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Breaking: Legal green light for smart contracts signals death knell for conveyancers

Landmark decision announced by Chancellor of the High Court says blockchain-based or 'smart' contracts are now enforceable under English and Welsh law.

Nigel Lewis

smart contracts

A landmark legal statement from a panel chaired by the Chancellor of the High Court has backed the use of smart contracts and has, at one stroke, signalled the potential death knell of conveyancing solicitors.

The announcement was made late yesterday by the UK Jurisdiction Taskforce (UKJT) of the Lawtech Delivery Panel, which is headed-up by Geoffrey Vos.

It says smart contracts, which are blockchain-based automatically-triggered agreements between two parties, should be given the same status as traditional house conveyancing contracts, making them enforceable under English Law.

The statement says smart contracts are set to revolutionise the processes of both conveyancing and applying for a mortgage.

Both will be significantly speeded up now that smart contracts have been confirmed as legally enforceable.

Following the announcement, buyer and seller could use such a contract without the need for ‘expensive services’ such as a solicitor and instead complete the sale between themselves.

“The worldwide smart contract market is expected to reach $300m by 2023 and the World Economic Forum predicts 10% of global GDP will be stored on the blockchain by 2027,” says Jenifer Swallow, (left) Director of the Lawtech Delivery Panel, which is a law industry initiative to prompt tech development within the sector.

“It is great to see the adaptability of our common law system to fast-changing technology, demonstrated in this landmark legal statement from the UKJT.”

Now that the way has been cleared following a lengthy consultation, it will take several years for the institutions involved in conveyancing and mortgage lending to adopt smart contracts, assuming they do at all, and for the tech to be developed. Smart contract have already been trialled as part of the Land Registry’s Digital Street project.

November 19, 2019

2 comments

  1. Death knell for conveyancing? I am not so sure. People forget that the Exchange of Contracts is the easy bit of the process: it is getting to that point which is the hard bit. The Chancellor of the High Court’s statement simply states that Blockchain contracts are legally enforceable. That is a good thing. In due course, I would like to see the LandRegistry administer a public blockchain platform which would allow an automated link between contractual commitment, funds settlement, and the registration process. Far from bringing about the end of the conveyancing process however, this would liberate conveyancers to focus on the core of the conveyancing process which is pre-completion title reporting and due diligence, and post-completion issues. Nothing in this announcement has any impact on those stages. To give an example, if you could push a button and contract to buy a car, you would still want to do your research on the vehicle. How much more so a house, with all the hidden complexities that affect legal title in the UK. At Muve we are at the forefront of deploying technology to the conveyancing process, using AI to transform the due diligence process. When Blockchain contracting comes we will be ready to connect our MuveFast process to it. But those hoping for the end of conveyancing solicitors may need to wait a while longer!

  2. At Muve we have been at the forefront of applying technology to the conveyancing process, such as AI. On Blockchain, I fear there is a bit of a misunderstanding. The legal statement by the Chancellor of the High Court simply makes clear that a Blockchain (or ‘smart’) contract can meet the requirements of the English law of contract. To quote directly from the statement:

    “The legal statement concludes that a smart contract is
    capable of satisfying the basic requirements of an English
    law legal contract. Those requirements are that two or more
    parties have reached an agreement, intend to create a legal
    relationship by doing so, and have each given something of
    benefit. Whether the requirements are in fact met in any
    given case will depend on the parties’ words and conduct,
    just as it does with any other contract. ”

    The truth of course is that in the conveyancing process the actual mechanics of exchanging contracts is one of the least problematic aspects of the process: it is getting to that point which is difficult! Whether the mechanics of agreement are done in the current manner or by Blockchain is not a revolutionary step in the process. In fact, Blockchain technology is really more a matter for the Land Registry – a kind of public contractual execution platform – that in due course may allow the whole process of exchange of contracts to registration, including settlement of completion monies, to be simplified. But, as I say, that is in overall terms a small tail end of the conveyancing process.

    The problem in conveyancing is codifying all the steps necessary to be able to get to the point of an exchange of contracts, whether that exchange is by documents or smart contracts. Even with the purchase of a car, where there is now a lot more on-line ‘title’ information, people still don’t simply push a button on a contract without doing a great deal of research. How much more so for their house!

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