By Michael Bacina and Katrine Narkiewicz -
Snapshot
- The adoption of smart contracts continues to grow, comprising a variety of contractual relationships partly automated by computer software and which run on blockchain technology.
- While smart contracts remove the human element usually involved in the performance of a contract, they are not ‘smart’ enough to completely avoid the need for lawyers, and have questionable validity under Australian law.
- The continued rise of automated legal processes, blockchain technology and smart contracts creates significant risks for lawyers who don’t stay up to date and technologically literate.
Lawyers today live in a world of ongoing disruption. As automation, artificial intelligence and blockchain technology assists in reducing the costs of business transactions and increases the reliability of record keeping, the adoption of smart contracts is an opportunity for lawyers to help their clients improve efficiency and reduce the scope for disputes, and a challenge for lawyers who do not stay abreast of this area.
Blockchain-based smart contracts have been increasingly deployed across the finance and property sectors in the last two years and even more widespread adoption is expected in the coming years as greater functionality and common standards emerge. Major banks, stock exchanges, and even postal services are investing in and investigating how blockchain technology can improve their cost base and business offerings (see, for example, J Grey, ‘Australia Post’s digital future rises from disruption as it embraces blockchain’, Australian Financial Review (online), 10 November 2016).
Smart contracts pose important questions for contract lawyers and litigators as they require a multitude of issues to be addressed when contracts can self-execute based on complex computer code and without regard to the desires of the parties to the contract, or indeed the courts, once they are entered into.
