The evolution of the blockchain technology is said to present a real threat to
radically change the face of legal practice as we know it, bring an end to the
days of voluminous paperwork and lawyers arguing over contract details and
disputes, and give way to the age of smart contracts and other legal documents
that can be executed and stored digitally through the blockchain technology,
which will possibly put lawyers out of work.
A blockchain is a distributed database that is linked to a network of computers. It comprises a list of ordered records called blocks. Each block is linked to a previous block and is time stamped. Once users on the system enter a transaction, for example a contract, it is recorded with its unique time stamp and is permanent.
Individual blocks cannot be deleted and are visible to anyone with access to the
system. Any attempt to modify a block’s content invalidates the unique
references that placed it in its position in the chain.
The system can be used to store court records as well as lawyers’ files in a permanent and immutable digital form, thereby avoiding the possibility of loss or sabotage. It can also be deployed to provide digitally automated systems for the execution of smart contracts, registration of documents at the land registry and the registration and distribution of intellectual property rights, among others. These have the potential of taking the work of lawyers and handing it over to data and computer codes.
The system is however becoming popular because of its prospects in the
application of smart contracts. Smart contracts refer to a coded program that
contains the terms of agreement and triggers, allowing the provisions of a
contract to be carried out upon notification. For example, the delivery of an asset, a shipment of goods or other promised completion of services can automatically trigger a payment or other exchange defined in the contract.
Smart contracts basically involve parties preparing a contract with the specific
terms and conditions. After the terms and conditions of the contract are finalized, they are transformed into the smart contracts and deployed on the blockchain. The system would then trigger the rules to execute the legal agreement after the specified conditions are met. By creating a contract which can automatically execute based on when specific requirements are met, the cost and friction of generating and securing legal agreements, as well as the need for third-party intermediaries, are reduced.
It is this capability of the blockchain technology that is said to present a real risk that it might take over the work of lawyers and hand it over to computer codes and data. The fear is that blockchain will automate decisions, processes, and contracts and remove the need for lawyers or at least reduce demand for legal services. On the other hand, it is argued that blockchain is a source of new
opportunities for growth in legal services, which will arise from the implementation of smart contracts and in the resolution of regulatory challenges that are bound to come up in blockchain adoption.
This writer is more inclined to the second view, because whatever contracts the
parties want to draw up, whatever transactions they might want to enter into,
they would still need lawyers to review the legal agreements and transactions by ensuring that they adhere to applicable laws and regulations.
Besides, it is not all the terms in a contract that are written in black and white;
certain terms of contracts are implied and apply when the terms of the contract
are being construed. Computer codes are not designed to interpret or
understand implied terms. When disputes arise out of these implied terms, lawyers’ intervention in interpreting them would be invariably required.
However, for lawyers to function effectively in the blockchain era, they may need to become blockchain software experts, adept at understanding the intricacies and triggers of smart contracts. This should be the aim of every 21st Century lawyer.
He has to prepare for the ‘new normal’ lest he be left behind.
