Traditional Contracts and their Pain Points
“Business does not stand still, however traditional contracts do.” Professor Shadab explained that businesses need dynamic contracts that can be updated in real time. Businesses are in need of contracts that integrate with the business world and are constantly evolving. He explained that the goal of clause is to help develop open-source standards to help move dynamic smart contracts forward. Dynamic contracts (legal smart contracts) would allow for contract terms and conditions to be adjustable over time based on the current business condition. Parties would be able to monitor price changes, discounts, shipping status in a dashboard as they occur. The price of aluminum fluctuates with demand and supply in the market, this would be of use to have automatically updated in the contract without having both parties guess its potential value for the contracting period. These dynamic contracts would monitor performance and compare the performance against the terms of the contract.
Integrating APIs and IOT in Dynamic Contracts
It is projected that there will be more than 20 billion connected devices in the next several years, from traffic lights to autonomous coffee makers. Corporations, like Amazon, are taking the stance that data collection is an invaluable asset and have taken steps to collect more, learn from it, and make modifications that increases profit/knowledge.
An API is a program that allows various products or services the ability to talk to other products or services. APIs allow for individuals or corporations to leverage their data by opening it up to other corporations. This allows for partners/consumers of the corporation’s firewall the ability to access its data. APIs that are incorporated into a contract has the ability to facilitate communication between smart contracts and the cloud.
An example would be a dynamic contract that is developed between a farmer of hay and a farmer of horses, which states that the horse farmer will purchase hay from the hay farmer if the rainfall does not exceed 4 inches that summer. The dynamic contract would pull data via the weather station’s API to monitor the amount of rainfall. If the rainfall remains below the 4-inch requirement then the smart contract will be automatically executed, whereas if it exceeds the requirement the smart contract will not proceed. The hay farmer could also incorporate IoT sensors in the ground to give a more accurate rate of rainfall, and have the information feedback into the dynamic contract. The horse farmer will be notified to allow for him/her to decide if 4 and a half inches is acceptable for executing the contract.