Smart Contracts: Reimagining the Law Firm
While the financial industry, electricity distribution companies, and telecommunications companies have all adopted blockchain, the benefits of smart contracts for law firms may be less clear.
In this post, we'll discuss how smart contracts are influencing the present jurisprudence landscape, as well as provide some predictions for law firms' immediate future and the unique issues they confront.
What Impact Does Blockchain Technology Have on the Legal Profession?
In corporate consciousness, we are currently experiencing the end of the era of big data. According to a new study, blockchain technology has reached a tipping point, and it is currently the number-one trend on the minds of public company executives.
The Law Firm Innovation Index assesses law firm innovation using Google advanced searches on official web pages of law firms. The use of blockchain as a metric for how law firms are assisting developing enterprise-use cases has been included.
This is a significant step forward, indicating that legal professionals are well positioned to be catalysts for blockchain technology.
As a result, more innovation and widespread adoption of technology will improve legal service delivery and make legal services more accessible to everyone.
The Enterprise Ethereum Alliance (EEA)
The Enterprise Ethereum Alliance is the world's largest Blockchain effort, demonstrating how cryptocurrencies and blockchain technology are gradually gaining mainstream acceptance.
The EEA is a non-profit organisation that connects Ethereum subject-matter experts with Fortune 500 companies, startups, academia, and technology vendors. The association has grown to over 200 members since February, including some well-known figures.
Ten law firms and four legal institutes that specialise in blockchain technology joined the group in August 2017. Among the new members are Cooley, Debevoise & Plimpton, Hogan Lovells, Holland & Knight, Jones Day, Morrison Foerster, Perkins Coie, Shearman & Sterling, and the Blockchain Project at Cardozo Law School.
In addition, they've joined the Legal Industry Working Group. The goal of the group was to raise awareness of the potential benefits of blockchain technology in the legal business, to encourage the growth and adoption of private versions of the Ethereum blockchain, and to make implementation more cost-effective. The group's goal is to verify that Ethereum smart contracts meet regulatory standards when used in conjunction with this new technology. Another benefit for legal institutions is that there is a learning component. Clients of legal firms don't want to pay for it, but lawyers should be aware of it, especially as state governments around the world continue to weigh in on blockchain (Japan, Australia, OAE, USA, EU etc). Attorneys must understand the differences between Ethereum and Bitcoin in order to deliver appropriate information to their clients.
This is significant because it signals Ethereum's adoption by major law firms, and with it, smart contract adoption.
Smart contracts, on the other hand, have a legal significance that extends beyond the European Economic Area. Digital contracts were recommended as a priority for the future event at a spring Seattle legal technology event, according to Forbes.
Smart Contracts and Traditional Law
Let's take a look at smart contracts from a legal standpoint.
Let's start with a definition of what a contract is. Wikipedia defines it as a voluntary agreement between two or more persons that is legally enforceable. An offer, acceptance, consideration, and mutual intention for the agreement are all part of the contract formation process. Not all agreements must be legally binding. Contracts are commonly used to regulate conduct by social institutions and/or the government.
Traditional contracts have a lengthy history, and they are based on customs that have existed for thousands of years. Smart contracts are agreements made using a cryptographic code comparable to other programming languages, whereas they shape relationships in the framework of law. The fundamental purpose of smart contract code is to handle transactions between agents in the blockchain ecosystem. The core premise of these digital agreements is that the vast majority of contractual situations can be integrated in the technology and software we work with.
The key distinction between regular contracts and smart contracts is that traditional law reasoning is dependent on subjective analogy interpretation. The complexity of traditional legal documents is already high. They frequently necessitate the assistance of educated professionals in order to be properly comprehended. As a result, customary law is rather adaptable, requiring interpretation and discretion (and can, therefore, be corrupted). Most commercial contracts, however, are incomplete in that they do not describe what will happen in every future condition, leaving that to be resolved afterwards. There are a variety of reasons why incomplete contracts are so widespread, according to economists and lawyers. The most obvious reason is that forecasting and agreeing to clear contractual conditions is often too expensive.
The software version is predetermined and strict. While traditional law is bound by state borders, blockchain-powered contract law has the ability to transcend them.
Advantages of Smart Contracts
Smart contracts are gaining popularity these days as a result of the numerous benefits they provide. They provide you with:
self-reliance (no need to rely on middlemen)
rely on (docs are encrypted in a shared ledger)
a back up (on the blockchain, docs are duplicated many times over)
security (due to cryptography)
rapidity (software code is used to automate tasks, thereby saving hours spent on paperwork)
monetary savings (no presence of an intermediary)
exactitude (you avoid the errors that come from manually filling out forms.)
Is it Legal to Use Smart Contracts?
