Trakti Smart "Legal" Contracts Blog

Lawyer and Smart legal contracts: legitimate fears and concrete opportunities

on March 6, 2023

Reading articles about “code is law”, looking at open job position that require a blockchain protocol engineer, full stack engineers and the like, were not helpful at all. It seemed to me something related to coders, and that’s it.

“Balance is achieved in perennial motion”.

And this always being on the move led me to analyse what smart contracts were and above all to understand if they were my competitor or if, instead, it was I who could “build” the system, stay at the centre and not at the corner.

Lawyers and smart legal contracts: disruption or opportunity?

Now I can affirm it: a great opportunity!

An opportunity to deliver real value to clients, an opportunity to better draft and understand a contract enhancing transparency and effectiveness. An opportunity to team with transversal backgrounds and professions to build projects that make the difference within businesses. An opportunity to work on different fields to achieve new expertise: challenging and enjoyable at the same time.

And so, yes! Smart Legal Contracts are disruptive, but not in the sense that they wipe out the category; they are disruptive in the way of thinking and, consequently, of writing of a jurist. They impose logic and creativity. They do not require you to study coding, solidity, python, but to work as a team with developers, learning to communicate with them.

I must admit it: at first it was hard to deal with developers, but step by step you climb the hill and breathe fresh air.

When you are at a crossroads and find a road that goes up and one that goes down, take the one that goes up. It is easier to go downhill, but in the end, you find yourself in a hole. There is more hope to climb.

I learned that the keywords are: parameterization, mapping, function, trigger, JSON call, perk, initialization and execution etc… Legal and technical language are integrated until they merge. The contract becomes efficient by exploiting digital environments. And it’s not just about redesigning contracts. The task that is required of the lawyer by these new technologies is much more articulated and complex because what is technologically possible is not always legally acceptable or convenient for the client. The proliferation of smart legal contracts offers new opportunities and requires new legal services.

Now I got it!

The lawyer must always check: compliance, what is the legal framework within which the technology moves, what is the data governance; he will have to understand and anticipate possible technical or legal problems that could arise, he will have to identify and coordinate the stakeholders. Lawyers will need to analyse and address the unique risks associated with smart contracts and the blockchain.

Let’s take the relationship between blockchain technology and GDPR for example. The point is to establish when data can be defined as “personal data”, and it is essential that professionals understand and evaluate the context in which the data is stored and transferred.

Again: the phenomenon of Initial Coin Offerings (“ICO”), in which companies offer digital tokens for sale to the public; a smart contract facilitates the collection of virtual currencies and the distribution of the company’s digital token within a written agreement that must define the risks that buyers assume and the rights they have towards the seller.

Finally: which party should be responsible for the losses incurred due to errors in the code? Who should bear the risks of delays in the blockchain network? How to solve the problem of the lack of flexibility of smart legal contracts? How to measure legal concept as “reasonable efforts”? What if an oracle malfunctions or sends incorrect information? How to tokenize the intangible?

A smart contract will not provide the answers to these questions. It is up to the lawyer to protect the interests of their client, recalibrating the standard contractual clauses such as indemnity and force majeure, to address these new risks.

Someone says well, “lawyers have a great social task ahead of them: to lead the community towards a digital [and automated – I add] dimension that respects people’s rights”.

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