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Legal Innovation and Technology (LIT) is a Singapore Management University School of Law (SMU Law) student initiative.

LIT was formed in recognition of technology’s increasingly disruptive role in the industry, and the increasing need for legal professionals to gain fundamental technology knowledge. Hence, LIT’s core mission is to educate SMU Law students on basic technology concepts.

Also, Singapore’s evolution into a “Smart Nation” entails adopting advanced technology which will bring along new legal questions. Thus, LIT’s peripheral mission is to spread awareness among our peers of these new issues. In doing so, LIT will work with the Centre for Artificial Intelligence and Data Governance (CAIDG) in SMU. Some topics include artificial intelligence governance, the legality of smart contracts and personal data management in the “Big Data” age.

INITIATIVES

What we do


Develop Legal Technology Applications

LIT’s Technology Division, led by a School of Information Systems (SIS) student, develops applications making legal research and writing easier.

Share Legal Technology Knowledge

LIT’s Legal Technology Division hosts programmes to help students learn more about state-of-the-art legal technology products being adopted or developed by law firms.

Discuss Technology Law

LIT’s Technology Law Division organises seminars to spread awareness of legal issues arising from the adoption of advanced technologies such as artificial intelligence and big data analytics. In doing so, LIT works closely with researchers from the Centre for Artificial Intelligence and Data Governance (CAIDG) in SMU.

Outreach

Together with industry and education partners, LIT’s Outreach Division organises events to bond the technology and legal communities and promote legal technology development.

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Present and Past ExCo Members

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Blog Posts

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  • September 9, 2019

LIT Student Contributor Programme: Smart Contracts: Boon or Bane?

Smart Contracts: Boon or Bane?
by Darren Chia and Shjoneman Tan

The emergence of Artificial Intelligence (AI) and an emerging legal technology industry has thrown a spanner into the works of the legal industry and seems to threaten lawyers’ (and law students’) prospects of stable employment. A not-so-new, yet critical component of this technological shift is the smart contract, which seems to be the new buzzword for such technologies. Considering how the smart contracts could shake up the industry, we will attempt to uncover and debunk what makes a smart contract “smart.” 

What is a Smart Contract?

The original definition of a smart contract originates from Nick Szabo, a computer scientist, law scholar and cryptographer, well known for his research in digital currency. In 1995, he defined a smart contract as: 

A set of promises specified in digital form, including protocols which the parties perform on those promises.

To put it simply, a smart contract is a contract whose terms are encoded in computer language instead of legal language. They are just like any other contract. The major difference? They are entirely digital as opposed to a traditional pen-and-paper contract.

How do Smart Contracts work?

Traditionally, for most contracts, you would seek the help of a middleman or a 3rd party. Let’s take Kickstarter.com, a popular American crowdfunding platform as an example. To start a fundraising project on Kickstarter.com, you as the organizer, would write about your fundraising project, state the fund target and wait to receive donations from users all across the globe. Kickstarter.com is essentially the 3rd party, acting as the middleman for all transactions from the donors to the organizer. 

With smart contracts, this middleman is not required. A smart contract is self-executing so long as its terms have a digital representation. An easier way to think of a smart contract is to compare them with a vending machine. With smart contracts, you simply drop either a bitcoin, etherum or any other alt coin into the ledger and just like that – your driver’s license, escrow or whatever drops into your account. Let’s use the same example of a crowdfunding project. A smart contract can be created and programmed to hold all the received funds until the fund target has been reached. The donors can transfer their funds in the form of cryptocurrency to this smart contract. Once the fund target has been reached, these funds will be transferred directly to the organizer. 

What is the technology behind Smart Contracts?

A smart contract is a tiny computer programme that is stored inside of a blockchain. Smart contracts are stored on a blockchain, thus making them possess these 2 properties: (1) immutable; and (2) distributable

What does “immutable” mean? 

Being immutable means that a smart contract can never be changed or tampered with. Once a smart contract has been created, the details in the content are permanent and unalterable. This unique nature of smart contracts being immutable is considered by many as a blessing since the performance of the contract in the manner in which it is coded is guaranteed. Furthermore, each and every transaction on the smart contract is recorded on the blockchain forever – making smart contracts extremely safe and secure for operation. 

