Let me share some puffed-up examples for Smart Contract:

“If a car, whose loan contract could automatically return access control of the car to the financier if the borrower failed to make payments on time. In this way, the car would provide value only to the real owner, and could eliminate the possibility of theft also.” Another one –

“‘X’ and ‘Y’ commits to a software development contract wherein ‘X’ to deliver to ‘Y’ a software and ‘Y’ to pay ‘X’ $1,500. The automated part of the contract might say:

Though payment assurance can be managed by new age payment solutions however, if needed, the process may be converted into split contract wherein ‘Y’ may get some autonomy to click on ‘approved’ or ‘disapproved’ button rather dependent upon test results and receive refund of full payment and settle the dispute, if any, through human arbitration. An intermediary or escrow agent for payment assurance can also be engaged.”

Now, read what is in history.

Somewhere around 1995-96, Smart Contract was first heard in Nick Szabo’s article “Smart Contracts: Building Blocks for Digital Markets”. It is flabbergasting that Nick Szabo’s vision of 1995-96 is becoming a reality today and a necessity of tomorrow. The below extracts from his article set the stage of this notion:

“….I call these new contracts “smart”, because they are far more functional than their inanimate paper-based ancestors. No use of artificial intelligence is implied. A smart contract is a set of promises, specified in digital form, including protocols within which the parties perform on these promises. …..The basic idea of smart contracts is that many kinds of contractual clauses (such as liens, bonding, delineation of property rights, etc.) can be embedded in the hardware and software we deal with, in such a way as to make breach of contract expensive (if desired, sometimes prohibitively so) for the breacher. …”

Accordingly, if the study on Smart Contract should be summed up, the Smart Contract is a piece of software that executes its terms automatically and encodes rules agreed upon by all parties. Smart contracts are decentralized — living on a blockchain — and transparent, viewable by all parties. They can be used to transfer value, and that transfer is triggered in response to certain events. It will remove lot of anomalies of the traditional way of executing contract, save the transaction cost, process time, a tamper-proof solution which protects the confidentiality, privacy and provides payment assurance, make the enforcement automatic on certain occasions.

Though Smart Contract was envisioned in 1995, it has gained recognition very recently with the advent of blockchain and cryptocurrencies and crowd funding platforms. Bitcoin, Etherium and other cryptocurrencies were the first which fall in line to experiment Smart Contract. Here, Miner to solve some mathematical problems and they can mint the bitcoin automatically.

Now, the use case of Smart Contract is broad-basing across many industries and verticals –

It may be said that on one side a traditional contract is a legal document and the Smart Contract is a computer code on the other. One is a human language text and the other is a machinereadable data. The former is performed by parties while later is partially or fully by computer. Traditional contract requires interpretation of ambiguity while Smart Contract cannot be ambiguous and if created with ambiguous code then cannot be executed or will be executed incorrectly. While it will remain an open question for some time that the Smart Contract will be legally effective or not, sooner or later the legal world from Courts to Regulators to Lawmakers will indeed adopt this tech revolution.

Nonetheless, in conclusion, it is not a threat to lawyers rather an opportunity and their role will become more strategic as the industry leaders would require help in dealing with associated risks and technical expertise to make the Smart Contracts binding and enforceable. The lawyers need to be up to speed in figuring out the technology specially blockchain and start embracing the software coding to the best extent. Smart Contract will seize more and more turfs henceforward and the lawyers with software coding skills will soon be most sought-after.