Technology in Construction 7 – Smart Contracts

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Continuing our series on Technology in Construction, we are taking a look at Smart Contracts and how these might help our industry.


Smart contracts” mean computer programming that is capable of facilitating, executing and enforcing the negotiation or performance of an agreement (that is, a contract) using blockchain technology.  As discussed in our previous article on Bitcoin, blockchain is a distributed system that is hosted on thousands of systems, thereby being resilient against hacking.  The Smart Contract process is completely automated as a set of instructions generally based on the If…Then concept.  For example, IF the partitioning has been completed, THEN release the funds to the contractor.


For the construction industry, along with many others, the most likely adoption of Smart Contracts will be through Smart Legal Contracts.  These contracts are a combination of the code that manages the If….Then statements, together with traditional legal language.  For example, the payment approval side would be undertaken with Smart Contract Code, but the clauses relating to indemnity, quality etc would be in the traditional legal language.  


Whilst there is a need for these contracts to be developed in code, managing against the set of rules, there is scope to have a fairly generic contract code setup for, for example, a JCT Intermediate Building Contract with contractor’s design 2016, and then just modify the details, very similar to what happens with the contracts and contract amendments at the moment.


So why might the industry want to adopt these Smart Contracts?  The aim of these type of contracts is to minimise disputes and legal actions, therefore a well thought out and structured Smart Contract could set clear acceptance criteria and when this is met, the stage is approved.  This could then release payments, authorise additional work or trigger programme review.  It could also be used to implement more formal stage gates, meaning that work could not progress without the set criteria being met.  Whilst some might see this as an obstruction, the reality is that it would protect all parties from works being commenced without all the necessary checks and documentation (such as drawings, specifications, benchmarks) being in place.


If you would like to discover more and you’re not already on our mailing list, join today for insights and development on how Buildupp wants to change the construction industry.   So what do you think about Smart Contracts?  Do you think they could help to streamline the industry?  Join the conversation at Buildupp.


  • Victor Paul

    It works as: Legal code – Approval/Acceptance- Technical code (Smart Contract)