08 September 2021•LawtechUK
Sharing our insights from industry as we look to bring the benefits of smarter contracting to life through practical use cases.
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Contracts, just smarter
Contracts are hugely important. They are a vital part of business and human relationships, enabling trust and understanding as well as providing proof and legal protection. Billions of contracts are entered into each year, ever increasing in volume and complexity as we live and work through the digital age. Contracts sit at the heart of transactions entered into across all sectors and play a critical role in trade and commerce. Yet we still approach contracts in much the same way as we have done for thousands of years - creating and managing them in paper form. Decades old technology such as PDF and Word continues to be widely used to write agreements in text and store them in a digital format, but does not render them to be truly digital in form. Contracting in this analogue way today has fundamental weaknesses and does not take advantage of the available technology to improve the contracting process, to make it fit for today’s commercial purposes and reality.
Technology offers us the opportunity to make contracts better by providing new functionality within established contracting principles - so we are still talking about contracts, just smarter ones.
It is a process that has started to happen. Technology is enabling contracts (as well as documents more widely) to be digitised so that they can be read by both machines and humans, allowing valuable contract data to be read, extracted and used. Digital contracts are not yet widely used, but offer a new way of contracting to individuals, businesses and their legal advisers. The benefits of digital contracts can be extended by the incorporation of self-executing code that automates specified actions within a document, creating a ‘smart legal contract’ or ‘smart contract’ which may be integrated with blockchain technologies to transform it into a live digital tool that connects to real world events and responds to them in real time. Whether it is appropriate or useful to include self-executing code within a digital contract will depend on the context.
At LawtechUK we want to demonstrate the benefits that technology can bring to the contracting process for the legal sector, for business and for wider society.
Digital and smart contracts continue to receive significant attention across a broad range of industry sectors but uptake is small and largely siloed, nationally and globally. Concerted effort is required to make paper agreements digital and, ultimately, to make them smart.
In recognition of their importance, LawtechUK is looking to bring digital contracts and their benefits into the mainstream, through collaborative working across disciplines and sectors. This work complements and builds on the UK Jurisdiction Taskforce’s Legal Statement on cryptoassets and smart contracts, the Law Commission’s ongoing review of the law on smart contracts, the UKJT’s Digital Dispute Resolution Rules, the Legal Schema and the UK Government’s National Data Strategy.
Insights from industry experts
We have been looking at how contracting could and should be evolved to better meet the legal needs of people and businesses. This has involved lively and thought-provoking conversations across sectors and disciplines.
In August 2021, LawtechUK hosted a roundtable - bringing together leading experts, practitioners and entrepreneurs working in this area - to explore the opportunities and issues around digital and smart contracting.
We talked about the state of play, barriers to adoption, benefits of using these new technologies, opportunities to increase adoption and potential projects to that end, ending with a poll on what the future looks like - with most agreeing with the statements that ‘machine-readable documents will be of more significance than self-executing contracts’ and the ‘majority of legal documents will be produced in machine-readable as well as human-readable form by 2030’.
The slides presented, including the full poll results, can be downloaded here.
A readout capturing the key discussion points and contributions in addition to the presented material can be found here.
So what next?
Building practical use cases received a high level of support during the roundtable, with 95% of the attendees seeing this as fundamental to demonstrate the benefits and drive practical applications.
We are now actively exploring the types of use cases that would be of most importance and highest impact, with a view to collaborating across sectors and disciplines to put together a portfolio of use cases. Our focus is on identifying and communicating the benefits over traditional ways of contracting and demonstrating what these technologies enable in practice, rather than focusing on the technical aspects.
We, together, have the opportunity to reimagine and improve the contracting process, by identifying and building use cases that can provide solutions to real-world issues and bring benefits to real people and companies in the near term. Given the potential impact of digitising contracts and smart legal contracts, and the role of the legal community in facilitating global business, it is in our collective interests to collaborate and engage with these technologies. Use cases will help to show why smarter, technology-enabled ways of contracting can add value to business practices and provide a wide range of commercial and societal benefits.
We will be collating and building the use cases from October to December 2021.
If you have ideas for or are interested in collaborating on a use case, we would welcome hearing from you. You can get in touch here.
Emma Dearnaley, LawtechUK
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