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What Are Smart Contracts And Why They Are The Future Of Legal

The world is changing, and so are its trends. With the boon in technology and digital, every industry is adapting to changes open-mindedly. Same is the case with the conventional legal industry. The self-executing technology has made the industries smart.

Talking of smart, have you heard about smart contracts? If not, we’re here to throw some light on it.

Smart contract are self-executing, and help you exchange money, shares, property or anything of value, in a conflict-free way while avoiding the interfering of middlemen.

Let’s understand it better with an example; say you are at a vending machine, you put in the money and withdraw the commodity of your choice. Smart contract is just like a vending machine wherein you simply drop in money, and get your contract generated.

The smart contract not only generates your contract, but also defines the penalties, more so automatically enforcing those obligations, hence completely striking off the need of a middleman.

Blockchain and bitcoin platforms of smart contracts have bewildered the Indian setup though. Currently, Ethereum is the most used platform for generating smart contracts. Now that we know more about smart contracts, here’s how you may use it-

• Protecting copyright content: Smart contract has multiple benefits for different types of industries. It enhances transparency, reduces time and expenditure. For instance – if you create a piece of content, say music, it is obvious that more than one person was involved in its creation. It can be a tricky job to figure out who will own the copyrights, and be responsible for all due payments. Smart contracts simplify it for you.
  
  
• Employment contract: An employee and employer relationship is a rather convoluted one. By opting for smart contracts, the job is made easier for both the parties. The employ will know what is expected of them, and so will the employer.
  
  
• Management: The blockchain streamlines the management for organisations. It carves out discrepancies that might occur with independent process of management.

Future of Smart Contracts in Legal –

Smart contracts may possibly change the legal scenario and the way lawyers work in and across firm. But it still is far from perfect. While it still has huge potential in India, there are still few major questions that linger around –

• What if there’s a bug in the code?
• We still miss clarity regarding how will it be codifies in the Indian Law, if at all it is.
• The undefined status of cryptocurrencies, and their taxation is a pertinent question on the future of smart contracts.
• The Indian IT Act 2000, has put a limitation on the use of digital signatures, unless and until they are obtained through a government designed certifying body. This is in complete contrast with blockchain technology.

But smart contracts do have some benefits over traditional contracts -

• Since smart contracts are automated, the use of language is more certain, avoiding any scope of human errors like in traditional contracts.
• Smart contracts are cost effective since there is nil human involvement.
• The process is fast as there’s no involvement of mediators, hence no to-and-fro which allows the process to be clear and transparent.
• Smart contracts cannot be tampered with.

As of today, we need more awareness about such advanced technologies, only then will there be positive acceptance towards it. Making a rush in this matter doesn’t make any sense. This is because the law makers and legislation need to be sure, and have complete understanding before taking this forward. The future of smart contract in India might be bright, but the light is still afar.