Smart contracts are made to carry out commercial agreements on their own. But do they really have a place in firms that are growing? Let’s investigate.
The growing acceptance of Blockchain technology is expected to propel the growth of the worldwide smart contracts industry, which is projected to reach $345 million by 2027. But can they really help solicitors grow their businesses? If so, how?
In this in-depth discussion, we’ll cover what smart legal contracts are, how they operate, and whether they can benefit your business or personally.
If you’re eager to find out more, continue reading.
How does a smart contract function?
A smart contract is a legal agreement whose provisions are encoded directly into computer code and kept on a decentralized, distributed blockchain network. Nevertheless, the code may also be included in another distributed ledger system.
This blockchain has no one owner and is basically a public database. Rather, the blockchain handles the transaction processing automatically, eliminating the need for a middleman.
The trade cannot be altered by either side since the transactions are connected and kept in this manner, making them very secure.
Though it may seem complicated, think of smart contracts as a section of computer code that, when certain circumstances have occurred, automatically monitors, carries out, and upholds an agreement.
Legal implications of smart contracts
Jonathan Rosenfeld, owner of Rosenfeld Injury Lawyers says: “It’s interesting to note that smart contracts resemble business regulations more than traditional legal contracts.
This is due to the fact that smart contracts essentially automate business transactions and don’t take the time to go over each party’s roles, responsibilities, and obligations, much alone the responsibility that arises from their not fulfilling them.
Unlike traditional contracts, which include complicated and elaborate terms that provide protection in the event that difficult legal challenges arise, a smart legal contract performs the business rules automatically.
Some contracts are designed to provide advice in the case that the intended consequences are not fulfilled, while smart contracts are just concerned with accomplishing basic goals.
Nevertheless, some law panels recently determined that, in spite of this, smart contracts may still be enforceable if they include the standard components of a contract.”
Smart legal contracts’ benefits
Smart contract proponents claim that there are several advantages to using them for commercial agreement execution and enforcement, such as:
The effectiveness and speed with which contracts are carried out
Harrison Tang, owner of Spokeo tells us:
“One of the most apparent advantages of a smart legal contract is that, instead of waiting for a human approval or execution procedure to be finished to complete the transaction, the provisions of the contract will be implemented instantly once a condition has been satisfied.
Businesses may save significant time and money by switching from the conventional contract procedure to a more effective contract workflow (like smart contracts), freeing up resources for other uses.
But developing, testing, and implementing smart contracts takes time.
If your team is made up of lawyers without programming expertise, you might find that having a large selection of automated contract templates works better for streamlining your contract process.”
Enhanced precision
Smart contracts have received good marks from users for their accuracy and dependability. As smart contracts need a high level of specificity in their contract code, it follows that their terms and conditions must be explicitly and thoroughly documented.
This is due to the fact that even the tiniest omission might result in a contract that is either badly or never performed.
That being said, because any inaccuracies might lead to expensive transaction issues, any omissions or mistakes could be disastrous.
Security
Tommy Mello, founder of A1 Garage shares: “An important characteristic of a smart legal contract is that its transaction records are encrypted, making it very impossible to hack or alter them.
This is a clear benefit for companies seeking to increase the security of their transactions because every record is linked to the previous and subsequent ones through the use of a distributed ledger.
This means that altering one record would require altering the entire chain.”
Self-enforceable
Because smart contracts run alone, they significantly eliminate the need for human involvement.
A smart contract’s code is logic-driven and releases value or access upon the fulfillment of a predetermined condition.
Self-Confirming
These agreements provide the ability to monitor whether or not both parties are abiding by the provisions of the agreement.
These contracts include the option to penalize the violating party as well. For example, smart contracts provide the ability to return money if a vendor misses the prearranged deadline automatically.
Reduced Middlemen and economical
Between the counterparties, there is less need for middlemen for trust services like escrow.
Because they need fewer middlemen and are simpler to store than paper-based contracts, smart contracts are much more affordable.
