Contracts in the virtual reality of the metaverse
Contracts in the virtual reality of the metaverse
Metaverses

Contracts in the virtual reality of the metaverse

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When one thinks of the metaverse it is easy to be led to the illusory perception that one is moving in some sort of parallel universe, in a virtual reality with rules all its own, untethered from those of the real world. 

Well, this is not the case at all.

What is the metaverse and how do we interact with virtual reality?

A metaverse is not an alternative place to physical reality where different legal rules apply, or where there is some form of extraterritoriality. The metaverse is a vehicle, a medium, in which legal subjects of various kinds can enter into relations and can establish relationships, some of which may even be patrimonial in nature.

The only thing is that these relationships or relations, including those of a patrimonial nature, travel on a new channel and with unprecedented modes of communication, which have traits in common but also significant differences from those normally employed in the real world.

Now, the peculiarities, including technological ones, of this medium obviously do not entail altering the legal norms underlying the relationships that go through a metaverse, but they certainly require to be correctly interpreted and applied.

In other words, users, economic operators and jurists must measure themselves against the specifics of the metaverse when it comes to establishing and regulating a relationship that assumes legal and patrimonial relevance.

The initiation of a contractual relationship in a metaverse presents several aspects on which critical issues, doubts or uncertainties may arise related precisely to the particularities of the virtual environment.

One of these is related to the identity of the contracting parties, and thus to certainty in the legal imputation of rights, obligations and effects arising from a contract.

The avatar in the virtual reality of the metaverse

One generally enters a metaverse through an avatar. The avatar ends up being the virtual identity one assumes when moving and entering into relationship with other subjects, who in turn will move into that metaverse through an avatar of their own. But who is behind the avatar?

Such a problem can arise in the relationship between individuals: for example, in the case where two individuals decide to enter into any contract, outside the performance of business activities or economic activities carried out professionally. Indeed, in such cases, it is not necessarily the case that the contracting parties are equipped to give an unambiguous guarantee of the physical identity associated with their avatar.

On a practical level, in the case of contracts with companies that deliver services through a metaverse, the problem of identifying users who purchase services can be easily solved.

It is worth bearing in mind that usually users, in order to benefit from the services they purchase, have a specific interest in making themselves identifiable: in fact, without proof that they are the person who actually purchased a certain service, it becomes impossible to make any claim regarding the proper fulfillment of the obligations assumed by the operator providing that service.

Crypto payments in the metaverse

Generally, the purchase of services remotely involves the use of tracked means of payment. One could argue that in the case of cryptocurrency payments from an unhosted wallet the user may not reveal his or her real identity. 

However, it will always be necessary for a unique identifier to be created for the user to be placed in a position to achieve the delivery of the service provided by the entity providing the goods or services. 

However, the problem of correct identification of the contractual counterpart may arise not only with respect to the identity of the user, but also of the company that markets its services through a metaverse.

In fact, it may happen that operators who offer their services in a metaverse do not provide unambiguous indications of the identity on the nature and even the registered office of the legal entity providing them. 

This is also a phenomenon already encountered in online sales of goods and services on the web, and very often it is an indication of probable fraud. 

In such cases, it is highly likely that the recipient of payments is a phantom entity that after collecting the price of unreasonably low-priced flash sales of goods or services that are miraculous, then “runs away with the cash” and it becomes almost impossible to track down the target.

And it also becomes problematic to figure out in which jurisdiction one needs to take action to obtain any form of protection of one’s rights. 

From this perspective, the phenomenon, when it occurs in the metaverse, can be even more insidious because the perception of a location, albeit only in virtual reality, of what may be a ghost company, may attenuate the user’s attention and provide an illusory belief in reliability.

Therefore, the issue of proper identification and detection of contractual counterparties for all economic relationships that may develop in a metaverse is the first of the crucial issues.

A second issue of great importance is that concerning the clarity of the terms of contractual agreements, which frequently converge in a terms & conditions document available online.

These types of documents fall into the genre of general terms and conditions within the context of so-called adhesion contracts, which are especially typical of distance contracts.

