Will you need legal services if you have a smart contract?
18 July 2022next article
What is the first thing that comes to your mind when it comes to developing or signing a conventional agreement with someone else? "You need to consult a lawyer," - this is what 96% of ordinary people polled by British scientists think. Indeed, it is lawyers with their knowledge of laws and regulations who look for the smallest details in agreements that can harm you in disputed situations. Similarly, when there is any misunderstanding, you also turn to a lawyer who tries to resolve the dispute in your favor by all possible legal means. The services of people in this profession are worth a lot in any country of the world, and cooperation can last for days, months or even years. But there are supporters of the opinion that the use of smart contracts completely eliminates your dependence on lawyers. Is it really so? Let's figure it out together.
Advantages of a smart contract over a regular agreement
To answer the question about lawyers, we should find out what makes a difference. smart contract from all other forms of agreements between people. There are really advantages and they are as follows:
Self-executive. A smart contract does not need to be given instructions for execution: everything necessary is already laid out in the code. Therefore, the smart contract algorithm will be executed regardless of the will of the parties that concluded it;
Exclusion of the human factor. The vast majority of misunderstandings that occur without malicious intent occur in transactions between people precisely because of simple mistakes inherent in each of us. A smart contract can be wrong only at the stage of its creation, and the error must be found and corrected at the testing stage. Therefore, in the future, the electronic agreement works clearly and harmoniously throughout its existence;
Predictability. From the previous two features, we have the third: the smart contract is predictable, so you can accurately calculate cash flows;
Service cost. Decentralized smart contracts do not require the involvement of a number of specialists and intermediaries, each of which requires its own commission. Administrative costs for a smart contract, compared to a regular one, are simply negligible;
Speed The smart contract is executed instantly, does not require references, clarifications or lengthy checks. If the specified event occurs, the smart contract will react with the programmed action.
So, we see that in addition to lawyers, people from other professions, as well as some institutions, such as banks, are not needed to service smart contracts. It is the banking services that add value to the final check and set the time frame.
Economic feasibility of smart contracts
Despite all the listed advantages, smart contracts may not always be the only correct solution in business. The use of electronic contracts becomes most economically feasible when the subject of the contract has a high value and significant risks, or when the terms of the contract are repeated many times. In this way, the costs of creating a smart contract are quickly recovered due to the minimization of risks and administrative costs or over time if the finished smart contract is repeated many times.
Therefore, we can conclude that the use of smart contracts is most suitable for the following areas of business:
purchase and sale of real estate and vehicles;
supply of goods and raw materials;
credits and loans;
insurance and finance;
Another interesting feature will pleasantly surprise many entrepreneurs: smart contracts do not require subscription. Indeed, money up front is a forced condition caused by mistrust of your partner and doubts about his intentions. Since the smart contract will be executed anyway, it just doesn't make sense to split the payments to have guarantees. A smart contract is already the best guarantee of the fulfillment of agreements in full.
When can you fire your lawyer?
So, now we see that the smart contract really does not need the intervention of legal experts for its correct operation. But don't rush to point the door at existing employees or throw away the business card of self-employed lawyers. A smart contract is an algorithm that performs programmed actions. But the consultation of a lawyer will be extremely necessary during its creation and testing. After all, the blockchain will execute and store everything programmed by the developers and under the conditions indicated by both sides of the agreement.
As developers, we at Aviva guarantee you clear and competent programming of a turnkey smart contract according to the technical task. But exactly what and when the smart contract will do and whether it will be beneficial for you depends on your lawyer. Experts are convinced that the complete victory of smart contracts over representatives of the legal profession will never happen. However, not all lawyers will be able to work well, but only those who competently adapt to modern technologies and will be able to provide quality services at the stage of creating smart contracts.
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