28 February 2022•LawtechUK
LawtechUK and its UK Jurisdiction Taskforce launch ‘Smarter Contracts’ project
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LawtechUK and its UK Jurisdiction Taskforce (UKJT) are encouraging increased understanding and use of ‘smarter’ contracts. They have released a detailed set of case studies that show technology being used to improve different types of contracts across commercial, financial and consumer sectors, building on the previous work of the UKJT and the Law Commission.
‘Smarter contracts’ are legally-binding digital contracts that use technology to provide benefits over conventional contracts. They span a wide spectrum, ranging from simple applications like electronic signatures, to human and machine-readable digital contracts, to sophisticated ‘self-executing’ smart legal contracts, which may be integrated with blockchain technology.
The Smarter Contracts project aims to encourage all who work with contracts to understand what these new technologies offer and to increase the use of smarter contracts in practice. LawtechUK and its UKJT have worked with collaborators across sectors and disciplines to identify some of the most compelling examples of smarter contracts and provide an accessible introduction to the everyday use of these technologies, following scoping work and a public call for ideas and submissions. The case studies demonstrate why smarter, technology-enabled ways of contracting add value to business practices and show how widely the technology is already being used.
Important examples include:
contract management tools enabling contracts to be read by both machines and humans so that the valuable data they contain can be instantly extracted and used
the use of digital documents and blockchain technology in supply chains reducing friction in global trade and transforming logistics operations
smarter parametric insurance contracts allowing for immediate payments to be made as soon as the relevant data is recorded - for example, when flights are delayed or storm damage occurs
self-executing contracts being central to renewable energy microgrids, with the automatic recording of transactions and immediate payments for small amounts of energy significantly increasing efficiency and enabling the transition to clean energy
smarter contracts and blockchain technology being used to expedite the sale, purchase and registration of homes
smart legal contracts and non-fungible tokens being securely linked to the ownership of physical assets, revolutionising the way assets are traded with economic and environmental advantages
The project, led by Emma Dearnaley (Head of Legal Services Innovation at the Ministry of Justice, on secondment to LawtechUK), includes case studies in relation to electronic signatures, contract automation and management, insurance, renewable energy, financial services, trade, sale of goods and services, logistics and transportation, the digital ownership of physical assets, sport sponsorship, and home buying and selling. The project also explores the opportunity for digital companies to use smarter contracts to unlock the benefits of a digital economy that are not available when using traditional corporate forms.
The project builds on the work of the UKJT and Law Commission. The UKJT has already demonstrated English law and the UK jurisdictions provide a strong legal foundation for the mainstream use of smart legal contracts, including through the Legal Statement on Cryptoassets and Smart Contracts and the Digital Dispute Resolution Rules for on-chain digital relationships and smart legal contracts. The Law Commission’s advice on smart legal contracts extends the conclusions reached in the UKJT’s Legal Statement, with related work underway that will further support the use of new technologies in the contract process.
The Smarter Contracts report published on 22 February 2022 includes the full set of case studies. The case studies are also available on a new ‘Smarter Contracts & Digital Assets’ page on the LawtechUK Hub, which includes a range of additional guidance, insights, courses and resources intended to provide a central space to learn more.
Sir Geoffrey Vos, Master of the Rolls and Chair of LawtechUK’s UK Jurisdiction Taskforce: “Smarter contracts and blockchain technology are already changing the way we work. The Smarter Contracts report is a living demonstration of use cases including automated contracting, the automation of house purchases, smart supply chains reducing friction in global trade, digitised insurance pay-outs, smart energy microgrids, and artworks bought and sold as non-fungible tokens. These are not things that might happen in years to come. They are happening now. English Law and the UK’s jurisdictions are ready to provide the legal foundation to allow these technologies to enter mainstream business practices. They offer the most exciting technological opportunities since computer processing power and the internet.”
Emma Dearnaley, LawtechUK: “Contracts are a vital part of all economic relationships in all sectors. Yet many still approach contracts in much the same way as we have for centuries, creating and managing them in paper form. Technology makes this unnecessary now. Contracts and the valuable data they contain can be digitised, offering a wide range of benefits and the opportunity to reimagine contracts as live sources of intelligence that add value to business all the time. At LawtechUK we wanted to build on the legal and technical work already done by shining a light on practical ‘smarter contract’ solutions to real-world problems, to spark ideas and inspire confidence in the further use of these new technologies. The Smarter Contracts report provides an accessible way for people to see and understand what is possible. Our thanks to everyone involved.”
Professor Sarah Green, Law Commissioner for Commercial and Common Law at Law Commision of England and Wales:
“Digital and smarter ways of contracting could revolutionise the way we do business, particularly by increasing efficiency and transparency. The Law Commission has concluded that electronic signatures can be used to execute documents and that the existing law of England and Wales is clearly able to facilitate and support the use of smart legal contracts. This confirms that the jurisdiction of England and Wales provides an ideal platform for the use of a wide range of ‘smarter contracts’ in practice. The Law Commission’s related work on electronic trade documents, digital assets and conflict of laws will further support the use of smarter contracts. The Smarter Contracts report published by LawtechUK is a helpful practical contribution to show the market how technology is already revolutionising contracts.”
To find out more about the Smarter Contracts project visit https://lawtechuk.io/programme...
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