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Author Topic: Smart Contracts - new role for lawyers?  (Read 2619 times)
ulhaq
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March 23, 2017, 12:24:45 PM
 #1

Currently lawyers and judges spend inordinate time in cases arguing over definitions of words and intended meaning of short phrases and sentences, and come up with all kinds of arguments for their side of a case. What appears to be a relatively simple case routinely results in decisions of hundreds of pages. As smart contracts become ubiquitous, and if it becomes standard practice to accept the code as law, this will radically redefine lawyers' roles, as well as impact their demand. I cannot ever see trusting code as law, because there can always be unintended consequences, especially in critical cases, but it can become standard to have a resolution mechanism built into the code, including adjudicators. Opinions?
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March 23, 2017, 12:46:29 PM
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Currently lawyers and judges spend inordinate time in cases arguing over definitions of words and intended meaning of short phrases and sentences, and come up with all kinds of arguments for their side of a case. What appears to be a relatively simple case routinely results in decisions of hundreds of pages. As smart contracts become ubiquitous, and if it becomes standard practice to accept the code as law, this will radically redefine lawyers' roles, as well as impact their demand. I cannot ever see trusting code as law, because there can always be unintended consequences, especially in critical cases, but it can become standard to have a resolution mechanism built into the code, including adjudicators. Opinions?

If you have resolution mechanisms being built into the code, I wouldn't call the contract 'smart'.  Smiley
Truly smart contracts would make lawyers redundant.
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March 24, 2017, 03:59:05 PM
 #3

It is impossible to have truly smart contracts (unless extremely simple). With the length required to spell out the details in a major contract, it is inevitable that there will be mistakes. If millions or hundreds of millions of dollars are on the line, this cannot be risked, especially if the outcome that occurs was not wanted by both parties in a contract, due to a semantic-type error.

The resolution mechanism I was referring to is an x of y ability to modify/nullify the contract. As far as I know, this is a standard feature in the bitcoin smart contracts and Rootstock.
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March 25, 2017, 01:55:34 AM
 #4

It is impossible to have truly smart contracts (unless extremely simple). With the length required to spell out the details in a major contract, it is inevitable that there will be mistakes. If millions or hundreds of millions of dollars are on the line, this cannot be risked, especially if the outcome that occurs was not wanted by both parties in a contract, due to a semantic-type error.

The resolution mechanism I was referring to is an x of y ability to modify/nullify the contract. As far as I know, this is a standard feature in the bitcoin smart contracts and Rootstock.

x of y ability? Could you please elaborate that?
On the risks involved in making smart contracts, I think the programmers (who will be well paid) are expected to underwrite this risk. If they screw up on making a smart contract, they can be sued for damages in the non-smart world.
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March 27, 2017, 08:43:17 PM
 #5

It is impossible to have truly smart contracts (unless extremely simple). With the length required to spell out the details in a major contract, it is inevitable that there will be mistakes. If millions or hundreds of millions of dollars are on the line, this cannot be risked, especially if the outcome that occurs was not wanted by both parties in a contract, due to a semantic-type error.

The resolution mechanism I was referring to is an x of y ability to modify/nullify the contract. As far as I know, this is a standard feature in the bitcoin smart contracts and Rootstock.

x of y ability? Could you please elaborate that?
On the risks involved in making smart contracts, I think the programmers (who will be well paid) are expected to underwrite this risk. If they screw up on making a smart contract, they can be sued for damages in the non-smart world.

I was referring to the concept of multi-signature transactions. So fraud could be prevented. In addition, with one of the smart contracts I was investigating (not sure of the specific one) there was language written in that if none of the parties gave the required signatures, the funds would be returned. So there was no risk of funds getting permanently stuck in escrow.

