 million dollars to Donald Trump . . . that he can donate to a charity of his choice. . . .”

Trump formally submitted his “acceptance” of this “offer” the next day, sending a copy of Trump’s birth certificate attesting that he is “the son of Fred Trump,” and naming the charities designated as beneficiaries of the $5 million. In Trump’s view, a contract was formed “the moment the Acceptance Letter was sent,” a reference to the usual rule of acceptances, which makes them effective on dispatch (affectionately referred to as the “mailbox rule”).

On February 4, 2013, Trump sued Maher. The lawsuit, of course, was an inherent loser, and Trump soon withdrew it. But in their filings, Trump’s lawyers got much of contract doctrine right, in both the Obama background and Maher interactions.

In relation to Obama, the lawyers correctly noted that (1) an offer creates the power of acceptance, (2) an unrevoked offer may be accepted by following the route to acceptance stated in the offer and a binding contract results, and (3) that the power of acceptance terminates upon any expiration stated (or upon the offer’s revocation of it, the offeree’s rejection of it, or the offeror’s death).

So why did Trump file such a patently frivolous lawsuit?  For a hint and another example of how Trump is a prolific frivolous litigator in American courts, see this companion post.


Buffett’s Timeless Investing Principles


WB MOAFWarren Buffett distills investment success into three words—margin of safety—and tells investors to take one of two approaches: either focus on value or buy an index fund. Buffett, the “Oracle of Omaha,” has been steadfastly giving such sage advice for decades, through calm and choppy markets alike.

In fact, twenty years ago I hosted Warren and Charlie Munger, his Berkshire Hathaway partner, for a two-day conference at Cardozo Law School that launched an international best seller, The Essays of Warren Buffett: Lessons for Corporate America. At the time, Warren’s investing style was unfashionable. Critics increasingly said he’d lost touch, misunderstanding the budding “new economy” and its “game-changing” technology.  Buffett foresaw exceedingly high stock prices—and soon proved correct.

After recently stumbling on the transcript from that gathering, I published an annotated version, The Buffett Essays Symposium: Annotated 20th Anniversary Transcript.  It’s packed with timeless gems for every investor—then and now, in ups or downs—including these three pivotal propositions. Read More