Shining More Light on Cares in Contracting

Law and technology enthusiasts cannot help but notice the opportunities presented by contracting. It’s long been an area ripe for innovation. Contracts are both fascinating information artifacts and frustrating business problems.

We already have an embarrassment of riches when it comes to solutions, nowadays mostly under the CLM (contract lifecycle management) banner. Investments are pouring in. Players like Agiloft, Akorda, Ironclad, Juro, and ThoughtRiver — to name just a few — have brought amazing products to the market. Shakeouts and consolidations among the hundreds of providers seem inevitable.

There have also been thousands of articles, white papers, blog posts, and webinars on the subject. (Not to mention tweets.)

So I’ll keep this short.

The next big thing?

Many obvious angles glisten for improving the universally bemoaned state of contracting. Disintermediate the lawyers! Mine the data! Enlist artificial intelligence! Promulgate standards! Use the blockchain!

One promising direction lies in lighting up the now largely invisible dance of preferences and tradeoffs that really drive contracting, but aren’t effectively managed. What parties really care about, and how much. Having that knowledge be visible, tangible, and interactive could ease headaches and grease the wheels of commerce.

Imagine that we’ve done almost everything imaginable tech-wise AND there’s been widespread acceptance of standards. Imagine that most contracts are ‘smart’ and relevant ones are consummated on public or private ledgers. End of problem?

Probably not. Even after AI and other automation and standardization have done their jobs we’ll still have the underlying challenge of helping people choose which contracts to propose and accept.

Lawyers can’t fully answer those questions for business people or consumers. Nor can machines. Both can tell us what we should care about. But so far only people know (or think they know) what they do.

Circles of concern

Contracts are texts with consequences. They open some opportunities and foreclose others. As forms of ‘private legislation’ they are full of normative statements that are subject to complex modes of interpretation.

A simplified view of the typical contracting situation might look like this:

The trajectory of a ‘deal’ typically starts with rough consensus on the basic understandings to be documented (terms), which are eventually hammered into draft agreements to ‘make it official’ (words), which in turn if executed will have consequences for the rights and duties of the parties (implications — what do the words mean?) People naturally care about all three of these things and their relationships.

At a base level a party wants to know: What will we be obligated to do or prohibited from doing, under what circumstances? What will the counterparty be obligated to do or prohibited from doing, under what circumstances?

You might be concerned about vague terms or ambiguities in the verbiage, even when you agree with what you think both parties intend.

As you navigate the ocean of words, with their mists of deontic implications, you’re also dealing with a tapestry of wants, concerns, and cares.

Many critical questions present themselves — What activities will these arrangements enable? What will they constrain? What powers are we gaining? What liabilities are we incurring? What does my counterparty think this means; what might a court or regulator? Do the words accurately/completely reflect the agreed terms? What unexpected stuff is in there? What are the legal and business implications of these normative arrangements? What rules will govern our relationship that are not explicitly covered? Are there any ‘catches’?

Lots of things to care about! And usually there are multiple people on both sides who care about different things, to different degrees.

You may not, for instance, care too much about new obligations to do what you would do any way, or prohibitions against things you would never do anyway. (I might not object to a provision prohibiting me from setting a competitor’s house on fire.) But you may care greatly about even subtle limitations on your freedom that don’t seem fairly imposed.

Points of reference

To contract effectively you need to know, or learn, what you care about (or should care about), and how a proposed contract serves those cares.

For companies, one approach is to compile playbooks that document organizational standards about required, forbidden, and acceptable terms and provisions. They help identify what may be unacceptably present, or unacceptably missing, in a contract under consideration. They may include exceptions, fallbacks, and escalation paths/protocols. You can think of them as codifying acceptability ‘curves’ — ranges of relative goodness in how a given issue is handled.

Such playbooks can now be semi-automatically created based on in-house or public collections of contracts. They can be used throughout a negotiation process to assess how acceptably complete or unacceptably incomplete a draft is at a given stage of discussion.

Contractual spectroscopy

In chemistry and physics, spectroscopy is used to analyze the properties of matter based on its electromagnetic behavior. We’re beginning to get tools that offer comparable insights into contracts.

