ContractPen: Legal Contracts with Calculations

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Contract Management

Contracts are an essential part of every business and creating legal contracts which successfully meet key business needs is an ongoing challenge. Contract management software arises to meet the needs for editing and management of contracts giving users the ability to more efficiently handle the contract management process. ContractPen assists businesses in the management of data and contracts, freeing up staff to focus on the data related to contracts rather than the details of the contracts themselves.

Smart legal contracts are an emerging area in the LegalTech field which can allow businesses to create legal contracts and associate data with those contracts. In the near future deployment of legal contracts to the BlockChain will become common-place. Integrations between contracts and the Accord project, the Agreements network and BlockChain oracles such as ChainLink will allow for real world data to flow into contracts, calculations to be made and automated payments to be executed in a verifiable and trustful way on the BlockChain.

For the moment consider a very common basic type of contract, an employment contract with a calculation of employees tax, this example contract is located here https://contractpen.com/share/8d40c6b3-cbbe-49d9-80c6-b3cbbeb9d966.

These contracts will normally have similarities between the different employees in a company but will also differ according to the data associated with the contract. For example one employee may have a different salary to another and a different name to another. A contract management software system such as ContractPen can allow for the storage of this data along with the legal contract for employment.

The contract management system can then allow the business to associate data with contracts and when the contract is created then the employees name and salary will automatically be placed in the right locations within the contract. This is the essence of a contract template facility which allows data to be combined with a contract template which can then be converted into a final contract.

Contract template + Data = Contract

Calculations in Contracts

Many real world legal contracts describe calculations and their calculated values within the contract. These calculations may be as simple as the calculation of the tax as a percentage of an employees salary or they could be more complex involving the royalties a licensor should be rewarded for their work as used by a licensee in an intellectual property licensing agreement.

Calculations within ContractPen are done with the use of spreadsheets, as spreadsheets are a common and easily understood way to describe calculations on data within businesses, as such they can easily be adopted and used by staff without the need for specialised skills.

By combining templates with data and spreadsheet calculations then contracts can be created in a user friendly way.

Contract Template + (Data + Spreadsheet Calculations) = Contract

Creating a contract

Creating a contract is simply a matter of clicking the “New Contract” button on the top left of the page, then editing the contract template and then to press the “Create Contract” button.

Whenever the “Create Contract” is clicked the data within the contract is combined with spreadsheet calculations and the “Contract Template” is built into the legal contract.

Adding spreadsheet calculations

Creating a new Spreadsheet by clicking the “Add Spreadsheet” button

As a simple demonstration, to calculate an employees taxation as a percentage of their salary here we create a new spreadsheet and associate it with a builder question by following these steps.

  1. Create the spreadsheet named salary and in cell A1 set value to 0 and cell A2 set the value to =A1*23%
    Cell A1 will be the employees salary and cell A2 is the computed taxation amount as 23% of the employees salary (as multiplied by 23%). The next step will bind data to the spreadsheet.
  2. To bind a Builder Question with the spreadsheet cell so that the answer to the question will go to the spreadsheet cell. 
    Go to the Builder Questions menu and add one question titled “Employee salary”. We need the builder question to obtain data from the user as the salary.
    Return to the Spreadsheets menu item, click on cell A1 and click “Use cell in question ‘input field name’” link above the spreadsheet table. This will allow us to bind the spreadsheet cell A1 with the builder question so that the answer to the question will be inserted into this spreadsheet cell A1.
    Click “Click here to insert the template” to bind this question to the spreadsheet cell A1 then the Close button.

3. The spreadsheet cell must be used within the contract template, so return to the Contract Template menu and enter the contract template as:

Your salary is {{spreadsheet/salary/cell/a1/displayValue}}
Your tax is {{spreadsheet/salary/cell/a2/displayValue}}

An alternative way to associate the spreadsheet cell with the Contract Template is to click on the spreadsheet cell and click the link above the spreadsheet entitled “Use spreadsheet cell value in the template”, this will take you to the Contract Template page where you can insert the template value.

Use spreadsheet cell value in the template

4. Now that the contract template, spreadsheet and builder questions are correct and linked together you can go to the Builder Answers menu page, fill in the answer to the question of “Employee salary” then return to the Create Contract menu item.
Click on the Use builder Answers to set it to YES and those answers from the Builder Answers menu are then used to compute the contract.
 In this case the salary has been set to 1200 within the Builder Answers and you can see the resultant contract with the calculated taxation result.

Contracts with calculations are easy

The above shows how calculations can be embedded in a contract based upon data and spreadsheet formulas. This example can be extended to become a more complete contract with more full terms and conditions of the contract, however for the sake of simplicity the above shows the calculation as an example.

The resultant contract can be viewed here.
https://contractpen.com/contract/8d40c6b3-cbbe-49d9-80c6-b3cbbeb9d966/create_contract.