However, nothing is really as alluring as it seems to be. There is a dark side to this feature of immutability – in the event of any errors in the code, the immutability feature prevents any rectification of such errors. The smart contract would still execute the performance regardless of the major error, which could very well lead to severe ramifications for the party/s. Additionally, in the world that we live in, a common saying is that “change is the only constant”. In the likely event that circumstances change, it is unfortunately impossible to make any amendments to the original smart contract. 

What does “distributable” mean?

Exactly as the word implies, a smart contract being distributable means that the code can be seen by everyone who accesses the technology, and the code is easily replicated. The advantage of this is transparency: Anyone can access the source code and verify that it is functional and free of improper or malicious coding.

Benefits and Applications of Smart Contracts

So what exactly are the benefits and applications of smart contracts?

Financial Services

One of the key problems clients of insurance policies face is the lengthy duration for the processing and receiving of payment. Smart contracts can help to simplify this process by automatically triggering the transaction when certain events are coded to occur. Specific details could be recorded on the blockchain to determine the exact amount of compensation

Supply Chain Management

Supply chain management involves the flow of goods from raw materials to the final product. Currently, the technology utilized comprises the Internet of Things sensors, which track goods from producers to warehouses to manufacturers to suppliers. Smart contracts can help to record ownership rights at all times, providing clarity and transparency as to who is responsible for the product at any given time.

Employment contracts

It is not uncommon for companies to take advantage of employees by refusing and delaying their payment of salary. By entering into a smart contract, wage payments can be facilitated in a fair and transparent manner according to the agreed amount and within a specific time period. This provides certainty for employees.

Real Estate Industry

The real estate industry stands to gain from the application of smart contracts as the real estate sector is traditionally an illiquid sector, and the benefits of a smart contract, bringing transparency, improved contracting speeds and a history of the transaction (for ownership records) are especially pertinent. In fact, in the United States and United Kingdom, property has already been sold using cryptocurrency, and it is likely only a matter of time before contracts for the sale of property are moved online.

Concerns and Implications regarding Smart Contracts

As we have seen, smart contracts confer an array of benefits over a wide swathe of industries. Considering how prevalent smart contracts have the potential to be, the next considerations are the shortcomings of a smart contract, and the implications that stem from them.

Regulation of Smart Contracts

In traditional contract, parties reason and negotiate to arrive at a set of terms. Similarly, parties to a smart contract will have to reason and negotiate over their set of terms, but with a twist – parties to a smart contract must also reason and negotiate over the intricacies of the smart contract code itself. Control over performance of a contractual obligation is ceded over to a set of code that runs regardless of circumstance (unless it is programmed to). A problem this raises is whether the contractual obligation has been aptly performed – there is (currently) a limit on how smart contracts, through software languages, are able to assess whether a contract has been aptly performed. For simple transactions this problem might not arise, but where contractual obligations are held to a subjective standard requiring a human to assess if the contractual obligation has been properly carried out, there is (currently) a lack of technology in assessing the completion of this crucial step. For example, applying the crowdfunding scenario, suppose for a $10 donation, the crowd funder will provide a painting in return every month. A traditional transaction would have the purchaser able to scrutinise the painting and ensure it meets his standards before payment is made, and if the painting does not arrive monthly, the purchaser party can take the seller to the courts to get his promised dues. Over a smart contract, however, there is no scrutinization, and the code will simply check if the painting has been completed, regardless of the promised standard of quality of the painting. The solution to this could be found in AI, where a machine learning software could be used to assess that the painting is of objectively passable quality, but there is currently no such software to ensure that subjective standards are met. 

A second concern regarding smart contracts is how they interact with traditional laws. For instance, certain areas of contract law like frustration, unconscionability, duress, and undue influence are highly fact specific and inherently not compatible with a self-executing code.  It remains to be seen how traditional laws will interact and change to accommodate these developments. 

Poor Coding

As alluded to above, smart contracts, being written in code, are susceptible to errors in programming or software bugs, which can lead to a transaction being improperly executed and hence resulting in damages. Whose shoulder does liability for this transaction then fall on? The platform, for not having enough checks and balances?  The contracting party, who ought to have checked and ascertained that the code was correctly written? Or even the writer of the code, who wrongly coded the software? Comparing this issue to the issue of a contract being poorly drafted in traditional contract, it would seem that traditional laws could apply, but one could always make the argument that improper code carries with it greater ramifications, seeing as to how the code affects the performance of the contractual terms itself. Only time (and cases) will tell how these issues interact with the law of contract.

