Digital contracts offer 'the most exciting technological opportunities since computer processing power and the internet', the master of the rolls has said, announcing the next phase of the government-backed LawtechUK initiative.
The 'smarter contracts' project aims to promote the move from paper to digital media when creating legally binding contracts. So-called smarter contracts are widely defined, ranging from the application of electronic signatures, to machine-readable digital documents, to ‘self-executing’ contracts, which may be integrated with blockchain technology.
Backing the initiative, Professor Sarah Green, law commissioner for commercial and common law, said that 'Digital and smarter ways of contracting could revolutionise the way we do business, particularly by increasing efficiency and transparency.' Green said that the Law Commission's conclusion that the existing law of England and Wales is able to facilitate and support 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 a collection of case studies, the smarter contracts project has set out what it says are examples of the technology already being used. They include:
- Contract management tools enabling contracts to be read by both machines and humans so that the data they contain can be instantly extracted
- The use of digital documents and blockchain technology in supply chains
- Smarter parametric insurance contracts allowing for immediate payments to be made as soon as the relevant data is recorded - for example, when flights are delayed or storm damage occurs
- Self-executing contracts being central to renewable energy microgrids, with the automatic recording of transactions and immediate payments for small amounts of energy
- Smarter contracts and blockchain technology being used to expedite the sale, purchase and registration of homes
- Smart legal contracts and non-fungible tokens being securely linked to the ownership of physical assets.
Sir Geoffrey Vos, master of the rolls and chair of LawtechUK’s UK jurisdiction taskforce said: ’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.’
LawtechUK is hosting a free ‘Contracts, just smarter’ event tomorrow (24 February). Register here.
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