Smart contracts, how will they affect to lawyers?

Posted Jun 3, 2019

Nowadays, we are increasingly familiar with the technological terminology that is linked to new areas of law. We hear words like blockchain, cryptocurrency, mining, etc., although in reality, they are concepts that in the vast majority in the field of our profession we find it difficult to assimilate.

One of these words are the so-called smart contracts, which, due to their purpose, it seems that in some matters they can leave the lawyers out of the game.

In the near future is expected Blockchain technology will transform many of the current social and economic structures by eliminating the need for intermediaries and trusted organizations. In relation to the figure of the intermediary and how this technology will affect its role, a chain of blocks generates trust through a consensus distributed among many people and the security of its code.

We understand for smart contracts, whose terms and conditions are redacted in blockchain code, and which the main consequences are those related, are automatically set in motion, without human intervention. One of the examples which is often put is the vending machine, when buying a soft drink, a transaction is established. We know that, once the amount is introduced, the machine gives us the drink (obviously if it is working correctly). The human factor cannot influence the rejection of the delivery of the refreshment, this is given automatically.

The above example is about a very simple contract, but what would happen if it worked with more complexed contracts in an increasingly connected world? What role would the lawyer figure play then?

It is possible that a future blockchain technology will consolidate and shake our current social structures, whether through a distributed system of information, the financial system, or technology. It is clear that if this happens, all industries and professions will be affected in some way, including that of lawyers, but this does not mean that their role should be secondary or even dispensable.

In terms of the contracts, even if they are computerized, each lawyer will always have to draft its content, to foresee that at least the essential elements are subject to legal binding principles. The question is if the lawyers should learn to program or even if the law firms should incorporate programmers in the different departments. As we are aware as lawyers, not everything is valid in a contract, part of our job is to advise our clients on this point, and our value does not consist in drafting but in advising.

Another interesting point is that many contracts have subjective terms such as: best efforts, good faith, reasonably, etc., these terms are subject to interpretation do not go well with the algorithms. In these cases, the smart contracts resort to an arbitrator, called the oracle, in order to determine these concepts and decide, nothing new for us in this case.

Furthermore, in some occasions conflict is inevitable and sometimes even for matters not contemplated in the contract, so that the resolution of these cannot occur autonomously.

In conclusion, in the middle term, lawyers will not have a secondary role. In a future there will be simple computerized contract which will supply a third of confidence and will assume a certain role of effectiveness, but at the same time, there will always be complex and atypical contracts, in which, even some of their characteristics become computerized looking for efficiency and immediacy between the parties, the figure of the lawyer will remain essential.