Now, one of the critical issues that is easy to encounter is that these documents often do not correctly delimit the rights and obligations of the counterparties and, in particular, do not correctly identify the services covered by the contract. This can result in not properly clarifying what obligations the party providing the service is bound by.

The reasons why this happens can be various. For example, because there is a tendency to use a contract document that aims to encompass all types of services provided by the company, trying to make sure that it also applies to products, services, and service packages that are not yet put on the market, but could possibly also be developed in the future. 

At other times, the reason may be that the company, instead of turning to a qualified and specialized professional who can prepare a customized contract document, chooses to use standard forms found on the Internet from service sites that promise to automatically generate a contract document tailored to the needs, but which often, due to limitations of the platforms or lack of certain information, actually fails to capture the specifics of products and services put on the market, and fails to precisely define contents and characteristics of services, rights and obligations that reflect the specifics of the type of service offered.

Other times, keeping the framework of rights and obligations undefined is a conscious and mischievous choice: at times there may be the afterthought of making life difficult for the end user by the expedient of not clearly defining the content of the obligations to which the company is subject. 

Without a clear picture of what can be legitimately claimed, in fact, it is clear that any claim can be more easily thwarted.

This brings us to another crucial issue: that of the correct legal framing of the nature of the relationships that are to be established in the case of services that are offered and aimed at those operators who aim to have a presence in a metaverse.

Offices in the virtual reality of the metaverse

We talk about the creation in virtual reality of offices and stores, meeting rooms and so on.

Often the use of virtual space in metaverses is handled along the lines of a lease agreement

In reality, the nature of the services that are provided for the use and possibly for a customized set-up of virtual spaces may have to do, depending on the case, with services that may have nothing to do with a lease or rental, but that on the legal level may be more correctly framed as a service contract and, in certain cases, even in the transfer of ownership of intangible assets.

So, for example, while it may make sense to frame the use of storage space on servers as a form of lease or rental, where existing virtual offices are made available (and thus access and availability is offered) the relationship should more consistently be framed as a service contract. 

Obviously, this is true where the service consists of access to the functionality of the space in virtual reality made available and then the use of the programs that allow avatars to enter and exit the premises and move around simulating what one would do in reality.

Then, if what is required and offered is the creation of an ad hoc virtual space, then we are talking about design and graphics services, which will take the form of the creation of diagrams and plans.

The end product of these activities will lead to the realization, through appropriate programming, of a computer file or set of files that make it possible to make visible and tangible in a metaverse what will appear as an office or store with the required characteristics.

The fate of this data package, depending on the agreements between the parties, may be that it will be transferred to the party that commissioned its creation.

But there is also the possibility that the parties intend to leave the ownership of the files or program with the one who developed it while what will be granted to the one who commissioned the work may be used only for a predetermined period of time, similar to a software license agreement.

The proper framing of the substantive and concrete aspects of what is being made available against payment of a fee is crucial because, especially when a sufficiently clear and detailed contractual document is lacking, certain aspects in civil law discipline can change a great deal, depending on the type of contract in which a certain relationship is to be framed.

Over time, it is inevitable that enforcement practices will become established that will provide users and operators with greater clarity and allow for greater confidence in establishing these types of relationships. In the meantime, it is important to pay close attention to the totality of all these elements and, specifically, to the contractual conditions that are proposed.

When in doubt, it is highly advisable to refer to an experienced attorney especially when the stakes refer to substantial economic values.

There is no doubt that the metaverse can be seen as a large market, full of opportunities, but to avoid nasty surprises it is essential to navigate carefully.

Luciano Quarta - The Crypto Lawyer

Luciano Quarta, tax lawyer in Milan, managing partner and founder of the tax law firm QRM&P, has published extensively on the legal and tax aspects of legal tech, artificial intelligence and cryptocurrencies. A speaker at numerous conferences on the subject, he writes the column "Tax & the city" for the daily newspaper "La Verità" and regularly writes for the Economy and Taxes section of "Panorama". He is a member of the Tax Justice Commission of the Milan Bar Association and is the contact person of the Milan office of the interdisciplinary association for the study and application of artificial intelligence GP4AI (Global Professionals for Artificial Intelligence).

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