Managing The Machines

As technology plays a greater role in commerce, so legal contracts need to be adapted

- Alexia Christie

Technology is changing almost every aspect of our lives. It is therefore no surprise that it has already had a profound effect on how legal contracts are made (and signed) – for example, we now negotiate via email, video conferencing and Skype and sign electronically without ever meeting face to face.

Technology is also revolutionising other broader issues of electronic contracting, including identification of parties, and is forcing us to rethink the fundamental ideals of what it means to conclude and perform under a contract. 

South African law has managed to keep pace with many key developments. Our law specifically recognises the validity of electronic contracts, accepts contracts concluded with electronic agents, and is even starting to recognise biometrics as the equivalent of a signature. Smart contracts have been around for some time, but the advent of distributed ledger/blockchain technology such as Ethereum now brings us to the brink of a new age. Think ‘Smart Contract 2.0’. Smart contracts will fundamentally change the way in which we contract, introducing significant benefits and transforming certain sectors and industries. It will likely bring with it disintermediation and decentralisation. It will also require a new approach to lawyering to navigate and address the complex issues. Smart Contract 2.0 will require the ‘smart lawyer’.

Defining the terms

We need to unpack what the term ‘smart contract’ means. To date, there has been much debate and confusion, mainly arising from the distinction between legal code and ‘smart code’, or the technology that automates performance in accordance with pre-determined rules.