Blockchain technology has been in the news consistently for more than a year. This technology has the potential to transform many industries, including those that are multiply-diverse. A blockchain provides a means of creating and maintaining an immutable and transparent database and ledger that may be distributed and shared by authorized users. Because of its many benefits, blockchain is increasingly becoming used in the practice of law.
Blockchain could help reduce the time spent by attorneys on routine tasks allowing them more time to spend on the more important aspects of the practice of law. After all, the practice of law is inundated with three things: paper, paper, and paper.
Lawyers can use a blockchain to draft legal documents, verify information, and record commercial transactions. Currently, the most significant impediment to the advancement of blockchain is the uncertainty of how Congress will formulate future legislation related to its use and development. For example, any legislation regarding smart contracts (contracts written in computer code) must consider those unique characteristics that distinguish them from written contracts.
It’s not all that surprising that some industry experts and observers are preaching caution about the use of smart contracts. Blockchain technology converts the practice of drafting and executing contracts into a digital process described as “smart contracts” by the fledgling blockchain industry These types of contracts could be created and executed directly between the transacting parties.
Theoretically, any literate person has the ability to read a physical contract written on paper. To ensure the existence of a binding legal agreement, a legally enforceable contract requires physical signatures executed on original documents, which is typically a time-consuming process.
With smart contracts, there is a greater risk that a party may insufficiently scrutinize the contract and, nevertheless, provide its assent to an agreement despite not fully understanding its terms and provisions. Some of the newer software endeavors to use the blockchain to decrease “the cost and friction of creating, securing, and generating binding legal agreements.” It also aims to provide the means for storing this data without the use of third-party intermediaries. However, any elimination of attorneys from the process of contract negotiation, formulation, and execution may act as a disruptive use of the technology as it may make transacting parties legally vulnerable.
The attorneys at Glass & Goldberg in California provide high quality, cost-effective legal services, and advice for clients in all aspects of commercial compliance, business litigation, and transactional law. Call us at (818) 888-2220, send an email inquiry to [email protected] or visit us online at glassgoldberg.com to learn more about the firm and to sign up for future newsletters.