“Smart Contracts” vs Legal Technology in Contract Practice

Abstract

Purpose: The purpose of the article is determining the advantages and disadvantages of using both «smart contracts» and «classic» contracts in contractual practice, with the possibility of agreeing on the conditions and applying the full range of available legal technology tools.

Design/Methodology/Approach: We use dialectic and comparative legal research methods.

Findings: The article identifies the concept of smart contracts, their scope, advantages and disadvantages of use. We study the means of legal technology, which are used in the text of a traditional contract. The question of the basis for comparing smart contracts and contracts that exist in the form of text is investigated. The prospects for the using of smart contracts and traditional contracts are determined.

Originality/Value: It has been established that the process of negotiating the terms of a traditional contract is carried out through negotiations and the search for the most appropriate formulations. The parties may agree on conditions that most closely reflect their interests and at the same time comply with applicable law.

There are also used terms that serve to ensure a uniform understanding of the text of the contract. Such an approach, however, may lead to errors and the need for interpretation of the contract.

Smart contracts aren’t based on text, but on computer code, through which the terms of the contract are recorded. This deprives such an agreement of the shortcomings that are usually inherent in the text - errors in the formulation of certain conditions, different understanding of the terms used by the parties.

However, smart contracts have a limited scope, and shouldn’t be used in cases of regulation of atypical relations of parties requiring an individual approach.

Smart contracts can successfully replace mass accession agreements existing in the form of typing and concluded via the Internet (for example, contracts for the sale of goods in online stores), due to their unconditional advantages - self-fulfillment, the inability to make changes to an already concluded contract, the fundamental lack of interpretation of the treaty.