Congestion

A further complication of a smart contract being poorly coded arises considering how once code is written onto a blockchain, it is immutable and cannot be changed, which in turn creates another issue – congestion. Blockchains have a limit as to the amount of transactions it can take. For example, Bitcoin blocks, operating on the bitcoin network, have an average creation time of 10 minutes per transaction.  The effect of having such a limit is that the network’s throughput, the amount of material passing through it, is limited, creating a bottleneck in the network: There is too much data waiting to pass through the maximum throughput of the network. This has resulting in higher transaction fees, and a higher transaction time which creates delayed transactions, which could affect the profitability of a transaction, especially when considering how exchange rates of virtual currency to actual currency can fluctuate. Who bears the risks of this and who bears the liability? A lawyer dealing with these blockchains would have to advise a client on drafting force majeure clauses or recalibrate traditional clauses to reflect this new technology. 

Conclusion

In conclusion, a smart contract has many applications and could alter the meaning of what makes a contract a “contract”. The lawyer in the digital age will have to adapt traditional notions to the new digital era and understand the technology behind a smart contract in order to smartly draft around it. Whether the smart contract will replace lawyers remains to be seen, as does its overall effect on the legal industry and the study of law.

Darren Chia
Shjoneman Tan

LIT Student Contributor Programme: 6 Legal Tech Trends 2019

  • August 12, 2019

LIT Student Contributor Programme: 6 Legal Tech Trends 2019

6 Legal Tech Trends 2019
by Javier Han and Jill Phua

Developments in legal technology have transformed legal practice to a certain extent today. While many are quick to jump onto the bandwagon and integrate technology into existing practices, it is even more important to take a step back and look at the trends brought by the latest developments in legal technology. In this post, we explore trends that are likely to shape the legal industry and which all law firms should pay attention to if they are to maintain their competitiveness and profitability in the industry.

1. Cybersecurity and data protection remain the forefront of any firm’s priorities.

The large volumes of sensitive and confidential data that law firms manage render them attractive and vulnerable victims to cyber attacks. Ineffective data management leave firms exposed to a myriad of threats ranging from ransomware or phishing emails to data breaches, which present greater compliance risks. According to PriceWaterhouseCoopers, 62% of Singapore law firms reported a cyber attack on their systems in 2015. Later in 2017, PwC released another report indicating that 40% of all Singapore law firms reported a form of business disruption that was caused by a cyber attack, where the majority of the firms suffered losses within the space of a year.

On the other end, the European Union (“EU”) General Data Protection Regulation (“GDPR”) has entered into force in May 2018 and has potential effects on current business policies and practices worldwide. Full compliance with the GDPR is obligatory and the EU has promised to impose a hefty fine should any organization fall short of the standards demanded by the regulations.

What should law firms do to keep up with such threats? They should continually improvise on and test their crisis management, incident response and business continuity plans, should any unfortunate events of cyber attack or a data compromise
occur. For example, in Singapore, Rajah & Tann, a local Big 4 law firm, has created a legal tech subsidiary, called Rajah & Tann Technologies, bringing together lawyers and IT professionals to work on areas such as forensics and cybersecurity, and provides tech-enabled legal solutions.

2. A client-centric approach now takes centerstage.

With the advent of technology, clients’ expectations of law firms are higher than before. Clients now expect law firms to be more cost and time-efficient in delivering their services. What this means for law firms is that in order for them to charge at premium prices, they must differentiate their legal services from other organizations. Client portals, which are simple, lightweight WordPress plugins that allow clients to keep track of the progress of their cases and provide access to all relevant files at any time, are gaining popularity as law firms seek to maintain their competitiveness by differentiating legal services, while enhancing communication between law firms and their clients and maximizing profits at the same time.

Basic yet essential tasks can be accomplished with the implementation of the right technology. Even simple corporate tasks can be handled effectively by AI with a fairly impressive level of competence. For example, VanillaLaw, a Singapore law firm, launched in 2016 its own smart document assembly and management software, called VanillaLaw Docs. It is a simple algorithm that helps its clients – usually small and medium-sized enterprises – draft agreements for their businesses.

