Technology

alt.legal: You Don’t Know How To Draft Contracts Anymore

Blockchain isn't going to eliminate lawyers, but it's going to radically change how we write contracts.

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This is the second article in a series focused on blockchain and cryptocurrency. For part 1, please see here.

In the midst of my groggy waking routine one morning last week, my blurry eyes perked up when I saw an email from the precocious Amy Wan (@amyywan), famously the topic of my first part in this series. The email had come in overnight, timestamped around 4 am Eastern/1 am Pacific.

Her first line: “I get so peeved when I read an article like this.” Obviously, peeved enough to fire off a late night mini-rant.

The “this” referred to a blog post that is typical these days: a provocative declaration that AI will put an end to all lawyers. The author, who is not a lawyer, accuses lawyers of behaving primarily in existential defense of the profession and dismisses any future role for lawyers in a world where machine learning and the blockchain is a superior and more objective arbiter of a contract. I imagined this solicited an epic eye roll from Amy, who demanded we address this sophomoric notion.

So today, I am happy to oblige. But to understand what lawyers will and will not do in a smart contract-enabled world, we should first consider two questions:

  1. What if there are areas of transactional practice that will effectively be reduced or eliminated by the full onset of technology-enabled contracts, especially in the blockchain?
  2. What are the new skills that will be required of lawyers in the foreseeable tech world?

To get some answers, I reached out to the experts.

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Where will the practice be reduced or eliminated by the blockchain?

Interestingly, Amy’s head went to litigation, not transactional practice. “The beautiful thing about smart contracts is that they essentially act as digital escrows,” Amy said. “So, I think the biggest threat to the legal industry is the reduction in litigation around the collections/enforcement of judgments and disputes.”

This makes sense, and ultimately, it’s an appropriate re-scoping and framing of what the blogger misattributed as the dagger for lawyers. Collections practice is still a substantial one, as enforcing judgments and getting money all the way between parties is still an inefficient step that the blockchain squarely solves.

Joe Raczynski (@joerazz), one of Thomson Reuters’s resident blockchain experts, also focused on some of the tactical efficiency, like the function of notary publics. “The essence of this service is to witness and certify validation of signatures on documents and certify the document itself,” said Joe. Distributed Ledger Technology has this as its core tenets.”

In terms of how much of the practice this will reach, Joe believes that “any standardized legal document that is easily modified and replicated” will be in play, over time.

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The question will ultimately become how much existing contracts can be reduced to simple, standardized ones. A great example is the ISDA Master Agreement, used for over-the-counter derivative transactions. While the negotiation of the master agreement between parties can require substantial effort, once it is executed, future transactions are far simpler negotiations on a fixed set of terms. When blockchain technology introduces a new impetus for simplification and standardization of contracts, will new “master agreements” appear for a broader set of contracts?

What skills will the blockchain-empowered transactional lawyer require?

To use smart contracts, the terms literally need to be reduced to conditional statements in code. So far, transactional attorneys have translated these conditional statements and intentions into a different code: wordsmithing language in constructing clauses. In other words, English.

Can all wordsmithing be replaced by coding smart contracts? Does this mean transactional attorneys will need to learn how to code?

Maybe not, but it will be important to have some familiarity. “Although lawyers don’t need to be coders, an elementary understanding of code would be helpful,” Amy said. Lawyers will need to be able to work with the developers that will be the last mile in this new medium of contract. “I foresee lawyers working with developers to flesh out the intent of parties, and all the thinking behind what could possibly go wrong with the smart contract — and address those issues accordingly.”

Joe aligned with this point. “It will be invaluable for lawyers to do their best to get their hands dirty with some basic coding skills. To be clear they will not have to code, but having this mindset will aid in their ability to communicate with colleagues, who will be more and more technical.”

David Curle (@davidcurle), another Thomson Reuters thought leader and a frequent speaker on these topics, agreed generally with the standardization of contracts that will come with the smart contract movement, but he also noted that “there is still a large bit of legal work that consists of advocacy, and that’s where the wordsmithery skills should come in.”

Sticking around for the new normal

It seems safe to say, for now, that the smart contracts on the blockchain will not eliminate all lawyers, and that they will still be around for the complex non-standard agreements. But where transactional attorneys have historically exhibited skill in wordsmithing English, they will soon need to master new mediums of expressing how they represent their clients. It is a wildly different skill set, and systems of help and support will be needed.

But the basis for how these terms are structured and represented will still be the function of human attorneys, for the foreseeable future.

Ed Sohn is VP, Product Management and Partnerships, for Thomson Reuters Legal Managed Services. After more than five years as a Biglaw litigation associate, Ed spent two years in New Delhi, India, overseeing and innovating legal process outsourcing services in litigation. Ed now focuses on delivering new e-discovery solutions with technology managed services. You can contact Ed about ediscovery, legal managed services, expat living in India, theology, chess, ST:TNG, or the Chicago Bulls at edward.sohn@thomsonreuters.com or via Twitter (@edsohn80). (The views expressed in his columns are his own and do not reflect those of his employer, Thomson Reuters.)

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