Who’s going to write ‘smart contracts’ – the lawyer or the programmer?

Blockchain Regulations Worldwide
UC Davis College of Engineering - Smart Contracts
Jacob Enoch
Written by Jacob Enoch

I have often come across the tired joke about lawyers not being “good at numbers” unless it’s to do with their fees. My experience is that this joke has substance. In general, lawyers see themselves as masters of the written or spoken word and not as people whose job it is to deal with numbers (never mind with computer code). And thus, it is customary in the legal profession, to classify legal studies as part of the Humanities, as distinct from the exact sciences.

I have always believed that was a basically false classification. My position has been that, whether we are talking about conducting a litigation proceeding (which requires the orderly and logical construction of an argument that leads to a conclusion) or about drafting a contract (building a “tree” of possibilities, relating to alternative scenarios and establishing provisions with regard to each scenario, basically putting in place a flow chart), the skills which are required of a competent lawyer are, in no small part, akin to the exact sciences (logic, algorithms, etc.).

Currently, with the rise of “smart contracts” based on Blockchain technology, the question seems to have been decided – the lawyer’s work will require, at the very least, working knowledge, and perhaps even a deep understanding, of programming.

The basic idea behind “smart contracts” came long before Blockchain technology (commonly attributed to Nick Szabo, who published articles on the subject as far back as 1996), but its significant implementation came about with the breakthrough of the technology into our lives.

Will the lawyers’ future role be reduced by smart contracts?

One of the accepted definitions of a “smart contract” is that it is a computerized protocol that enables, validates, or enforces negotiations or the implementation of a contract. In view of the fact that a “smart contract” is a computer program which, by definition is written in programming language and not in human language, the task of writing the program is entrusted to a programmer and not to a lawyer. This fact has led many people to believe that the future role of lawyers will decrease and may even disappear in this context, as is expected to happen with various other intermediaries in the Blockchain era.

But I believe that this assessment is not accurate. While there can be no doubt that the lawyer’s role will change significantly, for as long as the standard client cannot read a contract written in a computer code, the lawyer’s “translation” services will be required to describe the workings of the computerized “smart contract”, in human language.

For example, in the case of a “smart contract”, using the simplest example that can possibly be imagined, if the owner of a copyright in a musical work wants to allow it to be downloaded from the internet by means of a “smart contract” that effects payment for each download, it would be entirely preferable for the download process to incorporate a document in which the consumer confirms various matters – starting with the consumer’s understanding of how the “smart contract” works (downloading the song, the format, the automatic non-refundable transfer of virtual money, etc.); through to questions which are not necessarily incorporated into the code (such as the nature of the right acquired, the restriction of use for personal and private use, the fact that the copyright in the song is not transferred, etc.); and ending with standard legal clauses whose inclusion in such a document should be considered (such as, applicable law, place of jurisdiction, reference to the applicability of various laws, including provisions regarding remote purchases, etc.).

Of all the “translation” tasks outlined above, the first is of particular interest – the verbal description of how the “smart contract” works. Drafting text of this kind is not the same as drafting normal legal text and will require lawyers to fully understand how such software operates (though not necessarily the code itself but the underlying algorithm which it executes). Naturally, without such understanding, the lawyer will find it difficult to accurately describe how the software that makes up the “smart contract”, actually operates.

The bottom line is that lawyers will continue to draft contracts (or at least describe them), but in order to do this properly and to serve their clients faithfully, they must develop an understanding of the algorithmic methodology of “smart contracts” and substantiate the claim – once and for all – that lawyers are engaged in a profession akin to the exact sciences.

About the author

Jacob Enoch

Jacob Enoch

Jacob Enoch is a partner at M. Firon & Co., heading the firm’s mergers and acquisitions department. He has been recognized by Legal 500 as one of Israel’s 11 leading M&A lawyers and one of Israel’s 5 leading arbitration & mediation lawyers. Additionally, Jacob is an adjunct lecturer at the Buchman Faculty of Law at the Tel Aviv University as well as a member of the International Chamber of Commerce (ICC) Commission on Arbitration and ADR.

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