Facilitating computer code and natural language into a legally enforceable contract.
A smart legal contract is a new digitally native governance tool that combines legally enforceable natural language and executable code.
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.
Imagine an example set in the future: a space station in permanent orbit around the Earth.
The station has outsourced its oxygen supply to Hurricane Inc. via an SLC, sensors automatically detect its oxygen reserve levels and the SLC shares this sensor data in real-time. When oxygen reserves have dipped below three months’ supply, a purchase order is automatically issued, inventory is dispatched and estimated delivery times are provided.
An revised and published version of this paper can be found in the 2022, Oxford Smart Legal Contracts: Computable Law in Theory and Practice textbook.