The Accord project is the legal industry body which aims to create standards for smart legal contracts. The project is blockchain agnostic and is working with R3 to develop Accord support for R3’s Corda protocol.
Smart contracts v smart legal contracts
There’s often uncertainty about whether blockchain smart contracts are legally binding. Thanks to the use of the term ‘contract’ there’s a lot of confusion when in reality smart contracts are just programming code. That’s not what Accord is about. Instead, the organization’s focus is on legal contracts that are smart and intentionally legally binding.
Their definition: “A smart legal contract represents the technological evolution of traditional, paper-based legal agreements. A smart legal contract is a legally binding agreement that is embodied in digital form and that has at least some terms and conditions represented in computer code.”
Legal startup Clause founded Accord just a year ago. The founding partners were Linux’s Hyperledger consortium, the International Association for Commercial and Contract Management (IACCM), and Clio, the legal software company.
Since then they’ve signed up many of the world’s leading law firms as collaborators. Plus they’re partnering with other bodies around IoT and identity.
Last month they published a whitepaper on identity for smart legal contracts as the first step towards creating standards. The organization is collaborating with the leading players in the space. These include the Open Identity Exchange (OiX), Sovrin, and web standards body W3C.
Accords working groups include supply chain, financial services, intellectual property, token sales, and open data standards.
Koch Industries is also working on transitioning intellectual property to blockchain, but their focus is not on smart legal contracts.
Accord is developing an open source middleware layer which already supports Hyperledger Fabric and Ethereum.
It is here that R3 will partner to develop support for Corda. Additionally, R3 is partnering with Clause to build a bridge layer for users that manage contracts on Clause to be able to record contract states on Corda.
Accord intends that smart legal contracts can operate ‘off-chain’ and across any technology platform.
The group has created an open source smart contracting templating system called Cicero, which has three components. The first is the natural language text you’d expect in a contract. The text would include data-oriented variables such as price, quantity, and dates. Secondly, those variables are used in a data model which provides structure. The final leg is the logic used to execute the contract.
A simple example
In a simplistic example, you can imagine a standard purchase contract from a retailer. RetailerX (buyer) agrees to buy 50 pounds (quantity) of bananas (product) from SuperBananas (seller) for delivery on 1st July 2018 (date) and payment of $200 (price). And then there would be a ton of other text.
A typical data model (jargon for structuring data) might include:
- buyers: name, address, phone, tax number
- sellers: name, address, phone, tax number
- products: product name, product type, quality grade
- shipments: date, product, quantity, price, payment terms, status
- transaction history
And the logic is when the retailer receives the shipment on time and of acceptable grade, payment is legally enforceable (or automatic) after 30 days. You could then have automated logic for what if the quality is inferior or the shipment is late.
Accord is one of many blockchain standards-setting bodies. However, they’ve made more progress than most other industries. They’re partnering with the relevant organizations, and they’re advancing both the standard setting process and the technology.