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The “smart contract” as the future guarantor of your negotiations?

With the new area of
blockchain
smart contracts” are emerging and could become more and more important in the future, facilitating and guaranteeing the application of negotiated contracts.

What is a “Smart Contract”?

With the new area of
blockchain
smart contracts” are emerging and could become more and more important in the future, facilitating and guaranteeing the application of negotiated contracts.

The concept of a smart contract is simply to digitally encode the terms of a contract negotiated by the different parties. This concept has been around for many years but has taken an important turn with the emergence of
blockchain
.

Indeed, the
blockchain
allows to encrypt, trace, order and archive all the elements of a transaction in a decentralized and transparent way. This becomes a database containing the information of a contract to which the different parties have access in a secure manner. The smart contract governs the terms of the contract that are to be applied, which may be multiple, while the
blockchain
allows for instant execution of the transaction.

For example, we can give the following situation: your purchasing team is negotiating with a supplier of electrical components located outside Europe. They agreed on the order of 1000 products with delivery on a precise date and delay penalties, except for delays caused by customs. Depending on the number of days of delay and the number of products received, the price per item changes. All these factors and information will be defined in the smart contract. Thanks to the technology blockchainAll information will be captured, and the execution of the contract can be applied, including the payment which will be adjusted according to the reality of the situation. The price will be adjusted according to the number of items delivered and the number of days of delay, excluding customs time, and the payment will be executed instantly upon delivery.What is a smart-contract-

The advantages of smart contracts are numerous: reduction of errors, instantaneous process, reduction of third parties and therefore of related costs, security, transparency and increased reliability or automatic archiving.

However, There are still many challenges regarding these digital contracts. We can cite, for example, the problems of governance with the intervention of the State to regulate these
smart
contracts and taxing them, the learning curve required to standardize smart contracts, the adaptation of the legal ecosystem (specialist, specialist lawyers, technology used, etc.) or even the problematic concerning privacy, in particular the respect of the RGPD regulation with
blockchain
which makes these contracts available forever and everywhere. There are also constraints related to the adoption of the different actors to date.

If the usefulness of
smart
contracts seems obvious, the road to their democratization is still to be made. The key to a transaction will still be the negotiation, a key step for which the The know-how and skills of the professional buyer bring a real added value.

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