Six Levels of Contract Automation: Evolution to Digitalised Smart (and Legal) Contracts

Abstract

Automation is taking hold in different aspects of business across every industry and every sector. Consistent with this trend, the notion of embedding automation into legally binding contracts is also gaining momentum. COVID-19 is fuelling digital transformation and has highlighted frustrations with static contracts that sit disconnected from digital processes and systems. As automated ‘smart contracts’ become more common, lawyers have been grappling with how to preserve the legal integrity of the contract whilst harnessing the benefits of automation and digital connectivity. Automation of contract performance is a field lacking in standard definitions. This paper proposes a framework to assist discussion and development of legally enforceable automation of contract performance and explores high level features of contracts along the spectrum of contract automation by proposing an initial model for the levels of automation (and digitalisation). This model draws analogies with the SAE International J3016 “Levels of Automation” widely adopted for autonomous vehicles.