SYNTHESIS OF LEGAL TEXT AND PROGRAM CODE: THE CASE OF THE RICARDIAN CONTRACT

Abstract

The aim of the contract is to provide legal certainty to the parties and to define the toolkit of remedies available in a potential dispute. The contract in modern business practice has the ultimate goal of eliminating or reducing the possibility of legal liability: the issue of efficiency and effectiveness of contract implementation is not primary goal. The impact of technology in the concept of contracts` creation, implementation and control redefines the approach by which contracts are written by “lawyers for lawyers”. The contemporary moment witnesses the intertwining of rights and technology in a way that is outside and above the relationship between the regulator and the regulated object: technology becomes an organic element of law, its origin, application, control and development. A smart contract, as an example of the influence of technology in the field of discourse of contractual relations, automatically realizes the obligation, in accordance with what the parties decided in the agreement and embodied in the program code. Based on the blockchain, a smart contract changes profoundly the paradigm of trust in a person with the paradigm of trust in program code. The basic limitation of smart contracts is their ability to convert complex legal concepts into the computational form readable for program cod. They cannot function in pure form (entirely defined by program code). The code needs to be complemented by text. The form that should bridge the gap between the smart and the traditional contract is the Ricardian agreement. The Ricardian contract use the best from both worlds: on the one hand, the key terms of the contract are in software-readable program code format. On the other one, more complex provisions that are not suitable for conversion into an algorithm are contained in additional instructions that are part of the Ricardian agreement. In terms of legal obligation, the Ricardian contract reflects exclusively and only the intention of the parties without implying a legal obligation that could be formally established only by concluding the intended future agreement. As such, Ricardian contract can play the role of a guide for the interpretation of the agreement, which gives it a certain value in case of a dispute.