There’s an alternative universe where no one ever writes legal contracts. The negotiating parties gather in a room and wait for text messages from the future. One might be: “What should we do in the event of shares of company being granted to an ex-spouse in the case of divorce?” Then the parties argue and negotiate, and eventually there’s a decision about ex-spouses getting shares. “Their shares shouldn’t include voting rights within the company because the ex-spouse will likely lack expertise in the company’s specialty”. And when the situation arises in the future with emotions hot and impartial interests, it’s handled as it was planned objectively in the past.
I’ve recently been part of forming a company, and part of the frustrating bureaucracy is drafting legal documents. For example, you have to write an “operating agreement” that codifies exactly how certain situations are handled. What should the company do if one member isn’t pulling their weight? What should the company do if there is a death of one of the members?
It’s a time consuming and boring process. And the standard for great legal documents are those that are airtight: They foresee every possible contingency. What should the company do in the event of alien invasion? What if gravity reverses itself in Kansas City for two hours?
What’s frustrating to me is that when we write some legal document, we all end up arguing about all different sorts of contingencies (that likely won’t happen), so that we can put it into the operating agreement. It’s a waste of time that distracts us from building our product (which is stuck in an everlasting ‘one-month to launch’ limbo). On the other hand, at some point one of these contingencies may actually come into play — and it’s then that you would wish you’d spent more time on your legal document.
The main problem is that at the time of the contingency the people involved aren’t objective anymore — the contingency might mean that one person would benefit directly from something at the cost of the others. And when huge sums of money are involved any bet on rational and benevolent action are unwise. For example, if the president of the company dies, the other members might all think they would be best successor (especially if it entails a large raise). The document protects everyone from everyone else.
So the reason you draft a legal document ahead of time is that everyone is rational and reasonable and acting in the companies’ and each others’ interests at that time. You’re trying to freeze and bottle up the essence of what the company should do ahead of time.
Law By Time Travel
So imagine in an alternative universe, you didn’t ever make a contract. Instead, what you did was gather all the negotiating parties together in a room and wait for text messages from the future. And imagine that they poured in. “What should we do in the event of shares of company being granted to an ex-spouse in the case of divorce?” might be the first one. Then the parties argue and negotiate, and eventually there is a sentence in the contract about ex-spouses getting shares (you probably don’t want them to have any voting control of the company because they lack expertise in the company’s specialty).
The idea is that sometime in the future this issue arose, and so it became important to deal with it. However, rather than attempting to foresee it and write it into the document, it is dealt with by sending a text message to the past, at which point it is debated by the parties and decided then. The benefit is that only the issues that actually happen are dealt with and take time, and that unforeseeable issues don’t end up having crazy unintended consequences.
Importantly, the essence of the legal agreement is what those parties believe at the time of signature, and is corrupted in the future by extenuating circumstances. At the time of signature, there’s more objectivity. A particular circumstance that benefits one party ruins rational thinking and impartiality.
Law By Acting
Unfortunately, we can’t send text messages to the past. However, the key insight is that you want the essence of what you meant at the time to decide legal matters. We can get to this in other ways. For example, if a negotiating party wrote down a few pages on their motivations and important interests in the contract, an actor could later use these pages to negotiate on their behalf in the future.
In other words, you can try to freeze the essence of what you care about in a negotiation, and then have actors work from that essence in the future to hash out an unforeseen issue in a reasonably fair way. The actors are hired to work from the pages that the parties wrote at signing time and are provided the most general scenario to debate (without any impartial information, i.e., whose spouse now has shares?) so it remains an approximation of the debate that would have happened at the time of signature.
The benefit of this is that you don’t have to deal with all sorts of weird contingencies (and you can’t anticipate all of them, even then) before they actually begin to matter.
Moral of the Story
I think there’s something wrong with law and how it’s handled. Laws shouldn’t require years of study to write — or more importantly, to understand. I’m not sure yet of the best solution, but I think computers can play an important part. If there were some way to write laws in a way computers could understand (which is a level of logical consistency and clarity that lawyers aspire to), they could point out the logical implications that might not be obvious to humans. Or perhaps there are ways around actually writing many legal documents (such as law by acting).