Digital contracts provide ‘the most exciting technological opportunities since computer processing power and the internet’, the master of the Rolls has announced, disclosing the next stage of the government-backed LawtechUK initiative.
The ‘smarter contracts’ project intends to encourage the move to digital media from paper when producing legally binding contracts. These smarter contracts are largely defined, scaling from the application of electronic signatures, to machine-readable digital documents, to ‘self-executing’ contracts, which may be fused with blockchain technology.
Supporting the initiative, law commissioner for commercial and common law, Professor Sarah Green, noted that ‘Digital and smarter ways of contracting could revolutionise the way we do business, particularly by increasing efficiency and transparency.’ Green stated that the Law Commission’s decision that the current law of England and Wales is able to underpin the use of smart legal contracts ‘confirms that the jurisdiction of England and Wales provides an ideal platform for the use of a wide range of smarter contracts in practice.’
In an accumulation of case studies, the smarter contracts initiative has laid out what it maintains are examples of the technology currently in place. They include:
• Contract management tools allowing contracts to be interpreted by both humans and machines in order for the data they contain to be immediately extracted
• The usage of digital documents and block chain technology within supply chains
• Smarter parametric insurance contracts offering rapid payments to be made once the relevant data is recorded – such as, when flights are delayed or storm damage arises
• Self-executing contracts being pivotal to renewable energy microgrids, with the automatic recording of transactions and instant payments for modest amounts of energy
• Smarter contracts and blockchain technology being used to accelerate the purchase, sale and registration of properties
• Smart legal contracts and non-fungible tokens being safely bound to the ownership of physical assets.
Sir Geoffrey Vos, master of the Rolls and chair of LawtechUK’s UK jurisdiction taskforce commented: ‘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.’
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