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Blockchain-based smart legal contracts for freight industry

Washington, DC — National law firm BakerHostetler has collaborated with Clause, a software platform for smart legal contracts, to develop automated, digital legal agreements for the freight transportation industry.

These smart legal contracts are legal agreements in digital form where post-signature performance on an obligation is automatically integrated with existing enterprise systems. In a recent case study, the firm and Clause detail how the application of Connected Contracting can improve and streamline operations to greatly reduce a corporation’s administrative costs associated with, in this specific case, fuel surcharge provisions — a significant pain point in the transportation industry.

Connected Contracting changes legal agreements from static documents to dynamic, integrated forms that respond to real-time internal and external business data, automate the performance of contract obligations, and provide unprecedented visibility into contract events. Connected Contracting results from the application of Smart Clause® technology developed by Clause, which connects the text from legal agreements to external sources of data and enterprise software systems. In order to enhance automation of business processes and contract management, this solution can integrate into existing enterprise procurement and supply chain digital platforms. The BakerHostetler and Clause collaboration achieves their shared goal to produce a smart legal contract for use in the supply chain sector.

“Our collaboration has given us the opportunity to conduct extensive research and development to identify issues that can be automated for businesses post-signature,” said Katherine Lowry, Director of Practice Services for BakerHostetler. “Our work with Clause and their cutting-edge technology has been exciting and seamless largely because of our shared approach to client service.”

The connected freight transportation contract aims to save administrative overhead and help clients to avoid potential conflicts by using Smart Clause templates. These templates link with payment systems and public fuel price data to perform weekly pricing calculations, and they make payment adjustments as required by the contract. To facilitate transparency, distributed ledger technology was incorporated – an implementation of a Hyperledger Fabric network, which creates a single, shared source of truth for auditing, accessible by the manufacturer and its transportation providers.

“Building on top of Clause’s technology infrastructure for Connected Contracting, we also developed a separate, patent-pending process targeted narrowly at fuel surcharges — but our efforts to better serve clients with technology-enabled legal services need not stop there. Many aspects of supply chain management could be streamlined or completely re-envisioned,” noted Lowry. “We envision similar smart legal contracts for the communications, energy and manufacturing industries, as well as for other supply chain and logistics businesses.”

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