Computable Contracts

Authors

Harry Surden, University of Colorado Law SchoolFollow

Document Type

Article

Publication

U.C. Davis Law Review

Year

2012

Citation Information

Harry Surden, Computable Contracts, 46 U.C. Davis L. Rev. 629 (2012), available at https://scholar.law.colorado.edu/faculty-articles/148.

Abstract

This Article explains how and why firms are representing certain contractual obligations as computer data. The reason is so that computers can read and process the substantive aspects of contractual obligations. The representation of contractual obligations in data instead of (or in addition to) the traditional written language form - what this Article calls "data-oriented contracting" - allows for the application of advanced computer processing abilities to substantive contractual obligations. Certain financial contracts exemplify this model. Equity option contracts are routinely represented not as contract documents written in ordinary language - but as data records intended to be processed by computers. The parties incorporate such data as an expression of their substantive contractual memorialization through various processes.

The representation of contractual obligations as data allows for new contracting properties. Among these possibilities is the design of "computable" contract terms. This Article explains how parties can effectively "translate" certain contractual criteria into a comparable set of computer-processable rules. Parties can provide computer systems with existing data that is indicative or relevant to compliance or performance. In this way, certain previously manual comparisons between promised terms and actual party activities can be automated. This can have the effect of significantly reducing transaction costs associated with contract monitoring and compliance as compared to the traditional written language contracting paradigm.

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