Although I make an on the nose reference to piercing the corporate veil, legal tech can appear as a convoluted buzzword to mean any type of technology in the legal industry, which is untrue. In this article, I hope to explain the fundamentals of legal tech, why legal tech is being used, and what we might expect legal tech to do in the future.

The fundamentals

Legal Tech can really mean the use of technology to support and replace traditional methods for the delivery of legal services. While this broad definition may seem to encompass Word; (because surely it is a technology that helps deliver legal services!), it instead covers a range of processes such as document automation, virtual data rooms, and smart contracts.

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Document automation can be delivered by systems such as Avvoka and Bryter, both legal tech service providers. Document automation works as such : imagine yourself drafting a standard employment contract, you may be likely to use the employee’s name many times throughout that contract. What contract automation does is instead of downloading your standard form contract and filling in every [EMPLOYEE NAME], you’d enter that once in a control panel, such that you’d replace every [EMPLOYEE NAME] with “Jerry Tann”. These programmes are simple to use, not requiring code, and is essentially a “Find and Replace” function in a contract. 

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Virtual data rooms are perhaps the simplest form of legal tech. In many transactions, a “data room” is a room where all the relevant documents to that transaction are stored. Very quickly, one can imagine the problems this creates. What if another firm requires some documents that have been checked out by a partner? Instead, the prevailing approach of today is a virtual data room. These virtual data rooms are necessarily secured, but work similarly to Google drive. They allow changes to be made by any party and for documents to be “checked out” anywhere in the world. 

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Smart contracts are the most complicated. The textbook definition is “programmes stored on a blockchain that run when predetermined conditions are met”. Breaking this down, one must first have a brief understanding of blockchain. In a gross oversimplification, blockchain is a system whereby packages of information that are relevant are linked together in a sequential format. Once one “block” is filled with information, it can be “chained” to another block. For instance a blockchain may contain 5 packages of information, each being sequential to the last, and any incorrect information is cross referenced to the other blocks within the chain, thereby securing the information on the blockchain. 

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Smart contracts are a code that is built into the blockchain to facilitate, verify or negotiate a contract agreement that operates under a set of conditions. When these conditions are met, then the pre-agreed terms of the contract are automatically carried out. Imagine this scenario between a supplier and a manufacturer: The supplier sends a truck carrying 1 tonne of steel, and the manufacturer pays them upon delivery of exactly 1 tonne of steel. So far, relatively simple, there is consideration both ways at the same point in time. The manufacturer and supplier could use a notary, mediator or lawyer to carry out this rather repetitive task. 

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Alternatively, they’d entrust it to smart contracts. It would work this way: The manufacturer has a smart weighing scale that weighs the steel on delivery. If 1 tonne is in fact delivered, this triggers an automatic (think direct debit!) payment to the supplier. If perhaps 0.99 tonnes are delivered (or any agreed upon in-built tolerances are breached), then payment will not be triggered. If the steel was delivered but payment was not received, then the smart contract refunds the security deposit.