Nick Szabo's Papers and Concise Tutorials

Video Contracts

Copyright (c) 1998 by Nick Szabo
permission to redistribute without alteration hereby granted


Qualities important to contracting, such as understanding, agreement, and commitment, are often better communicated nonverbally than via writing. Violation of an emphatic and well articulated promise is and should be considered much more egregious than violation of an offhand comment taken as a promise, or violation of an unread or misunderstood term of a written contract. Written contracts cannot capture such distinctions, and thus the law developed for written contracts has not taken them into account.

The law has treated the written contract as a special social relationship. What is the special nature of a written versus an oral contract? Written contracts evolved out of oral contracts as a better way to memorize certain aspects of the oral agreement, the words. This is quite superior to the memories of principles or witnesses.

Witnesses are even worse when it comes to nonverbal communications. Unless they are very good actors, they must first tranlate the nonverbal into a verbal description -- a very lossy process indeed.

So nonverbal communications, rich in contractually relevant information but unreliable in the the era of witness memory, was deemphasized further in the paper era. Now for the first time we have the ability to record all external aspects of a contractual agreement.

This will not happen overnight. The law needs to develop an art of interpreting audio and video, just as it developed an art of interpreting text. We need to develop an art of drafting multimedia contracts just as we developed an art of written contracts. And we need to be learn to develop "video literacy" skills, and distinguish between people of high skill (such as actors) and low skills.

The Promise of Multimedia

Distinguishing innocent mistake from fraud is a problem common to law and governance. A proposed behavior the promisor is clear about and committed to is, absent fraud, much more reliable than behavior the promisor has only vague knowledge of or lukewarm commitment to. The emphasis, intention, and knowledge indicated by a visual account thus give the adjudicator much better information with which to disambiguate error from fraud. Video also vividly freshens the memory of the principles as to their state of mind and possibility of misunderstanding, so that the issue need not be taken to a third party. Video contracts may thus serve to greatly reduce the transaction costs associated with negotiating, committing to, and performing on agreements.

Practical experiment to try: next time you buy a used car, insist on videotaping the claims and promises! (It may help to call ahead of time and sign an agreement that you can't publish the tape -- even then it will likely be a rare gem to find a sales rep who will agree to this!)

Two examples of political videotape well known in the U.S. illustrate my point. The first, George Bush's infamous "read my lips -- no new taxes!" promise. Bush's emphatic assertion convinced voters the first time, and doomed him the second time when he had violated this promise. The fact that Bush committed fraud, rather than merely made a mistake, was clear enough for even the distant scattered electorate to see.

A more recent example (this is only meant to illustrate my point, not take a position, so please don't turn this into a Clinton scandal flame war!) is Bill Clinton's wagging his finger and declaiming, "I did not have sex with that woman!" Some are now embarrassed to have relied on this promise that the scandal would soon be debunked. As with Bush it clearly demonstrates an intentional falsehood rather than mere mistake or misunderstanding. It is this piece of videotape, more than the detailed sexual descriptions or legal technicalities of Starr's report, that form the main popular case against Clinton.

Non-commercial relationships may also be improved. Consider, for example, the emotions and intentions involved in a marriage commitment: much easier to capture on high quality video/audio than on paper. New forms of public and private marriage ceremony, adapted for visual and aural capture of emotion, intention, understanding, and commitment, may greatly improve the process of resolving marital dispute. A "video prenup" ceremony performed in private, or among a few close witnesses, may bridge the gap between cold prenuptial agreements and marriage ceremonies full of warmth but empty of concrete commitments.

Recovering the Meeting of the Minds

In written contract law, every term in a written contract is usually enforceable. Parties are charged with understanding the meaning of these terms before agreeing to them.

The reality, which videotaping would starkly reveal, is that lay people don't read most of the contracts drafted by lawyers, any more than most Windows users edit the Registry. To deal with the fact that such written contracts usually do not actually constitute a meeting of the minds, we have a host of regulatory restrictions on enforceability, often under the rubric of "consumer protection" or "labor relations". In this context "consumers", "labor", etc. denote lay people who sign laywer drafted contracts. The paper law has developed all these "epicycles" to deal with the fact there is so often little actual meeting of the minds.

