72 Pages Posted: 13 Feb 2013 Last revised: 22 Nov 2014
Date Written: 2012
It is possible to formulate contractual obligations so that computers can 'understand' and make prima-facie compliance assessments with specified terms and conditions. Such a contractual obligation, formulated specifically for computer processability, is what this Article terms a 'computable contract.' Computable contracts are not merely theoretical, but instead are increasingly being used in economically significant domains. Certain widely used financial contracts exemplify this model. The emergence of computable contracts has largely been unrecognized in the legal literature. However, computable contracting is not extensible across all, or even most, contracting scenarios. Rather, it is limited to a small subset of contracting scenarios involving standardization, and relative legal and factual certainty.
Drawing upon computer science research, this Article provides a theoretical account of computable contracting. It first explains how firms can communicate contracting information to computers by representing contracts as data instead of (or in addition to) the traditional written language form. Formalizing contractual obligations in this way is what is termed 'data-oriented' contracting. The representation of contractual obligations as data, in turn, allows for novel contracting properties. For example, parties can effectively 'translate' certain contractual criteria into a comparable set of computer-processable rules. To make contracts 'computable', parties provide computer systems with external data that is relevant to performance. This model is supported by contemporary examples of computable contracts in domains ranging from finance to intellectual property. This Article also provides principles for distinguishing contracting scenarios that are amenable to computability from those that are not.
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By Harry Surden