In the analysis of clause examples, Contract Standards uses the following classifications (first identified in this blog post) based on the metrics produced by the kiiac analysis software. These tools identify the frequency at which clauses occur across a given set of agreements and the similarity of the language of those clauses. Plotting these two metrics in a matrix creates the quadrants shown the diagram and these quadrants delineate the following classifications:
Standard Clauses (Common & Consistent) - These clauses contain frequently occurring, consistent clauses. Examples of such clauses usually include so-called “boilerplate” provisions.
Negotiated Clauses (Common & Divergent) - These clauses appear in most agreements, but usually contain significantly different language from agreement to agreement. Such language variation may occur due to negotiation between the parties creating different terms, for example, the purchase price clause in an acquisition agreement will likely be found in 100% of agreements but will exhibit wide language variation across all of the agreements.
Transaction Specific Clauses (Uncommon & Consistent) - These clauses do not occur frequently, but when they are found, the language is relatively consistent across the examples. These clauses are often indicative of a specific type or sub-type of transaction, for example “The Offer” term found in a set of merger agreements indicates the transaction is a tender offer. In one analysis, this term appeared in only about 20% of the agreements but the language was highly consistent across all of the examples of the clause.
Deal Specific Clauses (Uncommon & Divergent) - These clauses contain infrequently occurring clauses that display wide language variation. These clauses are often custom-tailored clauses that are relatively unique to a particular negotiation.