Fintech and blockchain have been the buzzwords in the finance industry for the past decade, but now all major industries are being impacted by this new technology.
One of the areas where it is having a constructive influence is contract management. New programmes offer a solution for organising and validating information across a contractual agreement, by monitoring performance and measuring risk.
Smart contracts are now widely used across many industries, including construction, insurance and all kinds of businesses involved in the supply chain for manufacturing or service provision. Financial services, supply chains, IoT, risk management, digital rights management and healthcare are areas poised to benefit.
The theory is that a smart contract enables companies to exchange goods and services without the need for third party oversight.
Examples of a contract management system using new technology can be found at sites such as www.contractswise.com/. These allow firms to evaluate all aspects of the contracts which make up their purchasing and sales chains, allowing credit validation and the monitoring the overall performance of business partners.
Major companies around the world are testing the design, management and execution of smart contracts, using new technology to help improve the efficiency and accountability of service-level agreements in multi-party business interactions.
Inevitably, lawyers are getting in on the act, and rightly so. As any contract lawyer will explain, words matter. The emergence of smart contracts does not mean that our legal friends will not need to be consulted. Consistency of language is crucial. Exactly what is a smart contract and is it smart or even a contract? A recently published White Paper by Norton Rose Fulbright presents an in-depth analysis of some of the issues which are raised by the new technology.
While examining smart contracts, the publication considers the need to note differing contracting jurisdictions, and the requirement of a new approach to dispute resolution in the context of these digital agreements.
Such disputes may arise where smart contracts purely digitalise a process and do not include contractual terms. Again, words matter. Self-executing documents may be convenient, but they could prove costly if automation fails, and there is no traditional wording to fall back on.
Although Fintech is having a huge influence in the contract sphere, legal oversight remains important in a world where efficiency and security are key.