Decentralizing the Deal
OpenLaw has developed tools to manage large and complex legal transactions on a blockchain. Using OpenLaw, you can execute multiple legal agreements using blockchain technology and trigger the execution of multiple smart contracts, including smart contracts to transfer ether every minute and to transfer tokenized stock on a vesting schedule.
By implication, OpenLaw will allow for a greater range of legal transactions to rely on blockchain technology for storage and digital signatures — all while gaining the dynamism of smart contract programs.
To see our most recent demo click here.
Complex Transactions
Commercial arrangements are often shrouded in complexity. Basic arrangements like NDAs, leases, services agreements, and short financing documents account for a large volume of commercial transactions. However, they are a mere sliver of the existing transactional legal market in the United States. As any lawyer will tell you, many transactions are a bundle of documents — a “deal” — that work hand-in-hand to manage the risks and allocate relevant rights for a given transaction.
Lawyers toil away managing the complexity of these deals, spending time ensuring that definitions, clauses, and basic information related to the parties remain consistent within these documents. The process for managing a deal currently is time consuming, cumbersome, tedious, and creates additional costs; costs that ultimately hurt clients, pad the pockets of law firms, and decrease access to basic legal services for large swaths of the population.
Reimagining Deals
At OpenLaw, we have begun to solve these problems by streamlining the creation of complex sets of legal documents using blockchain technology. Our goal is to drive down the cost (and tedium) of performing complex legal work, while increasing access to legal services across the world.
As we have described previously, a core component of OpenLaw is our legal markup language — a basic programming language that lawyers can use to embed logic into any legal agreement. Using our markup language, lawyers can structure their agreements — or entire deals — in a matter of minutes. Our markup language:
- Helps lawyers identify and incorporate optional legal provisions, what we call “conditionals”;
- Handles logical expressions (if → thens; if (Conditional A && Conditional B) → [actions], etc.);
- Structures key parts of legal agreements (like dates, numbers, and signatories);
- Groups variables;
- Performs basic calculations; and
- Helps contracting parties pass variables and make calls to smart contracts running on the Ethereum network.
Through this approach, we transform legal agreements from static documents to dynamic systems that manage complex commercial tasks.
How do we do this? Well, we start by turning each legal agreement on OpenLaw into an object. These legal agreements, in turn, each contain their own set of objects, which can be manipulated by users at will. As a result, legal agreements become increasingly computable: people can define and set variables, modify the text of an agreement (or sets of agreements) on the fly, and calculate payment amounts, distributions, and other obligations automatically.
Our object-based approach allows us to easily bundle together a set of documents (what we view as mere objects) and create a “deal” with interdependent relationships. Common variables between these documents can be set at the same time, and we can change the language of multiple agreements automatically through the simple click of a button.
Our “deal” architecture helps users of OpenLaw build and execute complex transactions in a matter of minutes. By way of demonstration, we have put together a demo of a fairly common, but complex, legal task — the on-boarding of an employee. Using OpenLaw, you can have an employee digitally sign an offer letter, an arbitration agreement, a confidentiality and invention assignment agreement, grant the employee restricted stock on a straight vesting schedule, and also generate a unanimous action of a board of directors in a matter of minutes and with a few clicks.
More than that, these agreements can call and execute multiple smart contract programs on execution, transferring payment and transferring tokenized stock on a vesting schedule to an employees. Tasks that would take lawyers hours, and would involve multiple intermediaries, now take minutes and are all managed via a blockchain.
Moving Forward
With the ability to handle complex deals, a greater range of transactions can now rely on a blockchain for their operation and management. And, over the next several months, we’ll continue to push the boundaries of our system by rolling out even more complex transactions.
We are just at the beginning of OpenLaw. With the ability to model out entire deals, OpenLaw is poised to start automating a greater range of legal work, while simultaneously helping to build next generation “smart” legal agreements, such as smart derivatives and securities, legal entities, and soon even decentralized organizations.
We still have a tremendous amount of work to do, including continuing to improve our markup language, building a contract management system, and further refining the tools developed to date.
The Value of Smart Contracts to Lawyers
Through our experiments, we have begun to distill the true value of blockchain technology when it comes to legal work. By incorporating smart contracts into transactional legal work, we have discovered that blockchains actually have the potential to increase the value of contracts dramatically. Before blockchains, contracts were primarily used to memorialize commercial relationships, manage risks, define performance obligations, assign rights, and potentially decrease transaction costs between parties.
By integrating smart contracts, however, a legal contract becomes a living document and the focal point of commercial transactions, actively managing complex business functions, like payroll, asset distribution, and cap table management.
As bridges are created to transfer traditional fiat currencies and traditional assets using smart contracts — as many anticipate — the commercial world begins to look different. Contracts no longer simply memorialize transactions. Rather, they actively guide commercial relationships, with smart contracts orchestrating performance obligations on an ongoing basis. Lawyers, in a sense, become conductors, picking and choosing the functionality necessary for clients to engage in commercial activity.
Just think about this in the context of our demo above. As Ethereum smart contracts improve and becoming increasingly standardized, they could manage payroll and manage a company’s cap table with little ongoing oversight for a greater range of businesses across the U.S. And, with each incremental improvement, large payroll processors like ADP, AmCheck, APS, BenefitMall, as well as third-party companies used to manage cap tables, like eShares, become less necessary. Basic commercial activities become more efficient — little software libraries that lawyers can embed in documents.
If such a future comes to pass, lawyers will be tasked with choosing these libraries and ensuring their proper functionality. The role of lawyers, therefore, will not diminish; rather, it will become heightened.
Join Us
The notion of smart legal agreements are tremendously exciting for the legal profession and the commercial world more broadly. And we are confident that OpenLaw will lead this transformation.
Join us in our crusade! We’re pragmatic idealists who believe in a more open, transparent, accessible, and efficient legal system. Help us re-imagine and actively build the future of law. If you want to learn more, join our mailing list, follow us on Twitter @OpenLawOfficial or send us a note. Don’t be shy! We’ll write back.
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