In this blog post we will talk about Smart Contracts, a concept born years ago that has been rescued in recent times thanks to Blockchain technology. This technology can help the implementation of Smart Contracts. But first, let's define what a Smart Contract (hereafter, SC) is.
An SC is, in general terms, a program, a code protocol, which records an agreement between two parties, and which has the capacity to execute itself automatically. To this program is added the different clauses that will compose the contract, such as obligations to do or not to do.
Automatic execution results in the elimination of intermediaries: the contract is executed directly as soon as the program registers that one party has fulfilled its part of the contract. There would be no need for a third party to verify that the agreement is fulfilled. This makes the process faster, cheaper and more secure.
This SC can be implemented thanks to Blockchain technology, where it is carried out by all the members of the blockchain (called nodes) the automatic verification that such SC has been fulfilled.
Use of Smart Legal Contracts
The Smart Legal Contract (SLC), on the other hand, would be nothing more than the use of SCs in the legal field. The difference between the SC and the SLC is that the Legal is not composed entirely of codes, but also in common language, so that an SLC could comply with the formality required by each legislation.
Thus, the agreement between two parties is recorded in the language spoken by both parties, and subsequently translated into code language. Thus, the code would be recorded so that if A happens, B happens, but if C happens, D happens.
These SLCs may bring about a revolution in the legal world.
Case studies
Let's consider the case of a company that arranges a delivery of goods with another party. As soon as geolocation is used to check that the goods have arrived at their destination, a payment order is automatically generated. Also in the case of rentals: a smart lock can be used to block the entry of a tenant who has not fulfilled his payment obligation and automatically unblocked as soon as he does so.
Other examples: in a contract of carriage of passengers by air, an airline may automatically indemnify a passenger whose flight has been delayed as soon as it is verified that such an obligation has arisen on the part of the airline.
Likewise, the figure of the Property and Mercantile Registrar could be progressively replaced by the Blockchain, as a reliable tool that cannot be modified and whose information would be verified by the members of the same.
A lawyer could also be affected in his or her work, given that the automation of processes and verification of contract compliance by a technology would reduce litigation.
Current regulation
The regulation of such contracts at the European level is found in Spain in Law 34/2002 on Information Society Services and Electronic Commerce (LSSI), which incorporates Directive 2000/31/EC of the Council and the European Parliament regulating certain legal aspects of Information Society Services, specifically those related to electronic commerce.
Thus, an electronic contract is defined as one "in which the offer and acceptance are transmitted by means of electronic data processing and storage equipment connected to a telecommunications network". This can be understood as an open door to a future regulation more in line with this reality.
For the time being, it is accepted that law has a place in technology, and vice versa, in the field of contracting. More and more voices are speaking out in this regard and advocating a definitive implementation, which would result in greater efficiency and security when it comes to contracting.
To learn more about the Blockchain, as well as its features and advantages, don't forget to visit our blog.
Vicox | Cryptocurrency Lawyer
