Drafters better be MECE

In a previous blog (click here), I wrote the following:

…think analytically and draft, in McKinsey’s terminology, ‘MECE’ (mutually exclusive, collectively exhaustive) or, in French philosophical terms, ‘cartesianic’. Cartesianic means that, consistent with the ideas of Descartes, the drafter cuts the greater concepts into understandable contractual pieces in respect of which he or she is convinced that those pieces are all the pieces and that they leave no gaps and do not overlap. This requires analytical skills and a capability to distinguish between things like ’cause and effect’, ‘matter and procedure’, ‘subjective and objective’.

In this blog, I will elaborate on the ‘MECE-principle’ in contract drafting.

The MECE-principle is addressed in two bestsellers of Ethan Rasiel (McKinsey)[1]. Let’s first disentangle the concept of ‘mutually exclusive, collectively exhaustive’, then look at the philosophical, historical side and end with some guidelines.

McKinsey. Wikipedia describes the two related concepts very clearly: a description of acts or events is ‘collectively exhaustive’ if no other act or event is conceivable. In contract drafting terms it means that describing a course of action is collectively exhaustive if all variants are caught (under the addressed conditions or circumstances). When you roll a dice, it will inevitable show a 1, 2, 3, 4, 5 or 6 and they capture all possible outcomes exhaustively. ‘Mutually exclusive’ are subject matters that exclude each other without any overlap. If you throw a coin, you can rest assured that the outcome is either heads or tails (yes, if you throw it in on the beach it might show the edge, which is why arguably the edge makes heads and tails collectively exhaustive, but still is mutually exclusive).

Descartes. The MECE-principle was probably identified by the 17th century philosopher, mathematician, physist and writer René Descartes. In his Discours de la méthode, and more elaborately in his Regulae ad directionem ingenii (Rules on the direction of the mind), he restated a few principles to deduct, on the basis of a hypothesis, an explanation or description of any investigated problem. Traditionally, the French PhD-doctorate books are set up according to Descartes’ method. Descartes proposed that:

“if we are to understand a problem perfectly, we must free it from any superfluous conceptions, reduce it to the simplest terms, and by a process of enumeration, split it up into the smallest possible parts.”

You. Now, let’s translate this into contract drafting. A draftsperson often deals with the question how to address a subject of discussion (or agreement) in such manner that the future will not show lacunas or reveal an interpretation that had not been put into the words by the parties. The task of a drafter is therefore to think analytically, to create a systematic structure, and to write logically. To identify the smallest possible parts, the drafter may revert to concepts such as:

  1. substance vs. procedure
  2. objective elements vs. subjective elements
  3. content vs. form
  4. cause vs. effects
  5. a concept vs. manifestations of the concept
  6. (chrono)logical sequence: before and after delivery/closing

By converting these concepts into the case at hand, a drafter may establish a belief that he or she captured the entire subject into the contract. If the contracting parties are unable to completely describe the desired end-result, they may ascertain that certain procedural steps will be taken in a predescribed manner, as this would enable each party to interfere at appropriate times and places. The quality of an end-result will certainly improve if the parties have established (and adhered to) a procedure ascertaining adequate evaluation. If contract parties are unable to foresee all possible events of default or all circumstances in which very considerable damages may occur, it would probably be more appropriate to provide for notification procedures and subsequent obligations to cooperate, than to say that in case of Events A, B or C, the seller will indemnify the purchaser. The latter manifestations will frequently trigger liability-avoiding behaviour (often including passivity and hence even greater damages).

A services contract would address all compliance-related aspects of a service by addressing the desired service level, as well as the procedural aspects of a service (which standard of conduct the service provider must adhere to whilst performing the services). The procedural aspects would ascertain that the agreed quality would not be achieved by incompliant behaviour that cannot possibly be foreseen in the context of the service agreement (or even a reference to an exhaustive set of supporting principles).

Pronounce MEESEE (like in see me).

[1]     Ethan M. Rasiel, The McKinsey way, McGraw-Hill 1999; and Ethan M. Rasiel and Paul N. Friga, The McKinsey mind, McGraw-Hill 2002 (both are translated into several languages).

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