You may not have heard about smart legal contracts before, despite their potential to transform the legal industry. Smart legal contracts are legal agreements with some or all of their terms expressed in code. Smart legal contracts can automate the performance of certain parts of a contract. The contract will self-execute when a party to the contract performs their obligations. This means that contracting parties can significantly simplify the contract process with a smart contract. In this article, we discuss three developments to watch in 2022 when it comes to smart legal contracts.
1. More Trained Experts
As the use of smart legal contracts increases in the market, we will need more software developers to build and manage smart legal contracts. Most lawyers today do not have computer science training. Therefore, they would need professionals to write the codes to automate the performance of contractual terms. There is currently also a shortage in the number of software developers in the Australian market. In 2022 and the years to follow, we expect more software developers to be trained and enter the market.
Smart legal contracts require the legal and the tech industries to work closely together. You need software developers to write code and build technical infrastructure. Lawyers, then, must assist in ensuring that the smart legal contract meets all legal requirements.
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2. Clarity on the Law
There are still a lot of questions around the legality of smart legal contracts. It is not always clear whether they are enforceable, and the incorporation of code complicates things as well.
Because the law is not always clear, many businesses and legal professionals are apprehensive about using smart contracts. Both the Government and the courts will have to address relevant legal questions around the enforceability of smart legal contracts before widespread uptake occurs.
As smart legal contracts become more prevalent in the market, the Government and the courts will have to address legal questions around smart legal contracts. Regulators have begun clarifying the law regarding cryptocurrency and blockchain finance, and we can expect smart legal contracts to follow soon.
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Contracts are not documents that exist in isolation. The obligations required under a contract will largely depend on things that happen in the natural world. To automate the performance of contractual obligations, smart legal contracts will need to communicate with items in the world. As more and more devices connect to the internet, this will make communication significantly easier. This technology is called the internet of things. It refers to the vast number of devices that can now communicate with each other via the internet.
Like smart legal contracts, the internet of things is at the inception of its development. Nevertheless, the development of 5G infrastructure is exciting because 5G will make communication between the internet of things and smart legal contracts faster.
Key Takeaways
Smart legal contracts are legally binding agreements that have the potential to automate certain contracts. If successfully adopted in the market, this will allow for faster performance of contracts. Smart legal contracts can also significantly reduce the management costs of small businesses. However, smart legal contracts are still in the early days of their development.
If you are interested in smart legal contracts, 2022 will likely be a year of significant development. More software developers will enter the legal world, and regulators will likely clarify the law around these contracts. If you have any questions about smart legal contracts or how you can implement them within your business, contact LegalVision’s Legal Transformation lawyers on 1300 544 755 or fill out the form on this page.
Frequently Asked Questions
At the moment, regulation around smart legal contracts is unclear. However, it is likely that the law will develop in this area in the near future.
Because they are automatic, smart legal contracts can significantly speed up business operations. Payment is sent automatically, which means transactions go faster. Additionally, your business can spend less money on management.
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