Using FLBC and Event Semantics for Modeling and Reasoning about Contracts

1
Using FLBC and Event Semantics for Modeling and
Reasoning about Contracts

• Yao-Hua Tan
• Walter Thoen

2
Objectives

• Develop a First-Order logical formalism to
  represent the content of business contracts
• (e.g. Kimbrough, Lee, Moore, Sergot)
• This formalism can be used to develop
  applications that
• automatically negotiate and process contracts
• give on-line support to human negotiators
• MeMo
• diCarta

3
Why FLBC Event Semantics?

• Five perspectives on modeling contracts
• Data perspective agreements are seen as a
  collection of data elements, such as addresses,
  delivery dates, production specifications and
  prices, which have to be stored in data bases,
  communicated using EDI and processed using ERP
  back office systems
• Document perspective agreements are seen as
  documents that should be managed during their
  life cycle. The documents have be adequately
  created, stored, retrieved, updated etc.
• Procedural perspective agreements are seen as
  specifying the intended behavior of the parties
  to the agreement.
• Normative perspective agreements are seen as a
  collection of norms that regulate the behavior of
  the parties to the agreement.
• Communication perspective agreements are seen
  as a set of speech acts where the parties to the
  agreement promise, assert and declare the
  propositions the make up the agreement

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Why FLBC Event Semantics?

• FLBC Event semantics
• Data perspective
• Communicative perspective
• Procedural perspective
• Normative perspective

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Event Semantics (Kimbrough)

• ?e (promise(e) ? speaker(e, Party) ? hearer(e,
  TheOtherParty) ?
• (Kept(e) ? ?e (deliver(e) ? agent(e, Party) ?
  theme(e, Products) ? sake(e, e))
• This expression is read as There exists a
  promising event (speech act) with the speaker
  being Party and the hearer being TheOtherParty
  and the promising event is kept if and only if
  there exists another event, which is a delivery
  event, the agent of that delivery event is Party,
  what was delivered is Products and the delivery
  event occurred for the sake of the promising
  event

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ICC Model contract

• We modeled the ICC model Distributorship Contract
  as part of the MeMo research project
• Several refinements of Kimbroughs event
  semantics are needed to model the ICC Model
  contract, e.g.
• Subcontracting
• Conditional promises
• Fundamental Breach
• Remedies Preferences
• Granting of Rights

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Subcontracting

• Article 8.107 (ex art. 3.107) Performance
  Entrusted to Another
• A party who entrusts performance of the
  contract to another person remains responsible
  for performance.
• (source THE PRINCIPLES OF EUROPEAN CONTRACT
  LAW 1998
• If we assume that a transporter will actually
  deliver the Products on behalf of the supplier,
  then we could represent this as
• ?e (promise(e) ? speaker(e, Supplier) ?
  hearer(e, Buyer) ? (Kept(e) ? ?e (deliver(e) ?
  agent(e, Transporter) ? theme(e, Products) ?
  sake(e, e) ? influenced(Transporter, Supplier)

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Subcontracting

• ?e (promise(e) ? speaker(e, Supplier) ?
  hearer(e, Buyer) ?
• (Kept(e) ?
• ?e (deliver(e) ? agent(e, Transporter) ?
  theme(e, Products) ? sake(e, e) ?
• ?e (promise(e) ? speaker(e, Transporter) ?
  hearer(e, Supplier) ? (Kept(e) ?
• ?e (deliver(e) ? agent(e, Transporter)
  ? theme(e, Products) ? sake(e, e) ?
  sake(e, e)))

• Embedded speech act to represent subcontract
• e and e describe same type of event
• sake(e, e) used to link contracts together

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Conditional promises

• Post-payment
• ?e (promise(e) ? speaker(e, Buyer) ? hearer(e,
  Supplier) ? (Kept(e) ?
• ?e (deliver(e) ? agent(e, Supplier) ?
  theme(e, Products) ? sake(e, e) ? cul(e, t1))
• ? no implication used!
• ?e (pay(e) ? agent(e, Buyer) ? theme(e,
  Money) ?
• sake(e, e) ? cul(e, t2) ? t2 lt (t1 30)))

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Fundamental Breach

• Article 8.103 - Fundamental Non-Performance
• A non-performance of an obligation is
  fundamental to the contract if
• strict compliance with the obligation is of the
  essence of the contract or
• the non-performance substantially deprives the
  aggrieved party of what it was entitled to expect
  under the contract, unless the other party did
  not foresee and could not reasonably have
  foreseen that result or
• the non-performance is intentional and gives the
  aggrieved party reason to believe that it cannot
  rely on the other party's future performance.

