The contract is the vehicle of every deal, and every contract has inherent value. Today, everything comes with a contract. Every business deal–every time we sign up for a new service–every time we share our data–we put our mark on a new contract. As a result, people can sign several contracts every single week. This volume of contracts can become unwieldy.
Smart contracts can increase the speed and reliability of your contract workflow. Like any other contract, a smart contract is a legally binding agreement between two parties. Unlike other contracts, a smart contract is made valid by the assignment of unalterable blocks of computer code stored in public databases.
While the details and review of a contract should always be overseen by an attorney, smart contracts in essence can operate without third-party oversight. Because they automatically take effect as soon as their conditions are met, smart contracts save time for all parties involved. As a result, smart contracts can vastly increase the speed and accuracy of contract workflow.
What Is A Smart Contract And How Does It Work?
So, if a smart contract doesn’t need third parties to confirm its validity, then how does it work?
Without getting into too much technical detail, smart contracts are valid because of the unique block of code related to each individual contract stored in publicly accessible blockchain, and then stored in decentralized databases with several different owners. This makes smart contracts almost impossible to hack. Any hacker would need to conduct successful hacks on numerous secure databases separately to come close to accessing the smart contract. Smart contracts are incredibly secure because of such secure blockchain technology.
Smart contracts can improve the contract workflow of any legal team by enhancing security through blockchain technology, and by increasing contract implementation without dependence on third parties.
Types of Smart Contracts
As with traditional contracts, smart contracts fall into several categories. A determination of the kind of smart contract is necessary prior to creating contract templates.
The three types of smart contracts are:
Smart Legal Contracts- These are enforceable legal agreements. These contracts require the signing parties to fulfill all contractual obligations. As with any other legal contract, failure to fulfill all the terms of a smart legal contract may result in legal action.
Application Logic Contracts- These contracts carry application-based code synchronized with other blockchain-based contracts, enabling communication between devices.
Decentralized Autonomous Organizations- These are blockchain communities bound by rules coded into their smart contracts. Actions of community members are dictated by self-enforcing code.
Legal departments are mainly concerned with smart legal contracts. However, there is still value in understanding the types of smart contracts and figuring out what value they might bear on your overall contract portfolio.
Smart Contracts and Legal Departments
The advent of digital technology for legal departments and the rise of smart contracts over traditional contracts have changed the industry. Because contracts represent one of the most fundamental features of the legal industry, digital contracts have perhaps the most important business potential for legal departments and law firms.
When created correctly, smart contracts are just as legally binding as traditional contracts. In fact, an argument could be made that smart contracts might be more secure than some traditional contracts.
The invention and social acceptance of e-signatures as acceptable for creating legally enforceable contracts is one example of technology driving legal interactions. As smart contracts get more secure, they may start to appear more often as an option for legal agreements in litigation.
Specialized smart contracts designed for many different types of legal transactions will potentially lower costs and improve every aspect of the contract workflow.
Data-Driven Contract Management
The combination of a strong operational service delivery supporting a dynamic data platform will change how contracting operates and delivers value to any business.
Through a review of core processes, internal talent, and data gathered from industry activity, UnitedLex clients have access to a wide range of contract workflow improvements. Such as:
Data-driven realignment of regional resources, creating potentially over 20% improvement in response time.
In select categories, our team showed over a 40% improvement in contract turnaround times.
Using project targeting, we have shown reduction in backlog–from 70% backlog to 20%.
Through application of digital contracting, contract management labor costs have been reduced by over 20%.
We have used automation to increase the speed of contract review, freeing up time for valuable staff members.
Costs necessary for outside counsel have sometimes dropped by 15%.
For a more in-depth analysis of digital contract management and smart contracts, download our white paper on the subject of digital contract management and contract management in the digital age.
UnitedLex provides contract lifecycle management solutions. With more than 3,000 legal, engineering, and technology professionals globally, UnitedLex enables legal teams and organizations to thrive in the Digital Age.
Over the past 15 years, we have successfully delivered eDiscovery, Source Code and Document Review, IP Monetization, and Contract Management Improvement services to over 25% of the Global 500, 30% of the Fortune 50, and 50% of the Am Law 100.
Contact UnitedLex to learn more about transforming your Corporate and Contracting Solutions.
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