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Arizona digital contract law protects business

Arizona's Electronic Transaction Act protects the legal validity and enforceability of signatures and records that are in electronic format and plays an important role in the state's commercial law. In March, this law was amended and enhanced to include digital signatures included in a blockchain.

A blockchain is a digital and decentralized ledger of all digital currency transactions. It grows constantly from the most recent transactions and are recorded and added in order of chronology. Market participants may follow digital currency transactions without having central record keeping. Each computer connected to this network receives a blockchain copy that is automatically downloaded.

Arizona is the only state, which has strengthened the enforceability of smart contracts tied to blockchains. This law provides that a signature that was secured through a blockchain is considered an electronic signature or an electronic record.

These rules have enhanced the validity of contracts in the state. Paper contracts have not kept up with technological advances in business, have become inefficient and are more susceptible to fraud. Business relationships are placed in doubt if contracts are unenforceable or not recognized in state courts.

If there is a dispute or breach of these smart contracts, the parties may seek legal remedies in Arizona courts. This provides advantages in real estate, finance, public records, insurance, supply chain and other business sectors.

The Arizona Attorney General also embraced smart contracts. He intends to establish the first regulatory framework to encourage this technology.

Smart contracts have shown their benefits for businesses developed as start-up company or developer. Recently, Vermont and Nevada also passed laws that have improved the enforceability of smart contracts even though their laws are not as strong as Arizona's statute.

Businesses should seek experienced legal representation for assistance with business formation and contracts that are enforceable and incorporate evolving technology. A qualified attorney can help assure that these agreements assure that deals and obligations are protected.

Source: CoinDesk, "Only in Arizona: How smart contract clarity is winning over startups," Aaron Stanley, Sept. 19, 2017

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