Interview by Dan Selman, CTO Clause Inc.
Matt, you recently joined Clause as Integration Lead, what attracted you to Clause?
There is a lot of hype in the ‘smart contract’ space and it was really refreshing to understand the Clause point-of-view. The chance to connect contracts to the real world is exciting; with or without a blockchain!
If we build connected contracts we can find missed revenue opportunities, better manage risk or remove tedious steps from manual processes. Right now, most people making legal agreements don’t care about blockchain, let alone whether the agreement can execute on any particular blockchain platform. I’m looking forward to building solutions that work for real law firms and real businesses, without any partisan nonsense.
Secondly, the chance to be involved in the open-source community was really attractive too. Working with open-source code, contract templates and working groups from the Accord Project must surely lead to greater trust and utility of the technology.
Much of your career has been spent working with large companies deploying business process management and decision management technology. What similarities and differences do you see between these technologies and smart legal contracts?
Yes, you’re right. In the past, I’ve focused on helping organisations to improve and automate their internal processes. Instead ‘connected contracts’ let us tackle the shared processes between parties, such as the transfer of assets in a supply chain or the lifecycle of intellectual property.
From a workflow perspective, there are lots of similarities here. Processes break-down when work gets handed back and forth between teams, or when different systems aren’t integrated. With the advent of decentralised systems, we can now apply familiar process improvement approaches to processes between organisations. We haven’t solved that problem well in the centralised-era.
Also, by decision management, we mean the process of managing and automating the rules in business policy: pricing decisions, eligibility checks and so on. Similarly, contracts contain business logic. Our goal is to make a contract a living agreement that can tell you what state it is in, or respond automatically to data. The way that we need to define and govern this logic is also similar in both scenarios. In particular, we need to give control to subject-matter experts as opposed to developers.
However, unlike enterprise automation, smart legal contracts are still in their infancy. There is a need to define and agree on the standards, for example. Again, the work of the Accord Project is fundamental to change in the industry.
How does blockchain and DLT relate to the world of contracts?
In general, the term smart contract is used to refer to the code that runs within a blockchain to make or validate changes to its data. Often, the only legal aspect of this code is a hard-coded link back to a traditional legal document. In this scenario, the contract and the code are decoupled and there can be debate about which has primacy.
When reading a contract it quickly becomes clear that most contract text is not suitable for automation. Instead, it is individual clauses that can be automated. For example, one clause might describe the conditions for making a payment, and another might describe how to make the payment. If we can detect the external stimuli for these conditions then we can trigger the payment automatically, for example.
The combination of ‘smart clauses’ with prose makes true smart contracts that keep their legal strength but still let us apply automation incrementally.
We can then make a business decision whether to run the ‘smart-clauses’ on a blockchain platform or off-chain depending on the trade-offs between trust, privacy and cost.
The tag-line for Clause is “connected contracting”. What sort of other connections to the outside-world do you think a contract will need to have?
I have a long list! Essentially it comes down to a few core categories: payments, sensors, systems of record and manual interactions.
Payment gateways and accounting systems will be a key target for connected contracts. Once the pre-requisite conditions for payment in a contract have been met, raising an invoice, sending a payment or even making a cryptocurrency transfer are all natural automatic steps.
Internet-of-things devices sense the world and business systems store information about customers, products and internal processes. The data tells us what is going on, and we can use it to make sure that we comply with a contract. For example, in a service-level agreement, we can detect if a website meets the agreed availability level and issue credit accordingly.
Finally, we don’t intend to take the human out of the process altogether! Manual decisions will still be required during contract formation, execution and termination. So being able to allow interactions with relevant parties throughout the contract lifecycle is something else that I’ll be working on.
Connecting your contracts to the real-world should be as easy as configuring Alexa to adjust your thermostat.
What do you like to do when you aren’t programming?
I love to go to the mountains whenever I can. I also spend a fair bit of time as an instructor with a local youth group.
