An Ontological Approach to Unified Contract Management Vandana Kabilan, Paul Johannesson, Dickson Rugaimukamu {vandana, pajo, si-dmr}@dsv.su.se Department of Computer and Systems Sciences Stockholm University and Royal Institute of Technology Forum 100, SE-164 40 Kista, Sweden Easy access of Internet has revolutionized the concept of electronic commerce. As the bulk of business transactions shifts to electronic media, we have business collaborations being negotiated between previously unknown partners. Thus a Contract is the key to a successful business relationship. We foresee a need for a unified contract management in order to achieve coherent business operations. Interoperability and integration of business processes with the agreed upon business, economic and legal terms and conditions as stated in a Contract is one of our primary goals. We aim at building conceptual models to capture the semantics of a Contract. An ontological approach enable us to analyze the same contract from different perspectives the legal and social behavioral centric, the business and process centric, as well as the document centric contract document view. This results in a basis for a Unified Contract Management framework supporting all the phases of a Contract life cycle including conception, formation, negotiation, monitor and fulfillment. 1.Introduction Contract management is not a novel concept. Contract Management tools and techniques have been around for quite some time. One of the pioneers in the field of Contracting was Ronald M Lee [7]. He has proposed methods to monitor and automate contracts using Logic models and Artificial Intelligence agents. The advent of EDI made the vision of electronic commerce possible but still remains elusive and expensive. The backbone of the Internet is drastically changing this situation. Business partnerships are discovered and negotiated on the Internet. Most business and trade relations are based on trust, competency and understanding, which is of paramount importance between parties who are relatively unknown to each other. This trust and understanding are recorded and captured in the form of Agreements and Contracts and all the Obligations, responsibilities and duties of each of the contracting parties are all captured in a contract. 2.Related Research Contracts have been a topic for research in diverse areas and for different purposes. Frameworks for e-contracts, have focused on different aspects, some of the key aspects being: Document Centric, in which case a contract is an archived document that is subject to negotiations, signed and circulated among parties involved. After that, processes are determined by rules and conditions that are defined in the contract. Most contract management tools available in the market today, deal with the structural composition of a contract and they extract the relevant Meta data content.
Process Centric, in which case a contract is an interpretation of activity states of business processes as well as constraints on the business events. There exist constraint based business rules courteous logic programming approach, which enables automated agents to understand the rules of a contract as proposed by B. Grosof [3]. The COSMOS project (Common Open Service Market for SMEs) has tried to model an Internet based e-contracting service to facilitate the business transaction process by providing tools for automated contract negotiation and execution. They have a good conceptual model for a contract but then have concentrated on the actual process centric and support infrastructure. Responsibility/Obligation Centric in which case a contract is an establishment of various jurisdiction and contract laws and clauses. This has a special legal textual implication. We find advances in the realm of Artificial Intelligence and logic programming. Works of Asspassia Daskalopolu [1,2] have focused on the legal aspects of contracts like logic-based tools for the analysis and representation of legal contracts, using Artificial Intelligence, information retrieval from large corpora of legal texts and cases, (Rissland et al., 1995;Hafner, 1987), interpretation of legal text, (Allen et al., 1993), argumentation, (Prakken, 1997; Sartor, 1994), and legislative drafting, (Allen, 1982). Daskalopolu has also been involved in a project to formalize the obligations and utterances of a business contract in a Formal Language for Business Communication (FLBC), which is based on the speech act theory developed by Austin, Searle and others. Yao-Hua Tan [4] has used both speech act fundamentals and event semantics to analyse European Contract Law.He has handled the concept of promises made by party and their prepositional content in an appropriate manner. Currently there are legal groups like LegalXML are working on developing Legal Ontologies for contracting within the ebxml Technical Committee Group. 3.Current Approach Figure 1. Multi Layered Approach for Contracting We find that any of the above perspectives alone is not sufficient to represent and manage a contract in its entirety. One or all of the aspects play a vital role in different phases of the contract life cycle. An Ontology provides a means to define an intermediate open layer that enables translation and integration of all the facets involved in a contract management scenario. A semantic ontology of contractual terms along with a conceptual modeling of the understanding of the obligations, responsibilities and duties of each counterpart of a contract, will aid in every phase of contract management, staring with contract monitoring and execution. We are working on modeling a multilayered approach for a conceptual model along similar lines as proposed by Nicola Guarino[7]. A global upper level layer, Figure 1, could consist of fundamental concepts for any contract, like their common terminology or their interrelationships. It is generic but outlines the concepts and the inherent relations, constraints, which are inherited by domain specific contracts. Some of the main concepts include Actors (parties to the agreement), their Roles, their Obligations (responsibilities, duties), Consideration (purpose behind the contract) etc. (See Figure 2: the figure is an illustration of some of the main concepts which could be included). We introduce a classification of Commitment
and Commitment types along with commitment states and their transition in accordance with business actions. Figure2: Example for an Upper Level Conceptual Ontology A domain specific ontology could be a secondary layer, which comprises of terminology and concepts pertaining to a specific type or domain of contracting, like say Sale of Goods Contract (refer to Figure 3 given below, a sample sketch for a Sale of Goods contract ontology). This inherits and builds on the concepts from the upper level ontology. For example we can define a Seller as a principal Actor in the Sale of Goods Contract Model whose primary role is to sell goods to a Buyer (who is an Actor with an obligation to buy and pay for the goods received). This layer identifies concepts, which are specific to the particular contract domain and can outline all allowable choices for this level. For example ICC s INCOTERMS could be Shared ontology for Delivery Patterns for International Commercial Sale of Goods. Figure3: Example for a Domain Specific Shared Ontology At the lowest level we propose a library or catalogue of templates modeled or implemented on the basis of the shared domain ontology. They could be ready to use plug gable versions of standard contract models and guidelines, which can be readily instantiated as a factual Contract. For example the model for sale of motorboats or sale of vehicle or a template for software licensing may all be modeled as template ontology. The template ontology differs from the shared ontology in that it has a specific usage.
