IoT Enabled Contracts – Dynamic Contracts Are On The Way – What Will Lawyers Do?

As a transactional lawyer, I have countless times assisted clients in renegotiating and drafting amendments, side letters and updates to signed contracts to address issues that come up from time to time during the contractual relationship. Let’s face it: contracts are a static, binding photograph of a situation, and their purpose is to address issues that may arise in the future so that in case a dispute arises the parties (or a judge) may refer to the parties’ original intention.

However a binding, static contract often fails to address what is likely to be the key issue between the parties: unless the contract covers a one shot transaction (such as the sale of a good) – the contractual relationship between the parties is by nature a dynamic, evolving relationship which – whether it is related to the provision of services or a corporate joint venture – will require innumerable compromises, changes and adaptations to the original ideas.

Good lawyers with sound experience know this and to the extent possible draft contracts that reflect principles which can be applied to an evolving relationship, however this may not be sufficient.  Often problems arise which had not or could not have been contemplated at the outset of the relationship and the key principles set out in the contract are not sufficient to address them. A renegotiation and amendment to the contract is necessary.

This however means that new paper will be produced and ultimately it will be difficult to make sense of the history of the relationship.

IoT enabled contracts which allow for a dynamic relationship may just be what companies need.  This type of contract would respond to external information fed into it and evolve with the parties’ relationship.  While this will have huge benefits in tracking the progress of ongoing relationships, the risk is of course that of making the original agreement between the parties useless.

As always, however, law and the practice of law will need to adapt to the needs of the market, and this might create the need for lawyers to evolve as well a new way of drafting contracts – with clauses, formulas and principles designed to work in an adaptive relationship.

See interesting information at: https://www.artificiallawyer.com/2017/05/08/guest-post-the-contract-stack-revolution-begins/

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