One unfortunate consequence of such regulation is that it further encourages laymen to sign contracts they don't read or understand, confident that the fine print doesn't give away their firstborn child, or a thousand other possible horrors. Thus regulation has caused contract law and practice to move further away from the idea that there must be a meeting of the minds.

Instead of all these regulations, a more general but perhaps too radical approach would have considered lay people, when unassisted by their own lawyers and signing contracts drafted by other lawyers, to be "wards of the court" for the purposes of enforcing such contracts. The assymetry here between a lawyer and a layman is very similar to the assymetry between an adult agreeing to a contract with a child, or that between a C++/Registry hacker and a Windows user.

We can now take a less radical approach and integrate video as a contractual medium co-equal to text to record whether, among other things, the layman actually understands the contract he is signing. Lawyers would then be forced to draft user-friendly contracts. This would follow the route blazed by Greg Burch's splendid example of seamen as wards of the court. Instead of lumping people into starkly unequal classes like "wards of the court", or ruthlessly enforcing terms a supposedly equal party didn't understand, the amount of assymetry involved in each particular contract becomes recorded on video and thus part of the contract itself.

A Phosphorecent Bright Line

The "bright line" defining the scope of the contract even more important in the digital era, as we move from boundaries defined by pieces of paper to boundaries defined by computer user interfaces and the scope of data encompassed by a digital committment protocol. The interface must be user-friendly and should unambiguously correspond with the committed data.

Where we may disagree is over whether the medium should be limited to text. I argue that audio and video clips of clear, well-defined extent, agreed and committed to at the same time as the text, should constitute an enforceable element of the contract co-equal to text.

If the outcome of contract disputes becomes less predictable, people will use contracts less oftne. We must develop the arts of drafting and interpreting multimedia contracts with this in mind. For example, the different media should reinforce and disambiguate each other, rather than contradict, just as one part of a contract's text should not contradict another.

"Drafting" using recordings of the parties, would become the art of developing informal protocols between these parties, such as those examining the interaction between the parties and the text. For example, a series of questions and answers between parties would both test their understanding and help clarify misunderstood aspects of the contract. The mere video record of a party reading a contract could serve a function much like the little ____ initial boxes put beside important sections in a contract. Except that the recording, including recording the eye movements of the party, is much more comprehensive than the little boxes.


Video survelleince puts privacy in grave jeopardy. Video reordings should be known, selective, and ceremonial rather than hidden, ubiquitous, and of raw life.

There is great potential for ambiguity in high bandwidth, in-person social interaction. This could gravely impact the enforceability of video contracts based on such interaction. Much of the ambiguity may stem from our poor memory of such events, as well as from the immature state of audio and video interpretation and composition skills for legal purposes. I suspect the wealth of new information far outweighs potential intractable ambiguities.


Understanding, agreement, and commitment, are often better communicated nonverbally than via writing. Thus video contracts can serve to greatly reduce the transaction costs associated with negotiating, committing to, and performing on agreements. In combination with ceremonies such as question and answer, video leaves recorded evidence of understanding. Verifying the extent of understanding may allow a Kuhnian paradigm shift, collapsing the "epicycles" of law developed to work around the fact that complex written contracts, drafted by lawyers, no longer constitute a meeting of the minds with a layman. In short, video adds an unprecedented new medium and will take its place co-equal to text in the drafting and interpretation of contracts.

In summary, I propose that video will come to augment, and sometimes even replace, the use of written contracts. The oral agreement, the handshake, and other indicators of agreement and commitment can be captured in a medium now as reliable as paper. With upcoming technologies, the recording, organization, and retrieval of video records will be more user friendly than a typical written contract. Video records of raw or ceremonial negotiations and commitment can communicate to principles and adjudicators readily recognizable and valuable information about the meeting of minds. Video will thus play an important role in smart contracts, and should take its place in the legal system beside written contracts.


My thanks to Gregory Burch, J.D. for his many useful comments and examples.
Nick Szabo's Papers and Concise Tutorials