In order to have Unified Contract Management we need to have a methodology to cover every phase of a contract life cycle from conception, negotiation, and storage, call off, fulfillment. To have an effective contract management we need to have a seamless integration and interoperability with the actual business process (the purpose behind the contracting). Hence we also intend to have a semantic mapping in between our model and existing ontology like the REA ontology [8] and other Business Process models. As a first exercise we model the knowledge embedded in the INCOTERMS [9]. 4.Ongoing Case Study In our quest to model the concepts behind contracts, we chose INCOTERMS as a first case study to evaluate as well as to test our theories and models. INCOTERMS are standard and widely accepted trade definitions most commonly used in international sales contracts. Devised and published by the International Chamber of Commerce, they are at the heart of world trade. This makes the INCOTERMS an ideal candidate for a case study.for example, a delivery pattern like EX-Works (EXW) outlines the obligations and duties of a Seller and a buyer. It also apportions the division of risks and costs in between them. The obligation of a seller is fulfilled once he has marked the goods for delivery prior to the agreed delivery date and accordingly informs the Buyer so. Henceforth it s the buyer s responsibility and cost to arrange for the transport, customs clearance and all other risks and damage liabilities. We can see business activities like purchase order placement, packaging, shipment, customs clearance, delivery, invoicing in the contract delivery pattern. We also see that there is an agreed sequence and choreography of these activities. On the legal perspective, we need to be aware of the extent of the seller s obligation and the buyers and the time and point of transfer of risk, responsibility, division of costs etc. We link each action to its direct and implied commitments and their possible consequences and counter actions. Since all these agreed terms have an existence in the form of an agreement (whether as a physical document or an electronic archived document) we also analyze the structural composition of the agreement or contract instance. 5. Uniqueness of Approach We summarize the salient features of our ongoing work as: Three Tiered Architecture for a Contracts Conceptual Model Multi-faceted approach to interpret every aspect of a Contract Modeling the different nature and types of Commitments and obligations stipulated in a Contract using Speech Acts Easy interoperability with business process models and other ontologies like REA[8] Covers the whole contract life cycle from the pre planning phase through the negotiation phase to the actual contract signing to the actual fulfillment and monitoring of the contracts. This is the foundation for our Unified Contract Management framework. 6. Advantages Most frameworks have concentrated on a single aspect of a contract and have proceeded on their chosen track. In contrast our approach takes into consideration all the major aspects and also has the key advantages of any ontology like sharing of domain knowledge, Re usability of knowledge, portability etc. In addition to these obvious advantages, some specific advantages are Classification and definition of Commitment Types, their relationships to business process, Actions. Semantic mappings to other existing enterprise ontology Our conceptual model is an integrated framework analysis of the context, contents and business model interoperability of a contract. Integrated approach for Unified Contract Management from conception to fulfillment.
7.References 1. A.Daskalopulu. Logic Based Tools for Legal Contract Drafting: Prospects and Problems. Proceedings of the 1st Logic Symposium 1997. University of Cyprus Press, pp.213-222 2. A Daskalopulu & MJ Sergot (1997). The Representation of Legal Contracts, AI and Society 11(Nos. ½), pp 6-17 3. B N Grosof, Yannis Labrou, Hoi Y Chan. A Declarative Approach to Business Rules in Contracts: Couteous Logic Programs in XML, Proceedings of 1st ACM Conference on Electronic Commerce (EC99). 4. Yao-Hua Tan, Walter Thoen. Using Event Semantics for Modeling Contracts. Proceedings of 35th Hawaii International Conference on System Sciences 2002. 5. A Goodchild, Charles Herring, Z Milosevic. Business Contracts for B2B. Proceedings of the CAISE00 Workshop on Infrastructure for Dynamic Business-to-Business Service Outsourcing, 2000 6. Lee, RM, A logic Model for Electronic Contracting, 1988,Lee, RM, towards open electronic contracting, 1998 7. Works of N. Guarino Available Online at Publications on Formal Ontologies, Conceptual Modeling and Knowledge Engineering 8. William E. McCarthy, Guido L. Geerts; The Ontological Foundation of REA Enterprise Ontology; Michigan State University; USA; 2000 9. Jan Ramberg; ICC Guide to Incoterms 2000. Understanding and Practical Use; International Chamber ofcommerce 2000 10. ICC International contract for sale of goods, published by ICC books, 2002. Also see International Chamber of Commerce, http://www.iccwbo.org/