5000 years ago, most contracts were oral, scratched into clay tablets with a reed or laboriously transcribed onto animal skins or papyrus.
In our modern, hyper-connected world – the digital age – you can create a contract in many different ways:
- Paper-based (hard copy)
- Electronic (soft copy)
- Digital (created, signed and managed on-line)
- Coded (automated, also known as smart or intelligent contracts).
Electronic v Digital
An electronic contract is often nothing more than an electronic (pdf, docx or xls) form of a paper contract.
It is negotiated in much the same way as a paper–based contract. It is shared and sent by e-mail or using electronic file-sharing. It may be signed using an electronic signing protocol, or it may be a scanned copy of a hard copy wet-signed contract. Once in soft copy it is stored on the cloud as a single immutable document.
By contrast, a digital contract may be negotiated before it is created – its creation is based on a common clause bank and answering a series of questions. This means that a whole suite of contracts designed for different procurement routes, payment strategies, risk approaches or forms of collaboration could be replaced with a single questionnaire.
But beware! This is no simple tick-box exercise. It is about making informed choices about the types of clauses needed for a specific project or transaction.
Once created, there may further refinements done on a single file with digital history and then signed digitally using a platform like DocuSign. This contract would then be stored with other contract documents on a digital shared platform, with most information open to the whole project team. Updates to the contract e.g. variation orders, new programmes become part of the contract data. Digital contracts will weave seamlessly into the BIM landscape as they are based on collaborative data-sharing and clear/automated processes.
A digital contract and the data it collects are assets during the whole asset lifecycle.
Digital v Smart
Beyond digital contracts are smart (or intelligent) contracts. These are created, negotiated and agreed in spoken language, before being translated into computer code. A smart contract must be capable of self-execution – at least in part – with minimal human intervention.
A smart contract updates automatically, creating a live contract with clear auditable history from its creation until its demise.
Whilst there is much debate about the role of smart contracts, there are many barriers to overcome before they will become commonplace and useful for most businesses.
What should you do?
At 500 Words, we believe that your contracts should help you do business. It’s time to completely rethink our approach to contracts, before designing tools or software to implement a flawed process or broken content.
You should carefully consider whether any shiny new technologies get to the core of the issues you really have with your contracts or is merely tinkering at the edges.