I will tell you how to minimize legal risks when developing smart contracts in this article.
Smart contracts are programs that automatically initiate the transaction process when certain conditions are met. From a legal point of view, they differ from standard contracts in that, according to the terms of the transaction, the obligations arising from it can be performed automatically without a separate expression of the will of the parties.
How smart contracts work
The obligations of the participants are provided in a smart contract in the form of “if-then” (for example: “if Party A transfers funds, then Party B automatically transfers the rights to some property object”). At first glance, everything is about the same as in a regular sales contract. However, smart contracts are completely autonomous. For example, a certain person is the owner of a digital right to a box with diamonds, which has an individual number. When buying in the information system, a transaction with such an object will be executed automatically, without additional expressions of the will of the parties - the seller will have a digital right written off, and the buyer has money, and it will not be possible to challenge this according to the general rule.
Smart contracts are concluded between two or more participants, who can be both individuals and legal entities. Such automated contracts allow the exchange of money, goods, securities and other assets. An important feature of smart contracts is that they can only work with assets located in their digital ecosystem. That is, any asset or rights to it must first be digitized.
Pros of smart contracts
First of all, it is convenience. Manual processing of documents takes a lot of time and stretches the terms of the deal Smart contracts involve an automated process and in most cases do not require the personal presence of the parties, which saves valuable time.
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Competent development of such agreements, taking into account the rigid concept of a smart contract, all possible details and potential force majeure situations due to imperfect computer code is not an easy task. Errors, as the Parity example shows, can be very expensive for companies, so it is best to involve a professional lawyer with relevant experience to create a contract using an auxiliary smart contract.