2 MODEL FOR CONTRACTUAL
OBLIGATIONS
When reaching a business agreement, parties sign a
contract including norms that describe their commit-
ments. In our approach, an institutional normative
environment provides a contract monitoring service,
including contractual norms and monitoring rules.
Active monitoring requires recording contract-related
events in a so-called normative state, including:
• institutional facts: institutionally recognized facts
that are brought about by agents
• obligations: what agents should do
• fulfillments: obligations that are fulfilled
• violations: obligations that are not fulfilled
Elements other than institutional facts are envi-
ronment events, asserted in the process of norm ac-
tivation and monitoring. Obligations describe what
agents should do, and may be fulfilled or not. We
consider different violation states, as explained later.
In general terms, a norm prescribes, given a cer-
tain state of affairs, what an agent is obliged to do:
situation → prescription. The situation comprises
any combination of events that have occurred for a
given contract. Consider, for instance, a simple pur-
chase contract. We may have a norm indicating that
when the seller issues the invoice (modeled as an in-
stitutional fact), the buyer is obliged to pay. Further-
more, we may state that once the payment has been
fulfilled, the seller is obliged to send the receipt. We
may also define norms based on violations: if the
buyer does not pay within due date, an interest rate
will be applied.
2.1 Directed Obligations with Time
Windows
When specifying norms in contracts, deadline han-
dling is central to define the semantics of contractual
obligations
1
. We have developed a model for these
obligations inspired in the CISG convention (UNCI-
TRAL, 1980). Consider the following excerpts:
Article 48: (1) [...] the seller may, even after the
date for delivery, remedy at his own expense any
failure to perform his obligations, if he can do so
without unreasonable delay [...]; (2) If the seller
requests the buyer to make known whether he will
1
Deontic operators include also permissions and prohi-
bitions, but we find obligations to be particularly relevant in
the domain of business contracts.
accept performance and the buyer does not com-
ply with the request within a reasonable time, the
seller may perform within the time indicated in his
request. [...]
Article 47: (1) The buyer may fix an additional pe-
riod of time of reasonable length for performance
by the seller of his obligations.
Article 63: (1) The seller may fix an additional pe-
riod of time of reasonable length for performance
by the buyer of his obligations.
Article 52: (1) If the seller delivers the goods before
the date fixed, the buyer may take delivery or refuse
to take delivery.
From this source we can see that even though a
deadline has been violated, the bearer may still be en-
titled to fulfill his obligation (Art. 48). Also, the coun-
terparty of an obligation may concede an extended
deadline to the bearer (Art. 47 and 63). Finally, antic-
ipated fulfillments are not always welcome (Art. 52).
Based on this background, we define the notion
of directed obligation with liveline and deadline –
O
b,c
( f , l, d): agent b is obliged towards agent c to
bring about f between l (a liveline) and d (a dead-
line). Directed obligations have been proposed in
(Herrestad and Krogh, 1995): obligations are seen
as directed from a bearer (responsible for fulfilling
the obligation) to a counterparty. We interpret obli-
gations of this kind as claims from counterparties to
bearers (as in (Tan and Thoen, 1998)): if b does not
bring about f between l and d then c is authorized to
react against b. Note that this reaction is discretionary,
not mandatory.
The temporal boundaries of obligations define a
time window within which the obliged fact should oc-
cur. However, not all obligations need livelines. In
fact, Art. 52 above is important only in the context of
trade transactions, where storage costs may need to be
considered. If, on the contrary, a deadline is enough,
we can fix l to the moment when the obligation arises.
We avoid using a fixed time reference for obligation
fulfillment (an obligation for bringing about f at time
t), which is suggested in Art. 52; we find it more con-
venient to define a fixed date as an interval, say, from
the start till the end of a specific date.
In order to accommodate the cooperative nature of
contract execution, the semantics of directed obliga-
tions with liveline and deadline is interdependent with
the notion of authorization. We consider that if fact f
is not yet the case when deadline d arises, the obli-
gation is not yet violated, but is in a state where the
counterparty is authorized to react. We emphasize the
case for a deadline violation (as opposed to obligation
violation). This comprises a flexible approach to han-
MONITORING COOPERATIVE BUSINESS CONTRACTS IN AN INSTITUTIONAL ENVIRONMENT
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