Logical Contracts — Want less lawyers?

1. Background

2. Introduction

3. Simple Case — Deposit on an Apartment module

  1. The Contract, a software program, begins execution on its commencement date and has a fixed duration.
  2. The Contract invokes a trusted service (e.g. a bank) to transfer $2000 from the Renters bank account and put it into an independent bank Account (escrow), owned by the Contract.
  3. At end of the rental period the Contract requests an independent assessor to check the property. This could be done via chatbot, Email, or other digital means.
  4. This trusted party creates a transaction which writes the value of the damages as a % of the deposit (0–100%) into the contract.
  5. This assessor is then paid a pre-agreed amount by the Contract.
  6. The damages are deducted from the deposit by the contract and paid to the landlord, and the renters are paid the remaining sum back into their account, all in a similar manner.

4. Simple B2B Case — A Data Processing job

  1. The contract extracts the data from its repository in company A, and transfers it to company B, who check it and confirm back to the contract that they have received the data as it was described, and it is present and in a correct format.
  2. Company B then processes and transforms the data as instructed by the contract, making the result available to the contract after a period of time. The contract delivers the data to company A.
  3. Before doing so the contract could call for an independent assessment of the results by a Trusted 3rd Party should Company A not accept or agree with the work done. In the advertising world and certain cases involving Personal Data and attribution we already use Trusted 3rd Parties to ensure the 2 sets of personal data are handled appropriately.
  4. Company A checks and accepts the data and informs the contract, which pays Company B and ensures they delete the data, and this is verified within a defined period.

5. The Internet of Things (IoT) Case

6. Challenges and Conclusions

  1. The need in company business agreements for sign-off, where every single department involved (however tenuously) must comment, change, review and approve their respective parts of any contract.
  2. The human tendency to embellish, complicate, demonstrate knowledge, and emphasize our own indispensability, resulting in too long and too complex contracts.
  3. The contract authors may not actually want them to be understood. For example, many consumer contracts are deliberately over-complex and obscure, to avoid them being fully understood. Check out App terms and conditions for use of your personal data, for examples of this.
  4. Standard business practises along the lines of ‘we’ve always done it this way’ or ‘Legal insists this standard text needs to be in every contract’.
  5. Lack of understanding and suspicion around Blockchain as the base for smart contracts. Blockchain is one of the few technologies where you need to explain its operation from first principles, just to sell an application based on it. It’s like describing how TCP/IP works when selling an eCommerce site. Furthermore, the need for trust as a cornerstone of contracts creates a slight tension due to the over-indexing of cowboys and get-rich-quick merchants found in the blockchain and related cryptocurrency space. It is becoming more respectable and accepted, but legacies remain.
  6. The need to consider all kind of eventualities and scenarios, however unlikely or extreme they may be.
  7. Recognition of the various laws, jurisdictions and court systems, as the only solution today.
  8. Why would turkeys embrace Xmas? You will need the help of lawyers, and legal departments, and their management, to introduce a new system that will reduce significantly their own power and influence.

About the Author

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Veteran Product Management guy based in Munich, starting to use medium to get some random thoughts written down, related mainly to my work.

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John Craig

Veteran Product Management guy based in Munich, starting to use medium to get some random thoughts written down, related mainly to my work.