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Empirical study of contract disputes in Europe and its use of complexity indices

A rare example of quantitative research that bears on management issues of legal departments appears in the Acad. Mgt. J., Oct. 2011 at 981. The authors analyzed all two-party disputes involving vertical relationships handled by one law firm in Western Europe between 1991 and 2005. Those 102 disagreements involved 178 different companies and amassed over 150,000 pages of documents. The researchers classified the contracts at issue as distribution (35.3%), production supply (29.4%), information technology (26.5%) and consulting and other services (8.8%). Perhaps that is a reasonable classification scheme and distribution in general for vertical (purchaser-supplier) procurements. They also classified the key provisions in terms of whether they emphasized control or coordination.

The researchers drew on earlier work that developed “an unweighted index of contractual complexity, which tabulates the presence of up to eight key contractual clause categories.” At least two other studies had used that index (See my post of June 25, 2007: contract complexity; Jan. 24, 2010: group contracts by complexity; Feb. 15, 2010: software to gauge complexity of contracts; Oct. 31, 2010: Halstead metrics of software complexity translated to law department contracts; and Nov. 10, 2010: response to comment on contract complexity; and Jan. 24, 2011: a method to group contracts by complexity.). Law department managers might find useful insights in the academic literature on contractual sophistication and how to assess it.

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