Smart contracts are like digital contracts created and stored on Ethereum Blockchain. The advantage with Smart Contracts is that it will be impossible for either of the entities to go back in time and change the contract. Smart contracts can also facilitate transfer of tokens/currency between the entities based on contract terms. A few companies & individuals are already working to develop solutions around Smart Contracts. Most of these solutions deal with entities & contracts within the digital world. For example, there are solutions being built around leasing spare storage space or processor capacity using smart contracts.
CONSENSYS is a company found by serial entrepreneur, Joseph Lubin. Joseph was also a cofounder of Ethereum. CONSENSYS is investing, partnering & building solutions in an effort to bring Blockchain to mainstream usage. One among these initiatives is OpenLaw. OpenLaw is trying to bring Blockchain Smart Contracts to replace real world contracts provided they are accepted and approved by federal agencies. It is a Blockchain-based protocol for the creation and execution of legal agreements. Proposed flow facilitates creation, storage and also digital signatures of Blockchain based legal contracts between entities.
People often getting into legally bound contracts/agreements with one another. They deal conflicts arising over the contract terms in the court of law. Litigations will rise due to one entity not honouring the contract, difference in interpretations of terms and sometimes forged or fake contract documents. While the first & second type of litigations are straight forward, the forged & fake contract documents pose serious challenges to courts & related federal agencies. Prosecution will have spend days & weeks to determine the authenticity of the contracts & signatories. With OpenLaw based smart contracts you can avoid these litigations.
A lot of places where people sign contracts on a daily basis, for example, employment contracts or lease agreements can use Blockchain based contracts. For employers who recruit and manage a large pool of employees, a Blockchain based contracts system that helps to create, maintain, track and execute contracts will reduce their cost per contract. Using OpenLaw, lawyers and organizations can create and manage the execution of legal documents. They use their propreitary markup language to help create legal document templates. With OpenLaw, any Ethereum smart contract can be embedded into a legal agreement.
It will be interesting to see how the governments will deal with this technology in the coming days.