The legal industry is turning to Ethereum smart contracts, as they have great potential to increase efficiency. This is because they are completely self-enforcing. By that, it means that only once certain and specific terms are met, will the contract follow through with its instructions. There are good and bad sides to this – great care must be taken when the contract is created, as smart contracts will always run exactly as they are written.
It is because of this that they are becoming so appealing, and that many legal firms are turning to them over traditional legal contracts. In fact, in August of 2017, ten law firms and four legal institutions joined the Ethereum Enterprise Alliance; including Hogan Lovells, who is one of the largest law firms in the United States, showing just how much of a big deal this is for Ethereum. Frost Brown Todd (FBT), a huge law firm based in the US took the initiatives to understand the implications of using smart contracts, which led to them announcing in May 2017 their completion of a prototype smart contract, which was to be used in software escrow agreements. There are specialist skills that are required to make these smart contracts, and it is often a technical skill set that legal professionals do not have. Smart contracts are written in computer code, so third party smart contract specialists would be brought into law firms to work closely with them. So, it is feasible that smart contracts could actually replace traditional contracts, although they require another set of skills, which might mean that this is a very slow adoption process.
Like we mentioned early, there are good and bad points to using smart contracts. When they are written correctly and well, it ensures that a contract is successfully carried through regardless of the circumstances; however, when they are written poorly, it could leave the contract open to lots of exploitation. This means that it could take a long time to lay out these clauses and create a smart contract. So, eventually, it will be beneficial to create a standard format for legal smart contracts. Until this happens, they are unlikely to be taking over traditional ones in the legal industry.
References and Further Reading:
- The CoinTelegraph; How the Legal Industry is Adopting Ethereum-Based Smart Contracts
- TrustNodes; Will Ethereum Based Smart Contracts Automate Contract Lawyers?
- Artificial Lawyer; OpenLaw Launches New Smart Contract Platform on Ethereum
- Financial Review; Blockchain ‘smart contracts’ to disrupt lawyers
- New Zealand Law Society; Ethereum, blockchain, and smart contracts – the future of law?