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Ok that is a long and fiddly [[metaphor]]. Let us now — sigh — tear ourselves away from Leo Fender’s wonderful creation, and apply the metaphor to the process of preparing, executing and performing a commercial contract. | Ok that is a long and fiddly [[metaphor]]. Let us now — sigh — tear ourselves away from Leo Fender’s wonderful creation, and apply the metaphor to the process of preparing, executing and performing a commercial contract. | ||
Who are the interested constituencies when it comes to the production and use of contracts? It is not just Party A and Party B: it isn’t ''even'' Party A and Party B, if we take the JC]]’s cynical line that each is merely a husk: a host — a static entry in a commercial register somewhere — unless and until animated its ''[[agent]]s''. | Who are the interested constituencies when it comes to the production and use of contracts? It is not just Party A and Party B: it isn’t ''even'' Party A and Party B, if we take the [[Jolly Contrarian|JC]]’s [[Agency problem|cynical line]] that each is merely a husk: a host — a static entry in a commercial register somewhere — unless and until animated its ''[[agent]]s''. | ||
The constituents who have an interest in a contract being done are those in Sales, Legal, Credit, Docs, Operations, Risk, and Trading — on each side of the table — and their external advisors. We see their interests: what they want out of the contract itself, are wildly different: | The constituents who have an interest in a contract being done are those in Sales, Legal, Credit, Docs, Operations, Risk, and Trading — on each side of the table — and their external advisors. We see their interests: what they want out of the contract itself, are wildly different: | ||
*'''[[Sales]]''': To Sales, a contract should be a tool for ''[[persuasion]]'': it should induce the customer to think happy thoughts about her principal — okay, fat chance with a legal contract, but a gal can dream — but at the very least it should be no less intimidating a document than is being presented by her competitors to the same client. Sales will be specially tuned to the message that [[all our other counterparties have agreed this]] should legal or credit baulk at a client request, and will hammer this imperative home, as often as not prevailing. | *'''[[Sales]]''': To [[Sales]], a contract should be a tool for ''[[persuasion]]'': it should induce the customer to think happy thoughts about her principal — okay, fat chance with a legal contract, but a gal can dream — but at the very least it should be no less intimidating a document than is being presented by her competitors to the same client. Sales will be specially tuned to the message that [[all our other counterparties have agreed this]] should legal or credit baulk at a client request, and will hammer this imperative home, as often as not prevailing. | ||
*'''[[ | *'''[[Credit]]''': To credit a contract is a defensive play and the name of the game is, to encode as many snares, booby-traps, tripwires and hundred-ton weights into the document as will be needed in a time of apocalypse. It will not matter that 75% of those contingencies should not, in the life of our universe, come about,<ref>For the obstreperous universe has a habit of playing tricks with people who are meant to know better. This is known as [[Goldman|David Viniar]]’s, or [[Long-Term Capital Management]]’s folly.</ref> nor that Credit would not, in the life of that universe, dream of actually using most the remainder: the exercise is fully hypothetical. For the [[credit]] team’s perspicacity is measured not in ''prospect'', about what in a sensible universe ''might'' happen, but in ''hindsight'' about what, in the mad universe we do inhabit, ''did'' happen. Since at the inception of a relationship this is entirely unpredictable, the beleaguered credit officer has no choice but to select all ordinance available to her, to Sales’ extreme frustration. | ||
*'''[[ | *'''[[Documentation unit|Docs]]''': The documentation team just wants to know who to ask for permission to do what, when. Their line management will be focused only on turnover of their portfolio, how many days delinquent it is. This is a shame, but a consequence of our [[modernist]] obsession with lean production management. It is all very well to set up your assembly line as if it were punting out [[Toyota Corolla]]<nowiki/>s, but your suppliers need to be on message, and generally they are not: the process is captive of fantastical terms imposed by Credit as per the above, rendered in language confected by [[legal]], buffeted by the [[The Structure of Scientific Revolutions|incommensurable]] frame of reference adopted by their counterparty and, more usually, its legal advisors. | ||
*'''[[ | *[[Buy-side legal eagle|'''External legal counsel''']]: The opposing side’s lawyers are mainly interested in showing how clever and useful they are to their client. This they can only do by ''changing the terms of your contract''. This was first articulated in [[Otto Büchstein|Büchstein]]’s articulation of legal existentialism: [[Scribo, ergo sum|''scribo, ergo sum'']].<ref>[[I mark up, therefore I am|I mark-up, therefore I am]]</ref> Now, the more rigorously your baseline contract terms are benched to market, the less scope there is for mark-up: to be sure, one can never entirely rid a document of fussy clarifications and [[For the avoidance of doubt|doubt-avoidance]] parentheticals, but you can minimise them by careful and elegant document design. But this rubs directly against [[Credit officer|Credit]]’s prerogative, above, which is to move the document as far from reality and towards the Platonic ideal of risk management as they can. This no-person’s land is an ideal playground for all the lawyers to mark-up, strike-out, thrust, parry and counter-thrust to their hearts’ consent. If the opposing sides pitch their tents five miles from each other, they cannot know when, whether or on what terms their respective minds will meet. Experience will say there is a fair chance they ''will'' meet, but exactly ''where'' will differ in ever case and, by the time they get there, the location will be shelled, pock-marked and riddled with bullet holes from the negotiation that it will resemble Berlin in 1946. | ||
*'''[[Trading]]''': | *'''[[Trading]]''': | ||
*'''[[Operations]]''': | |||
*'''[[Risk]]''': | *'''[[Risk]]''': | ||
{{Sa}} | |||
* [[Agency problem]] | |||
* [[Design principles]] | |||
{{ref}} | {{ref}} | ||