Monday, November 7, 2011

Standard English to Standard Business

For many years, the plain or standard English movement has sought to eliminate “legalese.” The term ‘”plain English” is, however, generally disfavored, because the goal is not to “dumb down” legal writing, but rather to use ordinary language in a manner that is readable to professionals. The difference between plain language and clear language is well described by Gail Dykstra of the CLIC Plain Language Centre. She writes:

"'Plain language' is language simplified to make it readily understandable by the average person. It is language stripped of unnecessary complexity, but not stripped of style. It is perhaps language at the lowest common denominator. It is reader-focused language. 'Clarified or simplified language' on the other hand is language that has been worked on to improve its understandability, but retains technical terms (terms of art), if necessary. It can rely on the assumption of commonly held knowledge of how the legal system or government operates in order to understand the language." Plain Language Association International

Applying the lessons to contract analysis, the clarification process is performed in two stages: clear language and clear purpose.

Clarity of language: Clear language is, of course, a worthy goal for its own sake. It also serves to reduce ambiguity, and the potential for dispute. However, it is not easy. It is often faster and easier to draft a stream of consciousness than to clearly and succinctly craft a contract term. Indeed, this was one of the principal motivations for programming a contract analysis application. Software can review a large sample set of clauses and identify the core, standard language (or pre-negotiated language): and distinguish deal-specific terms. In addition, the analysis also finds the frequently used term modifiers. For example, the core language of the authority representation states that “the party has power to enter into and execute the agreement.” The core language often includes modifying terms, such as: “complete power,” “full power,” “requisite power” or “necessary power,” or multiple combinations of such modifiers. In many cases, the modifiers can be removed without altering the meaning.

Clarity of purpose or intent: As we strip legal agreements of their nineteenth century affections, not only does clear modern English emerge, the meaning, or business terms, also becomes evident. For example, we recently worked on an asset purchase agreement. As is frequently the case, the business mechanics transaction appeared to be very complex. From a large set of sample documents, few people could read the agreements and clearly articulate the mechanics of the transaction. By performing the two-stage analysis—which doesn't take long—the business terms pop out from the page.

·          What assets are sold and purchased?
·          Will payment be made in the form of cash, stock or debt?
·          Will full consideration be paid at closing, or will some portion be held back in escrow?
·          Will the price be adjusted to account for any difference in the value of the assets between the time of agreement and the close of the transaction?

Each of these elements has sub-elements, which gives me an idea how to further automate contract analysis. And, this will be the subject of the next post, namely, how to design modular, contract building blocks, based on techniques of object orientated programming.