Friday, October 1, 2010

Contract Analysis -- Commonality and Consistency

In response to my last Post, Ken Adams returns to a familiar theme to question the contract analysis approach. His post, http://www.adamsdrafting.com/2010/09/30/for-optimal-contract-language-dont-follow-the-herd/ suggests the purpose of contract analysis is to find the most popular clauses.

This is an opportunity to clarify how kiiac works. In creating a reference set, kiiac creates an aggregated outline (similar to a table of contents for the collection) and a clause library for each outline branch. The outline captures the standard transaction elements and all deal-specific variations. It does, indeed, measure clause commonality, showing how frequently particular terms appear in the collection. The clause library, however, is organized not by commonality, but by language consistency. Our goal is to find the core, non-negotiated language for each provision. We then group the library by conformity to the standard, highlighting deal-specific or divergent terms in each clause. Typically all the clauses are slightly different, so it is difficult to determine which would be the most common.

kiiac proposes the core language as a starting point. You can select a different clause if it contains language you prefer, or you can quickly review the full range of alternatives and supply your own language for the provision.

Ultimately, the difference in approach between Koncision and kiiac may not be that different. kiiac’s approach is to start with a document structure and set of clauses that are familiar to the attorneys, identify the best precedent in the collection and enable a process of continuous improvement. As I understand it, Koncision will use existing precedent as a guide and may re-write terms where existing language is not optimally suited for its purpose. I think it is fair to say: we are both trying to get to the same point.

Figure 1 shows the outline created for a merger agreement, showing the organization of the agreement of the agreement and how frequently each provision occurs (the more common the clause, the more filled-in the icon).



















Figure 2 shows the clause library for the governing law provision, identifying the core clause with the least or no deal-specific or negotiated language, and grouping the clauses by divergence to such standard.

3 comments:

  1. Kingsley - I just discovered your blog (via Ken Adams) and love it. Can I ask you, do you have a "past readings" list? ;) I'm curious, do you have a search filter set up to locate the articles you find on the empirical analysis of contracts?

    Cheers,
    Rob Hyndman
    rh@hyndmanlaw.com

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  2. Rob,

    Thank you for your kind comments.

    These are both great ideas and something I have been meaning to do. There is great work being done in the field all around the world—mostly in academia. I stumble across interesting information from time-to-time. You have now given me the incentive to try and pull together a compendium of resources on contract analysis. Thanks.

    Kingsley

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