3. Law firms are increasingly working remotely.

Be it sole proprietorships, virtual law firms or large law firms operating in traditional office spaces, cloud solutions has facilitated remote working. This increases mobility and flexibility of operations. The cloud also allows real access and update of information and tasks in real time at any locations where there is network coverage. For example, VanillaLaw ‘s founder and managing director Mark Goh has likened the firm’s office at Tai Seng to that of a “taxi dispatch centre”, where his current group of six lawyers clock in the morning, then head out to meet their clients and work remotely. As attested by Mr Goh, such a move to digitise the firm’s operations and create its own smart document assembly and management software has resulted in time and cost savings.

The convenience and ease of usage of the cloud have also contributed to the increasing popularity of virtual law firms. With the use of cloud-based technology, law firms can not only deliver legal services online, but also operate 100% virtually. Virtual meetings also removes travel time and costs, enhancing the appeal of virtual law firms. Such cost reductions further allow virtual law firms to offer sophisticated legal services at lower prices, making them more price-competitive than traditional “brick-and-mortar” law firms.

4. Social media as a communication tool.
Law firms are also increasingly relying on online advertisements, chatbots, and podcasts to provide simple legal advice. For example, TSMP Law Corporation Money has been featured on Money FM 89.3’s podcast: Mind Your Business – Lawyers with a Heart! Turning to social media as a platform makes legal issues of all kinds more accessible to everyone, and helps highlight the important work done by legal professionals.

Singapore-based legal tech start-up LawGuide Singapore has also launched a legal chatbot for use on Facebook Messenger. This chatbot is designed to help the general public understand general legal terms and processes in areas such as criminal law and family law, thus bridging the gap on legal knowledge in Singapore. Legal chatbots can also assist law firms in a variety of ways. From initial client engagement and intake processes, document assembly, through to providing situational assessments. Legal chatbots can also engage with the client conversationally, exchanging key information and thereby improving efficiency. Rather than using traditional paper forms, which are confusing and impersonal, legal chatbots provide a conversational experience that better replicates the nuances of a typical legal conversation.

5. Digitisation of Internal Processes.

Lawyers spend a large amount of time going through paperwork. A way to improve efficiency would be to utilise technology that allows the digitalisation, and automation of manual processes. One key area of development that law firms can look into is the use of document automation. While larger law firms already have their own pre-built legal templates, smaller law firms can look into customising their own with the aid of online resources. This allows for greater flexibility and accuracy in preparing legal documents, and saves time for both lawyers and clients.

It is also likely that the future of legal tech lies in smart contracts. While this ambitious application of blockchain technology is still in its gestation phase, Legalese, a Singapore-based start-up is currently working on an open-source project to “draft legal documents the way programmers develop software”. Semantics are captured in their programming language, which can then be compiled into code for use in smart contracts.

There are a few reasons as to why smart contracts would appeal as an alternative to traditional legal contracts. First, they provide certainty in providing for a highly specific set of outcomes that are computer guaranteed. Thus, this reduces confusion between the contracting parties as to what has been agreed upon. Smart contracts are also more easily standardised and are immutable. This dispenses with the need for a trusted intermediary, and its self-enforcing nature also has the potential to dispense with the need for judges, thus potentially reducing the judiciary workload.

6.Lawyers are equipping themselves with legal tech skills.
Larger law firms in Singapore are moving towards investing in technological initiatives such as automation, artificial intelligence and cloud computing. For example, Rajah & Tann has created a legal tech subsidiary, called Rajah & Tann Technologies, which brings together lawyers and IT professionals to work on areas such as forensics and cybersecurity, and provides tech-enabled legal solutions.

Given that not all law firms have the necessary resources, a variety of financial schemes and grants are available for firms to defray the costs of technological adoption. In March 2017, the Ministry of Law, Law Society of Singapore, and the then-Spring Singapore launched a S$2.8 million subsidy scheme “Tech Start for Law”, as well as the “SmartLaw Assist” scheme to help defray costs for smaller firms.

The Singapore Academy of Law also offers basic proficiency certification in legal technology solutions for lawyers under its Legal Industry Framework for Training and Education (“LIFTED”). However, to quote Mr Jonathan Yuen, a partner at Rajah & Tann, rather than just having more grants and funding schemes, what is more critical is “a mindset change as to how technology can be harnessed and made a natural part of the workflow of lawyers”. Indeed, lawyers must themselves be convinced to embrace technology, and the subsequent changes and challenges that it would bring to the legal landscape.

Javier Han
Jill Phua

  • December 14, 2018

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