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Fundamental Breach

• Refine kept predicate and use kept_fundamental
  and kept_nonfundamental to model the distinction,
  for example
• ?e (promise(e) ? speaker(e, Party) ? hearer(e,
  TheOtherParty) ? (kept_fundamental(e) ?
• ?e (deliver(e) ? agent(e, Party) ? theme(e,
  Products) ? sake(e, e))
• Note that the contract should list the clauses
  that are fundamental explicitly.
• The distinction is made to infer that if
  kept_fundamental is false, then that is a
  fundamental breach of contract, which empowers
  the other party to declare the contract avoided

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Remedies Preference

• Most contracts contain remedies for violations
  that occur frequently. For example
• Late delivery or non-delivery
• Non-conforming goods
• Late payment
• The buyer has to pay an 1 interest charge if
  payment is not made within 30 days after delivery

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Remedies Preference

• ?e (promise(e) ? speaker(e, Buyer) ? hearer(e,
  Supplier) ?
• ( ( kept_fundamental(e, high) ?
• ( ?e ( deliver(e) ? agent(e, Supplier) ?
  theme(e, Products) ? sake(e, e) ? cul(e, t1)
  ) ) ?
• ( ?e ( pay(e) ? agent(e, Buyer) ?
  theme(e, Money) ? sake(e, e) ?
• cul(e, t2) ? t2 lt (t1 30) ) ) )
• ?
• ( kept_fundamental(e, low) ?
• ( ?e ( deliver(e) ? agent(e,
  Supplier) ? theme(e, Products) ? sake(e, e)
  ? cul(e, t3) ) ) ?
• ( ?e ( pay(e) ? agent(e, Buyer) ?
  theme(e, MoneyPlusPenalty) ? sake(e, e) ?
  cul(e, t4) ? t4 gt (t3 30) ) ) ) )

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Planning versus Monitoring

• Regarding the preference we have to make a
  distinction between Planning and Monitoring.
• By planning we mean that an agent would use the
  contract representation to optimize her behavior
  in the planning stage before the action is
  executed
• Planning is a separate decision making process
• It cannot be automatically inferred from the
  event semantics representation
• In the case of an artificial intelligent agent
  this decision making process could be executed by
  a separate expert system
• By monitoring we mean to monitor to what extent
  the behavior of the agent complies with the
  contract. (Judge perspective)

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Granting of rights

• The Supplier grants and the Distributor accepts
  the exclusive right to market and sell the
  Products in the Territory.
• ?e (grant(e) ? speaker(e, Supplier) ? hearer(e,
  Distributor) ? (Kept(e) ?
• ? ?e?e (market(e) ? agent(e, Distributor) ?
  not-successful(e) ? agent(e, Supplier) ?
  cause(e, not-successful(e))

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Prolog implementation

• Daskalopulu Sergot Computational Aspects of
  the FLBC Framework
• Basic idea
• ?e (promise(e) ? speaker(e, Party) ? hearer(e,
  TheOtherParty) ? (Kept(e) ? ?e (deliver(e) ?
  agent(e, Party) ? theme(e, Products) ? sake(e,
  e))
• Promise(e).
• Speaker(e, Party).
• Hearer(e, TheOtherParty).
• Kept(e) - Deliver(X), Agent(X, Party),
  Theme(X, Products),Sake(X, e).

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Prolog implementation

• ?e (grant(e) ? speaker(e, Supplier) ? hearer(e,
  Distributor) ? (Kept(e) ? ? ?e?e (market(e) ?
  agent(e, Distributor) ? not-successful(e) ?
  agent(e, Supplier) ?
• cause(e, not-successful(e))
• Grant(e).
• Speaker(e,Supplier).
• Hearer(e, Distributor).
• Kept(e) - not Failure(X).
• Kept(e) - not Cause_Failure(X,Supplier).
• Failure(X, market) - Market(X), Agent(X,
  Distributor), Not_Successful(X).

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Conclusions

• Kimbroughs Event Semantics suitable for modeling
  contracts
• But improvements were needed for complex
  contracts
• Implementation of Event Semantics in Prolog is
  possible.