Are Your Legal Agreements Future-Proof? Emerging financial technology and its impact on the deals you make today
It should go without saying that good legal agreements are meant to last. Whether it’s settling a legal dispute, preparing to do business together, or ensuring that a purchase transaction is final, effective negotiation and drafting needs to have a focus on the future to ensure that surprises don’t cause an agreement to unintentionally fall apart or become irrelevant.
Emerging financial technology (known as “fintech”) like blockchain ledgers and the cryptocurrencies they enable, have increasing relevance in day-to-day life and the way businesses operate. Bitcoin, the most prominent cryptocurrency, is only one example of the wide-ranging transactional and monetary applications which are grabbing the attention of world leaders, businesses, and savvy individuals.
The fact that your personal and business dealings today may make limited use of fintech, is no guarantee that you won’t be using this technology in the future – and perhaps sooner than you’d think.
Consider, for example, the rapid growth of online banking and shopping. When countless consumers make purchases on the Internet each holiday season, they aren’t physically exchanging cash or bank instruments. Rather, the purchaser, the vendor, the banking institution, and the transaction service provider will be relying on digital records to track and facilitate purchases. In a very general sense, cryptocurrencies enact a similar process, but rely on a blockchain ledger to track the movement of money, cutting down on the need for intermediary parties (removing so-called “middle men”).
Major financial players and even the Bank of Canada are exploring the adoption and creation of cryptocurrencies and new applications for blockchain technology like smart contracts – essentially, digital agreements that can enforce themselves and automatically keep all transactional records. Just as the example of online holiday shopping highlights how fintech developments can have a major impact on day-to-day business dealings, the many uses of blockchain applications like cryptocurrencies and smart contracts should leave forward-thinking individuals questioning what their financial and transactional services will look like through the 2020s.
How does this affect agreements being made today? The answer will be different in each specific circumstance and requires careful consideration about the way the parties to an agreement might hold their capital and conduct their financial dealings. Planning ahead involves asking the right questions at the outset and ensuring that agreements to make financial disclosure or form long-term contractual arrangements have sufficiently broad language to account for technological and legal changes in the coming years.
Whether you are resolving an interpersonal dispute, making a large purchase, or committing to a new business relationship, it’s worthwhile to look at the big picture and consider the legal and practical nuances of your situation.
Communications on this website are intended for information purposes only and do not constitute legal advice or an opinion on any issue. Readers are cautioned against making any decisions based on this material alone. The lawyers of Waterous Holden Amey Hitchon LLP would be pleased to provide additional details or advice about specific situations.