October 19, 2017

The Future of Law (Part Eight): Strange Bedfellows—Commercial Law and Legal Ethics

“Misery makes strange bedfellows.”
Shakespeare, The Tempest

rhodesThis week’s first prediction:

  • The law of commercial transactions will take on a bitcoin dynamic.

This is from the Bitcoin website:

Bitcoin uses peer-to-peer technology to operate with no central authority or banks; managing transactions and the issuing of bitcoins is carried out collectively by the network. Bitcoin is open-source; its design is public, nobody owns or controls Bitcoin and everyone can take part.

That’s pure democratization, folks! The key is “peer-to-peer”: if you and I agree that a business or network or other medium of exchange has value, then it does, and conventional metrics be damned. Think Amazon and Facebook: both immensely valuable; neither shows a profit.

Peer-to-peer is what’s driving the new sharing economy. Consider this from a recent article in Time Magazine:

The key to [the sharing economy] was the discovery that while we totally distrust strangers, we totally trust people — significantly more than we trust corporations or governments. Many sharing-company founders have one thing in common: they worked at eBay and, in bits and pieces, recreated that company’s trust and safety division. Rather than rely on insurance and background checks, its innovation was getting both the provider and the user to rate each other, usually with one to five stars. That eliminates the few bad actors who made everyone too nervous to deal with strangers.

(For more on this topic, see this week’s stories in Forbes and USA Today.)

  • Peer-to-peer will alter the key commercial concepts of valuation and contract consideration.
  • Commercial trust — deciding who you’re going to do business with — and related issues such as fairness and fraud will be built increasingly on the ratings you get from the people you do business with.

The sharing industry has more than a toehold on the economy: a graphic in the Time article shows that it has already raised billions of dollars in startup capital. It will only get bigger, despite the fact that…

It’s unclear if most of this is legal. The disrupters are being taken on by governments and the entrenched institutions they are challenging. . . . [T]here are thousands of companies — in areas such as food, education, and finance — that promise to turn nearly every aspect of our lives into contested ground, poking holes in the social contract if need be. After transforming or destroying publishing, television and music, technology has come after the service sector.

The legal profession is of course busy representing the “governments and entrenched institutions” trying to tax, license, and otherwise bring the sharing economy into conventional legal boundaries. Lawyers will win some and lose some, but in time…

  • The peer-to-peer dynamic will prevail in significant economic sectors — including the professional service sector of which the legal profession is a part.
  • As a result, peer-to-peer review of commercial transactions will extend to the parties’ legal counsel.
  • The resulting consumer satisfaction data will have a curious side effect as a new kind of legal ethics watchdog.

Peer-to-peer is the ultimate in self-policing, which makes its extension to legal ethics unlikely but logical. Rule 8.3 — the duty to report unethical behavior among our peers — has long been a part of the Model Rules of Professional Conduct, but has been more honored in the breach than the observance. The new, democratized marketplace will take this matter into its own hands.

Strange bedfellows, indeed.

Kevin Rhodes’ Legal Connection blog posts for the past three years have been collected into an ebook which is currently available as a promotional free download from Smashwords, Barnes & Noble, iTunes, and Scribd, and for a nominal price from Amazon. For those who prefer to do their reading in hard copy, the collection will soon be available in that format (details to follow).

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  1. […] the world of professional credentials is changing. I talked about this in a post last March called Strange Bedfellows: Commercial Law and Legal Ethics. Here’s an […]

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