Self-Driving Contracts

Author: 
Anthony J. Casey
with: 
Anthony Niblett

Ex post gap filling is a central function of contract law. But this is about to change. Predictive capabilities created by big data and artificial intelligence increasingly allow parties to draft contracts that fill their own gaps and interpret their own standards without adjudication. With these self-driving contracts, parties can agree to broad objectives and let automated analytics fill in the specifics based on real-time contingencies. Just as a self-driving car fills in the driving details to get its passenger to a designated end point, the self-driving contract fills in the contract details to achieve the parties’ designated outcome.

This development suggests a new focus for the doctrine and theories of contract law. Our primary goal in this Article is to introduce and develop that new focus. For example, self-driving contracts are both complete and incomplete. They are complete in that they specify actions for every contingency. This reduces the likelihood of breach and renegotiation. It also means that notions of efficient breach and ex post hold-up will be of reduced importance in contract law. At the same time, self-driving contracts are also incomplete in ways that render current notions of definiteness and mutual assent irrelevant or at best misleading.

Perhaps most importantly, with contracts being interpreted by their own internal software, contract law will have to focus on where that software comes from and how it operates. Markets will arise for third-party vendors who either certify or provide independent contract programming. In some cases, these will be new markets; in others, they will evolve from existing markets such as the market for contract arbitrators. Law will play a role in supporting and overseeing these markets. We explore that role and how it will differ in markets for contracts between sophisticated parties, on the one hand, and consumer contracts, on the other.