Contracts often include collateral or penalties for non-compliance. The purpose is to make the possibility of fulfillment of the contract more likely. Sometimes the lawyer’s creativity in securing the other party’s compliance is noteworthy!
I was so impressed and amused to discover how a rock band (Van Halen, to be precise) used candies to show whether a contract had been carefully read and, therefore, whether the band’s complex, and potentially dangerous, technical requirements were likely to have been met!
Article number 126, in the middle of nowhere, was: “There will be no brown M&M’s in the backstage area, upon pain of forfeiture of the show, with full compensation.”
“If I came backstage, having been one of the architects of this lighting and staging design, and I saw brown M&Ms on the catering table, then I guarantee the promoter had not read the contract rider, and we would have to do a serious line check” of the entire stage setup, lead singer David Lee Roth said.
A clause is as funny as it is smart! A candy to ensure the execution of the contractual terms and to fill the lack of trust!
“GO AHEAD AND JUMP” into the present!
Today we have a new and recognized type of contract to solve the above issues: smart legal contracts.
The solution is the Smart Legal Contract
Smart legal contract, the second-generation digitised form of legal contracts, enable specific areas of the contract to be performed automatically by including coded pre-set rules. So, transactions can only happen if the specific parameters within the smart contract are met.
Smart contracts eliminate the need for trust in the counterparty. Moreover, since performance is automatic, smart contracts enable the promises to obtain what has been promised and parties no longer have to monitor performance obligations.
They can be digitally connected into identified data sources (internet of things devices, sensors, drones, the back-end systems that manage them), including other relevant contracts that will enable a more accurate, responsive, and therefore efficient allocation of obligations, rights, goods, and services across the economy.
The integration of code into a contract brings it to life, transforming contracts from static to dynamic, capable of communicating and interacting with contracts and systems.
Natasha Blycha & Ariane Garside in “SMART LEGAL CONTRACTS: A MODEL FOR THE INTEGRATION OF MACHINE CAPABILITIES INTO CONTRACTS” refer to smart legal contract as a digital ‘mirror’ to real-world events where obligations such as deliveries, payments and reports occur. As the contract, the smart contract is agnostic and powerfully adaptable in its application: the capability to automate such processes is limited only by the capacity of technology to detect and communicate the process, and the creativity of the parties in identifying what should be measured, monitored, and transacted.
In this context, the smart legal contract becomes a tool capable of generating a shared digital audit trail in real-time of how a business relationship performs; they offer a pragmatic solution, creating significant efficiencies in the contractual relationship, increasing certainty, and reducing the risk of unfulfillment.
Interesting right! Do you want to know more? Do you want to use smart legal contracts in your company? Schedule a Demo with us NOW