Programmers cannot underwrite the risk. Take a look at the DAO, eg. At least $50 million USD worth of cryptocurrency was "stolen." There are no programmers making enough to take on that kind of risk.
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March 28, 2017, 01:27:04 AM
 #6

Programmers cannot underwrite the risk. Take a look at the DAO, eg. At least $50 million USD worth of cryptocurrency was "stolen." There are no programmers making enough to take on that kind of risk.

True, but I expect lawyers to be replaced by programmers. Right now, there are law firms which are so big that they have the capacity to underwrite such risks. Programmers might not make so much money, but software companies do have the money. If some big company (say Microsoft or Google) actually gets involved, then you don't have to worry about the money.
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March 28, 2017, 03:58:41 PM
 #7

Programmers cannot underwrite the risk. Take a look at the DAO, eg. At least $50 million USD worth of cryptocurrency was "stolen." There are no programmers making enough to take on that kind of risk.

True, but I expect lawyers to be replaced by programmers. Right now, there are law firms which are so big that they have the capacity to underwrite such risks. Programmers might not make so much money, but software companies do have the money. If some big company (say Microsoft or Google) actually gets involved, then you don't have to worry about the money.

I agree with you, so maybe the lawyer is not overly contribute to solve this case bitcoin

   
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AttorneyBitcoin
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March 29, 2017, 06:22:48 AM
 #8

As long as humans have misunderstandings, commit fraud, are dishonest, make mistakes, get into difficulties, there will be a need for an educated, calm and understanding professional person to help smooth it out and fix things as much as they can be fixed. That person is called an Attorney.

I'm delighted by Smart Contracts. They will hopefully be good for commerce between people. Every deal is different and all the facts and circumstances surrounding any given deal will also always be different. The variables and those things that are unforeseen are the reasons that attorneys can contribute to any given deal.

Sometimes things get over worried and a deal that could have happened never does. On the other hand, and more often, a deal is not considered carefully enough and if something does go wrong, there is no recourse or no fixing it.

Many deals are pretty straight forward and have many aspects that repeat themselves leading to standard contracts that can be modified for a particular deal. Realtors often use these types of contracts and for the most part attorneys are not needed. But it was attorneys who put them together and refined them to begin with.

Let's hope for a positive evolution of contracts and commerce with the advent of platforms that incorporate these new contracts. I saw that Arizona is allowing them legally. Along with the Smart Contracts it is my hope that peer to peer payment with crypto coins as part of the contracts becomes more widely accepted.

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March 29, 2017, 06:27:24 AM
 #9

Currently lawyers and judges spend inordinate time in cases arguing over definitions of words and intended meaning of short phrases and sentences, and come up with all kinds of arguments for their side of a case. What appears to be a relatively simple case routinely results in decisions of hundreds of pages. As smart contracts become ubiquitous, and if it becomes standard practice to accept the code as law, this will radically redefine lawyers' roles, as well as impact their demand. I cannot ever see trusting code as law, because there can always be unintended consequences, especially in critical cases, but it can become standard to have a resolution mechanism built into the code, including adjudicators. Opinions?

Complex resolution mechanisms that rely on a set of arbitrary rules can serve as a basis for the merit of a law and that can be written in cryptography. That said when a dispute on the value of a certain component of the law is called into question or rewritten the interpretation of a smart contracts may not be dynamic enough to fix a judgement. Therefore a resolution would be for dynamic smart contracts that adjust the interpretation of a set of rules based on a codex of laws.

In the end we will still need lawyers to interpret and adjust the smart contracts since they will likely never be fully automated due to changes in societal values and new use cases and interpretations  as a baseline however yes they can provide value judgments and be utilized as a new resolution dispute mechanism similar to torte law for lawyers and adjudicators in their toolbox.
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April 02, 2017, 05:07:37 PM
 #10

Take a look at the DAO, eg. At least $50 million USD worth of cryptocurrency was "stolen." There are no programmers making enough to take on that kind of risk.
Apparently there are people entrusting those programmers with a couple hundred million USD. The DAO showed smart contracts won't work, as people don't understand them. It also showed Ethereum can't be trusted to be "code is law" when the founder's money is at stake.
You got the love the irony that the one person who understood the contract is called "The Attacker".

