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This article is written by Anubhab Banerjee, from the School of Law, Alliance University. This article deals with the challenges faced with regard to the enforcement of technology contracts.

Introduction

Technology contracts are a new form of contracts which has started adapting itself into our lives. The added convenience and reduced costs which come by the use of such contracts is acting as promoting agents though nothing in this world is perfect. For tech contracts as well there are certain issues which need to be resolved before they become a thing for regular use.

This article would deal with those issues which the challenges which are faced with regards to the enforcement of technology contracts.

Challenges faced while enforcing technology contracts

Improper negotiation

The basic requirements of a contract is an offer and its acceptance. A contract gets its validity through the considerations made between the parties for the conditions of the contracts. Thus such negotiations are not possible without a physical meeting of parties which facilitates the negotiations between them. 

When we consider the same for technology contracts, these considerations may be made but mostly through electronic form and the absence of the human touch to them might just end up adding to the confusion with regards to them.

In regards with technology contracts, such a smart contract where the terms and conditions are already prefixed there is a major absence of any kind of negotiations happening between both the parties and it makes it all the more difficult as with regards to any issues raised in context with such agreements.

All of this is important as negotiations are considered to be an art. Without meeting the other party to a contract in person such negotiations would lose the personalised feel. This may at times end up being harmful to the parties in reaching an agreement or maybe not being able to express their desires well and thus, entering into an undesirable agreement. Complications like these can make contracts prone to breaches. Thus negotiation is an issue which should be conducted through better means while contracting parties for the formation of technology contacts.

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Poor communication

The absence of direct communication between the parties entering into a contract makes it all the more difficult to enter into a satisfactory contract, as communication and the considerations which occur due to physical communication are the very essence of a successful contract. If the parties do not even know each other physically then negotiating a contract may just become a very robotic event which is prone to mistakes. These mistakes mainly arise as these parties might not feel the same way while formulating the contracts as they would if they would have been in physical contact with the other party at least for once.

Poor review of the contract

When templates of technology contracts are used from the internet the parties make their changes to such contracts as per their requirement. Then such contracts are sent to the other party for consideration.

In this whole process, in most cases, such contracts which are modified by their users are not reviewed or verified by a legal practitioner or a contract expert. This keeps such contracts open to discrepancies. Such discrepancies can end up being harmful to either of the parties entering into such a contract as the people who are usually editing these contracts and entering into them are not legal experts and without proper knowledge of the law are not even aware of entering into any legal complications because of their contracts. Individuals using these pre-drafted agreements are generally of the opinion that everything is taken care of by the uploader and they do not have to look into the legal aspects.

Though, this is not the case in most places. Review of such contracts and who is supposed to take care of these reviews is a big question which is yet to be answered in the world of technology contracts. Until and unless such responsibilities are taken up by someone or people start acquiring proper education for using tech contracts, this problem is not going to be solved.

Unclear responsibilities

Technology contracts are more of technological development to date rather than a change in the legal system. Even though their increasing use has turned the eyes of the legal fraternity towards them but still they are not always something which is coming out of a legal professional.

Hence if such contracts are being used by the parties and some clause of the contract appears to make such a contract void or voidable it is unclear as to who is to be blamed for such an instance as both the parties to the contract have equal opportunity to get along with the different clauses of the contract. In the case of technology contracts, most parties prefer not to seek legal advice as they feel such contracts to be just the thing they need. These contracts eventually end up saving fortunes for their users, by saving them the hefty legal fees which they would have paid an attorney for verifying their contract.

This is where the problem arises. If something goes wrong with the contract it is not known as to whom to blame. The company which provided the draft is not somebody who can be blamed as there are necessary changes done by the parties after getting access to such draft. 

There may be other issues related to the responsibility which may have given rise to under such contracts if the parties to such a contract are not able to define their responsibilities well under the eyes of the law. Thus, careful consideration needs to be given to their authenticity while using such technology contracts. Taking advice from a lawyer or in-house counsels is something which is always advisable even for electronic contracts.

Auto-generated templates

The auto-generated templates are usually available to technology contracts online. These templates are easily available and can be modified as per the requirements of the users. This can be considered as an advantage of e-contract.

Though having such templates available online is also a huge challenge towards serving the needs of a customer who is using such a template. As most people who make use of such technology contracts to save their legal costs related to contract drafting. Thus, most of these people are not ones who have knowledge about the law. Thus, blindly using these templates and trying to frame them to meet their needs might actually end up being harmful to the user. AS these templates might have certain complications which a user is not aware of.

