By Elizabeth J. Goldstein
Special to the Legal
Imagine your physician practicing medicine identically to the doctors in Charles Dickens’ time. Ridiculous, right? However, we lawyers are still drafting contracts virtually identically to the solicitors who practiced in the days of Bleak House. I recently had the opportunity to interview Kingsley Martin, an attorney who is the CEO of Kiiac (pronounced kayak), a company that is harnessing the power of computing to create contract checklists for entire agreements and individual clauses.
Kiiac’s software can review a large sample set of agreements and identify the core, standard language and distinguish deal-specific terms. During our interview, Martin used a merger agreement as an example. Kiiac’s software has determined that there about 350 common clauses found in merger agreements. It is impossible for lawyers to keep all of these in their heads. Inevitably, lawyers will leave out key terms or put in duplicative or overlapping terms. Kiiac’s software application can review a draft agreement and compare its terms against the 350 standard merger provisions. It will indicate to the lawyer both possible additional terms and duplicative terms. The text of the reviewed agreement is color-coded. Black text means the text is commonly found in merger agreements, while red text delineates text that diverges from the standard agreement.
Martin has found that commercial clauses across agreements are strikingly similar, frequently using the same terms of art or common phrases. Additional analysis shows they share common sub-elements. Clauses, thus, can be viewed like agreements as checklists of elements, detailing mandatory and optional clauses. For example, the Nondisclosure Obligation in a confidentiality agreement can be viewed as containing four elements: (1) confidentiality, (2) non-use, (3) nondisclosure, and (4) protection of information.
Some contract terms with the most common text and frequent variations can be found for free at Kiiac’s website, www.contractstandards.com. These clauses create a checklist of elements detailing required and optional clause terms. Thus, Kiiac offers checklists at the macro and micro levels of contract drafting. It also automates template building, which should add to drafting efficiency.
Kiiac is working on analyzing all commercial agreements. Currently, it provides an interesting table on its website comparing and contrasting provisions among agreements. When agreements are compared this way, historical drafting idiosyncrasies are unearthed that can be corrected. For instance, almost all finance agreements have a representation and warranty concerning indebtedness. However, many acquisition agreements do not. This is a glaring omission, since the acquiring company should be as concerned with outstanding loans as a company providing financing.
A few lawyers have been critical of Kiiac’s contract analysis application because it indicates what language is prevalent but does not guarantee that the language is clear. However, the software performs an essential task, albeit one that could not be performed until now. With Kiiac, attorneys have the full anatomy of commercial contracts at their disposal. I predict that one day it will be malpractice not to use this type of software to draft and review contracts. This software, however, does not end the need for lawyers. Lawyers still must determine which clauses should be used in which contract and ultimately how these provisions should be drafted and interpreted. Nevertheless, it is inarguable that the computer is a powerful computational engine that can aid lawyers in drafting smarter agreements but does not allow lawyers to put themselves on autopilot. Now, excuse me while I fire up David Copperfield on my Kindle.
This posting is for informational purposes and should not be construed or interpreted as either legal advice on any matter or as in any way creating an attorney-client relationship.