I cannot ever see trusting code as law, because there can always be unintended consequences
The obvious solution would be to only use very simple smart contracts. Say: "if address A holds more than X amount on May 1, 2017, send it to address B. If else, send to address C".

The thing with lawyers is that most people still don't understand the contract they sign. Take something simple: do you understand the details of your mortgate agreement? Your car finance? Or just your local laws? Most people only know the basics, not the details. That means you either have to trust a lawyer or a programmer to do the right thing. Adding legal complications to a smart contract makes it just a classic "dumb" contract again.

So far I haven't seen any real applications of smart contracts. Many theoretical possibilities have been mentioned, like a car rental company, but nothing real. I doubt it will happen, for the above reasons.

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April 04, 2017, 12:51:40 AM
 #11

So far I haven't seen any real applications of smart contracts. Many theoretical possibilities have been mentioned, like a car rental company, but nothing real. I doubt it will happen, for the above reasons.

You have to give it time. People will first get used to simple smart contracts, see that they work and then have the confidence to try them out in real applications. This is not something to be rushed into.
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April 04, 2017, 03:13:26 AM
 #12

Programmers cannot underwrite the risk. Take a look at the DAO, eg. At least $50 million USD worth of cryptocurrency was "stolen." There are no programmers making enough to take on that kind of risk.

True, but I expect lawyers to be replaced by programmers. Right now, there are law firms which are so big that they have the capacity to underwrite such risks. Programmers might not make so much money, but software companies do have the money. If some big company (say Microsoft or Google) actually gets involved, then you don't have to worry about the money.

But the risks cannot be "underwritten." Who is to say what the smart contract is supposed to achieve, if the code is not law? All the parties have the ability to review the smart contract in advance of signing.

Let's say party A and B agree to a smart contract, and both of them believe that if C happens, then the smart contract executes D. C does happen, but actually the smart contract executes E.  The only way that the desired outcome could be achieved at that point was if there was a built-in dispute resolution mechanism in that smart contract, which would have to involve humans (because if it was known that the code of the smart contract was flawed, then obviously it would have been fixed).

I disagree that this makes smart contracts useless. An enormous number of things can be automated and efficiency increased. Adjudication might only occur in a tiny percentage of the smart contracts.

Also, if the intent was written into the smart contract in plain language, this could be used for adjudication. It is easy to see, eg, that in the DAO no one intended for someone to be able to remove $50 million for herself.

A subset of smart contracts could be "code is law." Parties would agree to this beforehand.
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April 05, 2017, 12:58:55 AM
 #13

But the risks cannot be "underwritten." Who is to say what the smart contract is supposed to achieve, if the code is not law? All the parties have the ability to review the smart contract in advance of signing.

Let's say party A and B agree to a smart contract, and both of them believe that if C happens, then the smart contract executes D. C does happen, but actually the smart contract executes E.  The only way that the desired outcome could be achieved at that point was if there was a built-in dispute resolution mechanism in that smart contract, which would have to involve humans (because if it was known that the code of the smart contract was flawed, then obviously it would have been fixed).

In a scenario where A and B get programmers to write the contract, then the programmers could be held liable. This would have to follow a lengthy court process, which wouldn't be smart.  Smiley
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April 08, 2017, 08:03:11 AM
 #14

But the risks cannot be "underwritten." Who is to say what the smart contract is supposed to achieve, if the code is not law? All the parties have the ability to review the smart contract in advance of signing.

Let's say party A and B agree to a smart contract, and both of them believe that if C happens, then the smart contract executes D. C does happen, but actually the smart contract executes E.  The only way that the desired outcome could be achieved at that point was if there was a built-in dispute resolution mechanism in that smart contract, which would have to involve humans (because if it was known that the code of the smart contract was flawed, then obviously it would have been fixed).

