1. Computable Contracts as Functional Elements
Harry Surden
Professor of Law, University of Colorado Law School
Affiliated Faculty, CodeX Stanford Center for Legal Informatics

2. Computable Contracts Project
Project Goals
Create
Standards and protocol for expressing computable contracts
A series of high-quality, open source tools
Standards and protocol will be
Open-source
Flexible to arbitrary contracting scenarios
Compatible with existing technologies,
Such as the block chain, databases, legal-xml
Extensible to new, not yet developed technologies

3. Overview Presentation Overview What are computable contracts?
Vision: A world with computable contracts
What is missing today
Computable Contracts Stack Proposal
Group Discussion

4. What are
Computable Contracts?

5. Contract A contract A legally enforceable promise
To do something in the future
Under certain conditions
Financial Contract (Option Contract)
“I promise to sell you 100 shares of Apple stock at $200 per share prior to the expiration date of August 12, 2017”
Terms: 100 shares of Apple stock (Qty) at $200 per share (Price)
Conditions: Only prior to expiration date

6. Computable Contract Computable Contract Contract expressed as
Computable Contracts are legal contracts
that computers can “understand”,
assess for compliance with conditions,
and execute
Contract expressed as
Data (which can be interpreted to human readable form)
+ Rules for carrying out meaning and logic of contract promise

7. Computable Contracts “Ordinary Contracts”
English “natural language” contracts
Currently computers have very limited ability
To read and understand natural language contracts
At the level of precision needed for execution or compliance

8. Computable Contracts are both Machine Readable and Computable
Distinguishing Machine Readable Only Contracts
”Machine readable” contracts are contracts
Whose components have been labeled in a structured way
So that a computer can identify individual components
E.g. Legal XML or
For example, a financial contract with an expiration date
Natural Language Version:
“This contract expires and shall no longer be valid after August 12, 2017”
Machine Readable Version:
<Expiration_Date (08,12,2017)>

9. Distinction from Machine Readable
Distinguishing Machine Readable Contracts
Machine-readable = highly structured data format
That allows a computer to parse data with precision
A computer can unambiguously extract the expiration date
<Expiration_Date (08,12,2017)> = August 12, 2017
But computer doesn’t know what “expiration date” means
Or what to do when it sees expiration date
“Expiration date” is merely a label for the data

10. Computable = Giving Computer Rules To Effectuate Meaning of Contract Terms
Computable Contract Terms
Computer has a series of instructions or logical rules
That allow it to automatically execute the meaning of the term
Computer ”understands”, “knows what to do” for terms
Example: “Computable” Contract Expiration Date Term
Computer is given a series of rules that express the meaning
And underlying logic of contract terms and conditions
Rules expressing meaning of word “expiration date”
If current_date > expiration_date
Then do_not_execute_contract

11. Examples Computable Contracts Today
There are limited computable contracts today
Contracts for Financial Securities
Expressed as data
Computable to some degree
Some company purchase order contracts
Some Internet purchase contracts
Some blockchain ”smart contracts”
Basic versions have been around for some time
But currently do not represent the full range of functionality

12. World With Computable Contracts
Vision of
World With Computable Contracts

13. The Vision Goal Create a contracting stack and ecosystem
And a series of open source tools
Around computable Contracting
To make computable contracting easy and effortless
Company A sits down and executes a computable contract
Around an arbitrary good or service
With Company B
The contract terms are self-executing

14. Why Computable Contracts?
Many benefits of computable contracting
Low transaction costs of contracting
Efficiency and cost reduction
Lower barriers to entry for entrepreneurs
Contracts can serve as inputs to other system
Allows for systematic risk assessment
E.g. Preventing Financial Crisis
Detecting errors and contract conflicts
Understanding risk and obligations

15. What We Don’t Have Today

16. Many Components Today
Today there are many bits and pieces of the puzzle
Thanks to the efforts of many in this room
(Meng Wong will discuss in more depth these efforts later)
But we don’t have the whole puzzle

17. The Problem
We do not have an full scale solution for computable contracting today
Today it is not easy for one company or a person to sit down at a computer
And just effortlessly construct a computable contract for an arbitrary good or service
And have that contract be honored
Computable contracts today require tremendous infrastructure and costs

18. The Problem
Why what we have today doesn’t fulfil the computable contracts vision
Absence of Standards
Existing approaches are domain specific
Absence of quality, free software tools
Current approaches not flexible, not general, not extensible
Tied to specific technological implementations
Insufficient Interdisciplinarity
Insufficient ecosystem and buy-in

19. Computable Contracts Stack
Suggestion:
Computable Contracts Stack

20. Computable Contracts Stack
A Functional Stack
What happens when we make a contract?
Represent each stage of contracting as abstract components
Expressing Contract
Transmitting Contract
Recording Contract.
..etc
Whose functionality can be implemented technologically
Analogy to TCP/IP Internet Stack
Multiple layers that are functionally based
But are independent and technologically agnostic

21. Computable Contracts Stack
User Interface
Human Understandable Contract
API
Machine-Readable Contract
Contract Data Representation Layer
Standard Contract Transmission Protocol
Interpretation Layer
Contract Functionality
Interoperability Layer
Storage
Compliance
Notification
Recording / Ledgering

22. Contract Templates Templates Allow Easy Setup of Common Contracts
Many contracts are standardized, and common
Allow templates that are customized to individual fields
E.g. Finance, startups, etc
Contract Templates can be reused for repeat contracting

23. Not Every Contract Has to Be Computable
Computable Contracts work best for standardized, frequently contracts
There are many of these in the world
Computable contracts not the right tool for every contracts
Still will be many bespoke contracts for complex scenarios
Or for scenarios that require subjectivity or discretion
Do not need to make every contract computable
This frees us from burden of a complete solution

24. Computable Contracts As One Example of Computable Law
Ideas Extensible to other areas of law
Contracting is just one area of law
By focusing first upon contract law
Ideas developed in this project can be extended to other areas of law more broadly
Computable Regulation and Legislation

25. Computable Contracts Goals Flexible to multiple contracting scenarios
Very low cost and low barriers to contracting
Compatible with existing technologies
E.g. Blockchain
Adaptable to Future Technologies
Technology agnostic
Can implement ledgering in blockchain, or database, etc
Open source, free, and standardized
Visually appealing and easy to use

26. Discussion