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One of the applications that have come from the surge in research around blockchain is the idea of a ‘smart contract’. The core purpose of a smart contract is to automate obligations which are held as code. Lawrence Lessig notably stated that “code is law”(Code Version 2.0, Lawrence Lessig, Basic Books, 2006). Code is essentially a set of rules or instructions, much like the law.
The impact this automation would have on lawyers could be significant. Law firms are already striving for better efficiency to reduce costs and streamline workflows. The beginning of this process starts with designing a consensus agreed template code
language, which will allow firms globally to have a standard when creating contracts.
Lexis®PSL subscribers can enjoy expert guidance on numerous topics, such as this one. If you are not a subscriber, you can take a free trial of Lexis®PSL here.
There is no clear definition when it comes to what a smart contract is. At the start of their inception, smart contracts have been limited to software architects and web developers creating the rules and validation. John Stark in his articleMaking Sense of Blockchain Smart Contracts outlines
the two different ways that the term ‘Smart Contract’ is understood:
Smart contracts could be built on a pseudo code of “If” and “Then” statements. I have taken an example and created a pseudo code format for a Call Option Agreement from LexisPSL.
In consideration of the payment of £[insert figure] by the Buyer to the Seller, the Seller grants the Buyer an option to purchase the Call Option Shares subject to the terms, conditions and provisions set out in this agreement (the Call Option).
S2.1 “Option” In a pseudo code format:
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