Nasdaq listed Docusign has acquired Clause, one of the major innovators in the legal automation sector. Clause was one of the first to create smart legal contracts which aim to add automated elements to conventional contracts that can use blockchain but don’t have to. It was the founder of the Accord Project, a non-profit association dedicated to smart legal contracts which boasts members from many of the world’s largest law firms.
A contract might include a service level agreement such as server uptime that can be measured and automatically trigger a penalty in default. Most contracts have some action that triggers a payment, such as a delivery. If there’s a bank account associated with the contract and an API linked to a delivery receipt, then the payment can be automatically triggered.
Back in 2019, Clause worked with law firm BakerHostetler on fuel surcharges. Many contracts account for fuel often at a particular rate. Clause developed a smart legal contract that took account of inputs such as mileage, projected fuel cost, actual fuel cost to calculate the fuel surcharge using an agreed method. The advantage is that all parties to the contract share the data, preventing a later dispute over the fuel cost rate used.
In the early days, most of those contracts were blockchain-based. However, over time that requirement was removed, so the smart programmable aspect is often used independently of blockchain.
Docusign participated as a strategic investor in Clause’s 2019 $5.5 million Series A round.
Icertis is another company that leverages blockchain for contract management but doesn’t use the ‘smart legal contract’ label. The unicorn contract management company partnered with Mercedes to address sustainability in its supply chain.