Smart contracts do not exist outside of the legal system, without a doubt. As a result, smart contracts must be categorised as legal behaviour. They're just another tool for keeping track of business relationships. In terms of a diagram, this relationship may look like this:
Lawyers and programmers are best friends.
Such contracts will necessitate a closer working relationship between lawyers, their clients, and computer programmers, who will be in charge of drafting digital contracts. Lawyers will serve as a link between traditional contracts and smart contracts, bridging the gap and providing the essential legal expertise. Bits and bytes will be the language of programmers.
Many organisations are still experimenting with smart contracts, but traditional paper contracts appear to be sticking around for a long time. Because many traditional contracts aren't genuinely executable, they don't belong in the world of smart contracts.
Furthermore, many legal issues surrounding smart contracts have yet to be resolved or must be handled on an individual basis. What are the procedures for enforcing agreements in different jurisdictions? What methods are used to access and protect certain data? Finding the solutions appears to be quite promising, and it will catapult the sector to new heights.
Professionals in the field of public relations must be digital savvy. If lawyers are to continue to play a relevant role in jurisdictions where this applies, they must have technological competence. The legal profession owes it to modern educational institutions.
Artificial Intelligence Provides New Perspectives
Hundreds of existing pilots and proofs-of-concept are just the tip of the iceberg when it comes to prospective applications.
Data sharing and processing are more reliable and efficient thanks to blockchain and smart contracts. This is the foundation that will allow AI and machine learning to fully awaken their abilities, with a wide range of applications ranging from personal usage to virtual assistants, cybersecurity, and chatbots, among others.
Complex kinds of agent-managed, peer-to-peer automation, such as the Internet of Things (IoT) and a network of agents, are of more interest in the long run.
Smart contracts, as well as the processes they run, must meet the following conditions in order to replace traditional paper contracts.
First and foremost, they must be lawful. Smart contracts must follow the same structure as traditional contracts, including a description of an offer, acceptance, and mutual agreement to be bound by its conditions. This will act as verification that certain requirements have been accepted.
Second, smart contracts should be available for AI agents to examine. In the same way as a competent attorney would, this will clarify users' insights regarding their best line of action.
Third, the user interface and user experience (UI/UX) of a smart contract online application should be straightforward and intuitive.
Finally, smart contracts must be adaptable and interactive, allowing for management, adaptation, and renegotiation. Smart contracts must span the whole contract life cycle and enable the execution of various scenarios based on user demand. It must be possible to affirm or deny whether or not duties were met. Otherwise, incontrovertible proof that specific requirements have been met should be provided.
The rest of the decade will almost certainly be an era of mastery.
Long-Term Visions for Smart Contracts
Contracts in the traditional sense rely on a legal system governed by human institutions. They necessitate faith. People are ecstatic about the prospect of the government ceasing to perform this vital function. Smart-contract envisioners are enthused about the potential of contracts without a government-run legal system, just as Bitcoin aficionados are excited about the notion of cash without a government.
On the Blockchain, Democracy
Constituents would be able to vote by smartphone, tablet, or computer using blockchain code, resulting in instantly verifiable results. Brazil may enact new legislation based on Ethereum blockchain data. They are willing to use the Ethereum blockchain to demonstrate the existence of signatures collected for petitions to the Brazilian Congress. In one of the first applications of a cryptocurrency by a political system, Brazilian legislators are looking to Ethereum to tackle the problem. Quartz published an article on the topic on January 5, 2018. See Coinspot for updates on developments in Dubai.
Predictions of court judgments
Even with fewer knowledge, computers can anticipate Supreme Court rulings better than legal professors, according to a recent research. Martin Katz looked at judicial prediction from a variety of perspectives and came up with three basic types of legal prediction: experts, crowds, and algorithms. Forecasting necessitates a well-defined data and modelling context. The application of smart contracts is gaining traction.
Government with a Distributed Autonomy
Settlers are creating their own self-enforcing governmental services in formerly deserted areas.
Furthermore, proponents of blockchain technology believe that certain areas of society, as well as companies, may be automated. Self-enforcing trade agreements are being established by groups of settlers from various places.
Perspectives for the Future
The majority of legal innovation began elsewhere.
However, the industry is aiming for innovation as customers of legal services become more educated, new providers enter the market, newer technologies emerge, and fee pressure grows.
The legal profession, like the rest of the world, is undergoing rapid change. Smart contracts represent a paradigm shift. Law companies that embrace them will not only be able to control the risks they confront, but will also be able to take advantage of incredible opportunities.
Although the blockchain distributed ledger may not be able to replace all levels, it has the potential to eliminate many of the manual stages traditionally associated with contract execution.
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