Smart Contracts: a tool for the economic recovery post Covid-19
Over the past 18 months, the coronavirus (COVID-19) pandemic has accelerated the use and evolution of distributed ledger technology such as blockchain and smart contracts.
To this end, The Law Society has published a second edition of its Blockchain: Legal & Regulatory Guidance providing technical guidance and suggestions allowing solicitors to drive and manage the post COVID-19 recovery across all sectors of the economy.
Smart contracts are coded instructions which execute on the occurrence of an event. Smart contract technology can be used to define and perform the obligations of a legally binding contract where certain obligations may be represented by or written in code.
Advantages and legal framework
The digitalisation of contracts will allow to:
- Increase the accuracy and potential transparency of contractual terms which combined with the automatic execution facilitates an environment of trust and removes manual errors;
- Increase their efficiency through automated performance for standard form contracts which are not heavily negotiated;
- Reduce the scope of misinterpretation or competing interpretations as the smart contract will be automatically executed in accordance with its agreed terms;
- Minimise dispute around the fulfilment of contractual terms and ownership of title; and
- Implement even more efficiently dispute resolution mechanisms by isolating the contract in dispute without necessarily affecting the wider transaction.
The current legal framework is clearly able to facilitate and support the use of smart legal contracts. However, current legal principles are still applicable to smart legal contracts in much the same way as they do to traditional contracts and the development of smart legal contracts may introduce new issues and harms which the law needs to respond to. Therefore, before entering into a smart legal contract, parties should consider engaging in a rigorous planning phase to understand business requirements, and the objectives of the smart legal contract, therefore, it is sensible to obtain advice from solicitors specialised in this area located in England and Wales.
How Can Ellis Jones Help?
Our business services team have specialist knowledge and expertise across a broad range of business related matters. If you feel you need any advice on smart contracts, please contact our business services team on 01202 525333 or email our business services partner, Neil Cook at firstname.lastname@example.org.
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