Multiple vendors have technologies that can identify, classify, and rate provisions in contracts. They can quickly communicate such insights as “This document has 91% of the provisions typically found in a contract of this sort. But it has two provisions that are not typically seen. And these versions of the common provisions are problematic. This exception is unusually weak.” See e.g. My Legal Einstein and TermScout.

Computational linguistics can be used to extract the conditional and unconditional obligations, permissions, prohibitions, and other normative propositions implicit in a contract by intelligently parsing it. The technology to do this can be expensive, but it is available and will likely become a commodity.

So it may become commonplace to seek and get automated answers to questions like this: How does the contract I’m considering (or creating) compare to what I would ideally want, to one whose aspects are optimal from my perspective?

The response might be in the form of a graphical scorecard, showing the relative goodness of multiple aspects, and their tradeoffs, in vivid color.

Note that the inevitable complexity of contracts will likely not fully be dispelled by such tools. In some ways, even more cares will be surfaced that need to be wrestled with.

Let there be light

It’s long seemed valuable to me for contracting parties to have greater visibility into who cares how much about what. And for that to be explicitly modeled and visualized.

Can we shine more light on those cares?

Clarifying your own (or your team’s) cares can be liberating. Getting clear on what aspects of a pending contract you most care about and why helps to focus analysis and discussion. And finding out, or at least supposing, what the other ‘side’ really cares about can help identify potential win-win solutions.

In a contentious negotiation of course you likely won’t want to reveal your full set of care curves, or expect the counterparty to do so. Still, when all parties are brought into interactive playbooks you can do such things as tit-for-tat fallbacking. (“I’ll accept my second-favorite version of provision X if you accept your second-favorite version of provision Y.”)

I’ve opined at modest length about these things in a two-part article that began life at a 2013 Stanford Law School workshop. Most evidently find it TL;DR, despite my lovely prose and brilliant insights. (http://www.capstonepractice.com/s/Enhancing-Contract-Playbooks-with-Interactive-IntelligencePart-I.pdf and http://www.capstonepractice.com/s/Enhancing-Contract-Playbooks-with-Interactive-IntelligencePart-II.pdf.)

The core idea is that contractors — both professionals and amateurs — would be well served by shared environments that use interactive visualization and social production — within or across teams — to collaboratively deliberate as they articulate and track how much they care about things.

As far as I can tell, much of this now only exists in my fertile imagination. (Like the rest of the choiceboxing conspiracy.)

It’s a wrap

Even seemingly simple, routine contracts, like the click wrap agreements most of us thoughtlessly accept, can present thorny challenges. Leases and other agreements, while not technically ‘contracts of adhesion,’ are generally not carefully negotiated. Just as few consumers read terms and conditions before accepting them, many small business folks don’t either.

We rationalize unthinking acceptance of such a contract by imagining that no reputable vendor would include or enforce abusive provisions, that “I can get out of this if I have to,” that it only applies to this transaction, that everyone else is doing it, so there’s safety in numbers. True, most such agreements may just sit in a metaphorical drawer. People sign and hope for the best. But sometimes they come back to bite you.

Consumers and small businesses can’t afford to develop and maintain sophisticated playbooks for the many contractual situations they find themselves drawn into. I look forward to vendors that can supply just-in-time reference standards through which even infrequent flyers can more intelligently contract. Again, that will require highly nuanced engagement with the specific circumstances and goals of users. (What are you seeking to obtain? avoid? As they say, “If you don’t know where you’re going any road will get you there.”)

The last (s)mile

The ‘last mile’ often refers to the challenge of connecting homes and businesses to the main telecommunication network. We also hear it in transportation logistics and other contexts.

Is there a last mile in contracting?

I suggest that it is on the bridge between what contracts say and what people want. That bridge needs more lights.

Contracts are tangles of satisfied and thwarted preferences. Yet negotiation can end with smiles all around, not grimaces or whimpers. Tools that put cares front and center can help produce more happy endings.

I’ve seen glimmers of enhanced care visibility in recent products and papers, but so much more seems possible and desirable. Do you agree? What am I missing?