Smart Contracts Part 2 – Family Law Applications

In a previous post, we discussed the basics and legal implications of smart contracts built upon blockchain technologies. These smart contracts are one of the highly touted tools that are set to streamline business. The recent law that formed regulatory sandboxes to promote innovative fintech (financial technology) products portends this State’s promotion of such tools as smart contracts. It is an interesting time to be in the fintech space.

If you haven’t heard, smart contracts are already in use. If you have ever purchased from Home Depot, you have likely been a cog in a smart contract transaction. They use smart contracts with vendors to maintain their supply chain. Other often cited proposals for the use of smart contracts are in employment contracts, real estate, and insurance. In each, there is a triggering event that causes money to flow. Upon completion of a job, the employee gets paid. Upon satisfaction of a mortgage, the deed is executed and released. Upon a condition being met, the insurance is paid out. In each of these instances, a smart contract was beneficial because it reduced overhead by eliminating a middleman and increased efficiency because it was automatic.

So how can this technology make its way into a family law case? Traditionally, parties that do not wish to litigate in court, which can be expensive, rigid, time-consuming, and contentious, can settle their divorce and separation issues by separation agreements, property settlement agreements, and alimony agreements. These are contracts. Some of the terms in these contracts are very simple and can be made seamless. Transfers of titles, deeds, and the paperwork to effectuate these transfers can be implemented in smart contracts to automate the transaction. As a common example, suppose one spouse is to refinance a mortgage in her name only: upon that condition being met, the deed could automatically execute, release, and record. This reduces the need for paperwork to be shuttled around offices, wasting time and resources. In child support orders, instead of manually checking for the payment of support, enforcement can automatically issue show cause orders upon missed payments, eliminating the need for court resources to be spent on drafting paperwork for enforcement. These are rudimentary examples, but the concept is that in each instance, the transaction is seamless and automatic. The big question is whether a smart contract can be flexible enough to be practical.

As the technology grows, we should begin to see just where the best use cases will land. Whether or not it reaches the governmental level and the legal profession remains to be seen. Already some of the ministerial acts of the legal system could be streamlined through implementation on a blockchain and the use of smart contracts. Be warned, the legal system is slow to adopt. Perhaps attorneys can begin exploring which of their practice areas can adopt smart contract and blockchain resources.