In a scenario where A and B get programmers to write the contract, then the programmers could be held liable. This would have to follow a lengthy court process, which wouldn't be smart.  Smiley

That's exactly my point. If you want programmers to be "liable", you cannot specify the conditions under which they are liable for what, because if those were known then the smart contract would have been written differently such that the conditions could not occur. The only remaining possibility is a blanket statement, which would require the courts. So it is not feasible to have programmers bear liability, the contract would just use the courts without the coders.
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April 11, 2017, 12:12:05 AM
 #15

But the risks cannot be "underwritten." Who is to say what the smart contract is supposed to achieve, if the code is not law? All the parties have the ability to review the smart contract in advance of signing.

Let's say party A and B agree to a smart contract, and both of them believe that if C happens, then the smart contract executes D. C does happen, but actually the smart contract executes E.  The only way that the desired outcome could be achieved at that point was if there was a built-in dispute resolution mechanism in that smart contract, which would have to involve humans (because if it was known that the code of the smart contract was flawed, then obviously it would have been fixed).

In a scenario where A and B get programmers to write the contract, then the programmers could be held liable. This would have to follow a lengthy court process, which wouldn't be smart.  Smiley

That's exactly my point. If you want programmers to be "liable", you cannot specify the conditions under which they are liable for what, because if those were known then the smart contract would have been written differently such that the conditions could not occur. The only remaining possibility is a blanket statement, which would require the courts. So it is not feasible to have programmers bear liability, the contract would just use the courts without the coders.

You don't have to specify the exact conditions. Think of the DAO. The program did not behave as it was supposed to.
I think in cases like this, you can say that the programmers are liable.
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April 13, 2017, 08:07:03 PM
 #16

Even the smart contracts will be subjected to litigations no matter how simple. No matter how smart contract are people always engage in it in other to avoid cost implications and to save time. The moment they parties run into problem, that when the issue of motions and counter motions will happen and the lawyers will come in. So I dont see this as an alternative but also a way to make work easier.
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April 14, 2017, 06:20:48 AM
 #17

You don't have to specify the exact conditions. Think of the DAO. The program did not behave as it was supposed to.
I think in cases like this, you can say that the programmers are liable.
Who is ever going to take a programming job, if he will be held accountable for the loss of $200 million?

That's the difference with lawyers: they cover their own interests in legal disclaimers. If your lawyer makes a mistake, he'll most likely get away with it.
Most software comes without warranty too: if a software programmer makes a mistake, he isn't liable any damage it causes.

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April 18, 2017, 08:12:33 AM
 #18

What if the lawyers of the future will also be programmers or at least have a basic knowledge of programming/coding? So, when a client wants to have a contract, a lawyer will simply write code (contract clauses basically). If we will be able to build a truly capable platforms for the contracts, such smart contracts could also be run as simulations and be checked in advance for "bugs" (parts which are not working).

I am a lawyer and I see a huge potential in combining code and law. Smart contracts would help lawyers and clients at the same time and make so many things better.
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April 24, 2017, 06:46:38 PM
 #19

I think future smart contracts can be seen like standartised,unified agreements
they should be structured the way that illiminates duality,divided into categories,this should minimize the amount of additional info required
think of them as of ,for example,employment contracts (in a way that all of the contracts are individual and differ ,but the legal basis and their structure is pretty similair)

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April 24, 2017, 07:45:17 PM
 #20

I think future smart contracts can be seen like standartised,unified agreements
they should be structured the way that illiminates duality,divided into categories,this should minimize the amount of additional info required
think of them as of ,for example,employment contracts (in a way that all of the contracts are individual and differ ,but the legal basis and their structure is pretty similair)

Can you explain what you mean? I'm not sure what a standardized, unified agreement is. With employment contracts, they vary considerably from occupation to occupation. There is no standard employment contract.
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