Well, you knew it was coming, right? In this era on artificial intelligence and automated everything, you just knew some really smart person would create self-executing and self-enforcing so-called “smart” contracts.
‘Smart’ contracts are generating a lot of interest because of their innovative nature and potential to substantially boost efficiency in many areas of law and business. But these contracts — digital agreements that automatically fulfill themselves — come with serious limitations as well. On a recent podcast, Wharton’s Kevin Werbach and Nicolas Cornell discussed their ongoing research into smart contracts.
Key points included:
- A smart contract is an agreement in digital form that is self-executing and self-enforcing. (Sounds great)
- A smart contract, in theory at least, takes away the legal system entirely. Now there is nothing but that digital agreement. (Uh-huh)
- The reality is, even though we think machines can render contracts effectively, there are lots of situations where they cannot. (Correct)
- Contracts must be executable in machine language to be “smart” For example, if a contract says something like ‘you’ll use best efforts,’ which is frequently included in human contracts, what does that actually mean? (Don’t confuse the machines, people!)
- Renegotiation could be tricky — When people negotiate a contract in real life, a traditional contract, there is still the possibility they can re-negotiate it. (Again, the machine’s heads if they have them will be spinning here)
Werbach and Cornell say, “Smart contracts force us to re-examine just what contract law is actually doing. Is it basically prospectively creating new rights, or is it retrospectively — as we argue — creating a mechanism for remediation when something goes wrong?”
Well, one thing we know for sure is that most humans couldn’t agree on the Ten Commandments if Moses was buying the drinks. As a species, we dispute and fight about everything in our never-ending quest to “teach” the other side “a lesson.” Disputes are everywhere and until the machines take over this world, they will continue to be. When disputes affect YOUR business, you want an actual human business litigator like Dean Sperling there to resolve YOUR matter with YOUR best interests in mind.
More on the case:
The Promise — and Perils — of ‘Smart’ Contracts