Smart Legal Contracts: A Model for the Integration of Machine Capabilities Into Contracts

48 Pages Posted: 27 Jan 2021

See all articles by Natasha Blycha

Natasha Blycha

Herbert Smith Freehills

Ariane Garside

Herbert Smith Freehills

Date Written: December 7, 2020

Abstract

We set out a Smart Legal Contract (SLC) Model to facilitate the integration of computer code and natural language into a technically functional and legally enforceable contract. We propose a formal definition of an SLC for the purposes of scoping this Model, and within the SLC Model identify key foundational attributes that require a different approach to that of traditional contracting. We then use this framework to consider some legal principles and practical methodologies for ensuring that neither the legal nor code elements of the contract undermine the other’s fitness for purpose and effectiveness in their respective domains of operation.

We identify that there is a need for mechanisms of governance in the natural language over the status and effect of SLC coded elements. These mechanisms focus on the linking and integration of natural language to related code, and so also have the effect of enhancing the drafter’s ability to ensure the intended agreement of the parties is unaffected (and indeed enhanced) by the inclusion of code. Finally, we argue that the SLC Model will result in a viable legal contract with enhanced functional (‘smart’) capabilities that digitally automate the performance of certain (but not all) rights and obligations via the inclusion of coded instructions.

Keywords: Smart Legal Contracts, Smart Legal Contract, Smart Contract, digital law, automated law, self-executing code, contract law, Blycha and Garside model, Rule-Making Components, Active Components, Machine-readable contract, natural language, conjoined clause, SLC, smart policy document, SPD, conjoined

JEL Classification: K, L, P, O

Suggested Citation

Blycha, Natasha and Garside, Ariane, Smart Legal Contracts: A Model for the Integration of Machine Capabilities Into Contracts (December 7, 2020). Available at SSRN: https://ssrn.com/abstract=3743932 or http://dx.doi.org/10.2139/ssrn.3743932

Natasha Blycha (Contact Author)

Herbert Smith Freehills ( email )

101 Collins Street
Melbourne, 3000
Australia

Ariane Garside

Herbert Smith Freehills ( email )

101 Collins Street
Melbourne, 3000
Australia

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