DocuSign Can Now Trigger Clause Smart Contracts, Co. Preps For Paid Clients

Smart contract pioneer, Clause, has now extended its integration with DocuSign so that signing with the electronic system allows the coded elements of a contract to be triggered. The company has also announced that ‘in the coming months’ it will move to a full commercial level and launch a pricing plan for clients, in what will be a major landmark.

The move means that Clause users with a DocuSign account can now enable their ‘Smart Clauses’ – i.e. the coded elements in a contract, to respond to DocuSign Connect events using the DocuSign Listener application.

The company’s lead UX Designer, Michael Grover, explained in a statement: ‘For example, using DocuSign Listener you can aggregate signature events from a collection of related ‘envelopes’, taking action as appropriate.’

Grover gave the example of a client signing a smart contract with DocuSign to confirm a construction company had done the work properly and then the contract would pay out accordingly.

Here is how he explains it:

  1. Let’s consider a contract between a construction company and their client.
  2. Upon the completion of each phase of the construction project, a detailed engineering inspection is carried out and a DocuSign envelope is created by the construction company.
  3. When the envelope is signed by the client acknowledging approval of the milestone deliverable, a Smart Clause is triggered, emitting a payment obligation from the client to the construction company.
  4. The client and construction company can use custom fields in the envelope to list any monetary deductions based on any flaws revealed in the engineering inspection.
  5. This ensures that the client only pays when the milestones are approved, and that the construction company is paid in a timely manner.

So, there you go. It’s probably not going to be totally simple (as in real life these things never are), but it will add a potentially very useful functionality.

Now, you may ask: why doesn’t the client just wire the money to the construction company? Well, they could, but it would just be a lot slower and the immediate link between approval and payment would be lost. Paperwork and admin would get in the way, delays would creep in, maybe people would forget details, information from the on-site inspection gets lost, and so on.

This way the contract is set up to be triggered when the client gets what they want, i.e. when approval by the inspector is reached. As soon as that condition is met, a signature is gained, and we’re off to the races. People get paid, things move forward, time is saved and there are no loose ends or broken links between the parties and the paperwork.

But, also, there is a no quibble deduction for areas where the construction company has not met the contract’s terms. Again, there is no paperwork to cart around, and no ability for intermediaries to be influenced by the construction company. It’s signed or not, and once signed it’s in motion, because the terms of the contract are activated by the signature. It’s all linked together.

And perhaps this is the root benefit of smart contracts. They are not a magic cure. They don’t solve every single problem with contracting. But, they do speed things up and keep everything connected. They also leave a very nice digital audit trail and provide immediate transparency of the state of the contract for all the parties that have access to that contract, which is an added bonus.

Moving to Paid Plans

While most of us assume it’s normal to pay for the use of a tech application, when you are still in the early stages of development of technology which is very pioneering, that isn’t always something that can happen. Often you need to work with law firms and other entities to perfect the tech to make it market ready. That can’t always be done by charging people, or at least not all users of the product.

So, moving to proper payment plans for clients and the end of Beta has several key aspects:

  • It’s a sign that Clause is now ‘ready’ to go to market and roll out its smart contracts into active client matters – and that is a huge step forward. I.e. if all users are going to start paying for the tech then presumably they will do it because they need it for a client matter that will generate a fee in return. Some may still be paying so they can experiment, but hopefully this also means a move beyond pilots.
  • The company will start to – one would expect – generate a growing revenue as clients will be paying. That matters as the Clause team will then find it easier to grow, market itself and then that becomes a benign feedback loop, allowing the company to grow further. In turn that should help to drive more adoption.
  • And finally, it means that the legal sector, after waiting several years, (presumably) we are going to start seeing major law firms and corporate legal teams integrating smart contracts into their work product, and that will be very exciting to see….or at least that’s the plan. But, the signs are promising.

Clause has worked incredibly hard to get to this stage. Now, it’s up to the legal world to make use of what has been developed. We’ll soon see what uptake is like.