FEATURED PAPER
By Swati Dangi
SKEMA Business School
Paris, France
ABSTRACT
Contracts are an integral part of the corporate world, and even for individuals dealing with all types of big and small businesses or even other individuals. This paper explores if and why smart contracts will replace traditional contract systems in the near and upcoming future. In this paper, the author analyses the working of both traditional and smart contracts. The paper explains the working of the blockchain technology which is the basis of smart contracts, and explains what contracts are, and how they are related to projects, programmes, and portfolios. The paper compares other alternatives to smart contracts with the help of Multi-Attribute Decision Making Matrix and selects the best one using selection criteria method. Finally, the author summarizes the paper with the advantages and disadvantages of traditional and smart contracts.
Key words: Contracts, Smart Contracts, Blockchain, Project Management
INTRODUCTION
A contract is generally defined as “An agreement between two or more persons, which created an obligation to do a particular thing. Its essentials are competent parties, subject matter, legal consideration, mutuality of agreement, and mutuality of obligation.” [1]
“A contract is a binding agreement between two or more parties. It has several legal elements, such as an offer made by one party; acceptance of the offer by another party; intention to create a legal relationship by the parties; and consideration for the offer. An agreement can be formed in writing, through a discussion by parties (oral), or it can be implied”.[2]
“Contracts have always required middlemen or brokers till now and creating them can be a time and money consuming process. Moreover, there are litigious elements related to contracts that can either be exploited or can just make matters more complicated than easier when they are actually needed most.”[3]
But nowadays everyone trusts technology more than people. A smart contract eliminates the middlemen (lawyer, bank, etc.), or you can say it is a platform between buyers and sellers without a broker. It works as a digital notary for contracts where no lawyer is required to ensure that the agreements are met. It has a self- executing nature, and is based on a code.[4] Smart contracts save money in business as no extra pay or share is going to the broker as these are by very definition decentralized, i.e., they are not controlled by anyone.[5] It is a safe, uninterrupted, and secure network, and your information is most likely to be never lost in smart contracts as they work on blockchain technology and the code is written on a blockchain.[6]
Now, what is blockchain? In simple words, it is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value. “It is basically a growing list of records, called blocks, which are linked using cryptography. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data. By design, a blockchain is resistant to modification of the data”. [7] Thus, it is a secured database and it cannot be hacked or modified as every node downloads the copy of the contract and every single modification is stored.
In smart contracts the output of a project or agreement is already fixed, so we already know what to expect. It helps in the management of any workflow related to this project or agreement as we have a proper work breakdown structure – it has all the set stages, marked dates, and payment details. Once a phase is completed it automatically transfers the payment to the concerned person/department. Delays or scheduled progress can be noted easily, and the payment can be sent accordingly.
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Editor’s note: This paper was prepared for the course “International Contract Management” facilitated by Dr Paul D. Giammalvo of PT Mitratata Citragraha, Jakarta, Indonesia as an Adjunct Professor under contract to SKEMA Business School for the program Master of Science in Project and Programme Management and Business Development. http://www.skema.edu/programmes/masters-of-science. For more information on this global program (Lille and Paris in France; Belo Horizonte in Brazil), contact Dr Paul Gardiner, Global Programme Director paul.gardiner@skema.edu.
How to cite this paper: Dangi, S. (2019). Are Smart Contracts the Future of Contracts? PM World Journal, Vol. VIII, Issue IX, October. Available online at https://pmworldlibrary.net/wp-content/uploads/2019/10/pmwj86-Oct2019-Dangli-are-smart-contracts-the-future-of-contracts.pdf
About the Author
Swati Dangi
SKEMA Business School, Paris
India & France
Swati Dangi has done her bachelor’s degree in architecture at Aayojan School of Architecture, Jaipur, India. Born in Delhi, the capital of India, she is currently in Paris pursuing her MSc in “Programme Management and Project Management & Business Development” from Skema Business School, Paris campus.
She has worked for 5 years in three different architecture firms in India, where she has worked with a multitude of colleagues and clients on projects both big and small and in the capacity of junior architect and project manager as well. She also has PRINCE2® Foundation Certificate, AgilePM® Foundation Examination Certificate, and Six Sigma (yellow belt) Certification.
Now, she is looking forward to working in an international environment where she can utilize her previous professional experience as well as international academic experience to perform at her best on exciting new projects.
Swati lives in Paris and can be contacted at swati.dangi@skema.edu or https://www.linkedin.com/in/swati-dangi/
[1] Max Wideman Comparative Glossary of Common Project Management Terms v5.5. (n.d.). Wideman Comparative Glossary of Project Management Terms v5.5. Retrieved from http://www.maxwideman.com/pmglossary/PMG_C09.htm#Contract%20Form
[2] Rule of law – Institute of Australia. (2018, May 31). Case Note – Contract Law – Rule of Law Institute of Australia. Retrieved November 13, 2018, from https://www.ruleoflaw.org.au/contract-law/
[3] By author
[4] Block Greeks. (n.d.). What Are Smart Contracts? A Beginner’s Guide to Smart Contracts. Retrieved from https://blockgeeks.com/guides/smart-contracts/#comments/
[5] Block Greeks. (n.d.). What Are Smart Contracts? A Beginner’s Guide to Smart Contracts. Retrieved from https://blockgeeks.com/guides/smart-contracts/#comments/
[6] Smith, R. (2018, 2). Smart Contracts – The Future of Project Management – Wildara Project Management. Retrieved from https://www.wildara.com.au/insight/smart-contracts-the-future-of-project-management/
[7] Fointrade. (n.d.). FoinTrade. Retrieved from https://fointrade.com/