Thus, proper government regulation with regards to these templates can be something which can be used as a tool to help check the genuineness of these templates. It should also be checked whether such templates are suitable enough to be edited by a person without much knowledge of the law.

Challenges faced while enforcing Smart Contract Specifically

The latest development in the area of technology contracts has been the invention of the concept of a smart contract. These contracts are basically pre-drafted contracts, for which the terms and conditions are provided from before and if someone enters a contract then such shall be considered complete only when the person agreeing to such a contract fulfils his side of the contract as per the terms and conditions.

There are several challenges faced by businesses and their employees while trying to implement smart contracts. As the concept with regards to smart contracts is relevantly new and is not known by most. 

A few of the challenges faced by businesses while dealing with smart contracts are as follows:

Adoption of the technology

The businesses and their employees trying to adapt to such means would mean a huge deal to most. As most people are used to the traditional means of contract and thus, such technological changes might be difficult to cope up with.

Learning about its use

To start using smart contracts, people have to first learn using them. People need to be educated about how these smart contracts are formed and what would they mean for the company or individuals. Thus, it is not soon that such a concept would be accepted globally in every sphere of life.

The legal and regulatory aspect related to smart contracts

Currently, there is no regulatory system available with regards to smart contracts. Smart contracts are more of a technological thing as of now. As these smart contracts are developed by software developers who use different types of codes to frame them. The absence of a legal professional in the process of formation of these contracts itself shows its inefficiency in the field of law. 

As whenever the word contract gets involved it should be related to the different contract law regulations around the world. Though as of now the situation is nothing like that for the smart contract, which is a software developers thing. Thus, there are hardly any regulatory frameworks present with regards to smart contracts around the world. Unless such regulations come in the transactions through smart contracts don’t hold much of an authenticity under the eyes of the law.

                   

The changes a business needs to make to its system and framework

The present technologies, software and systems which are currently being used by most businesses need to be revisited and changed if these businesses plan on making a shift to the use of smart contracts.

No standardisation available yet with respect to smart contracts

As of now, there is no standard form of smart contracts and most of them are as per the wishes of their developers. So it’s a long way to go before we can get a standard form for these contracts.

Competition in the market

The world has to a certain extent started shifting to an electronic form of contracts though they have their own challenges still the other kinds of electronic contracts which are better known to people are always considered safer than smart contracts. As for most people, the use of other electronic forms of the contract of which they have little knowledge is better than using smart contracts for which they do not have any knowledge at all. Thus the level of competition which is already present in the market with regards to technology contracts is going to make it all the more difficult for smart contracts to come in as a well-established concept.

Data Privacy related issues

The blockchain technology which stores the information related to such a smart contract is a database which is accessible with a certain amount of technological knowledge. Though it is very difficult to make changes with regards to the transactions stored under such blockchains, the information available online for a lifetime makes it an issue related to the personal privacy of users.

Operational issues and execution speed

The storage of records with regards to the transactions performed over smart contracts is done in a chronological order, where every such transaction has its own identification code which cannot be altered with and if any alterations are done then such might lead to changing their identification number. These identification numbers are given as per the chronological order in which the information with regards to the transactions is stored. This makes such transactions secure but on the other side, it also makes their usability and traceability slow.

People’s expectation

The hype about technological developments such as blockchains, bitcoins and smart contracts has created a particular impression about them in the minds of the people. It is alright for people to have such imaginary impressions about smart contracts but relevant and prompt education and knowledge should be reached out to people to help them better understand these concepts and not be under a wrong impression about them.

Conclusion

Technology has come a long way and is revolutionizing the way we lead our lives. Though complete control of our lives shouldn’t be given to technology. Especially in context with matters related to the law. As most of these technological developments are made by people who excel in the field of science but might not have the sufficient knowledge of the law which shall be required for the purpose of development of technology contracts.

Hence a better meeting of law and technology which can be ensured with the meeting of minds from both the fields would be something very beneficial towards the development of a better legal framework online.

Technology contracts are the future and there is no doubt about it. Though, there has to be major changes made to the present concepts. This process is going to take some time but maybe sometime in the future, we would have such technology contracts which would include much less complications and can be executed much more conveniently under proper regulations.

References

  1. https://www.lexology.com/library/detail.aspx?g=31c4d588-990c-4fdd-bec9-e5506f403dad
  2. https://www.sgrlaw.com/ttl-articles/10-technology-challenges/

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