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Ricardian contracts have more features that are similar to traditional legal contracts than smart contracts. While smart contracts help to automate transactions, they are not contracts in the legal sense. However, when linked to legal prose in the form of a dual-linked (Ricardian) contract, they may be considered to share more features with legal contracts than smart contracts do.
It is possible to implement a Ricardian contract as a smart contract but not all Ricardian contracts are smart contracts and in the same way, not all smart contracts are Ricardian.
Smart contracts are admired for their immutability and self-executability. They make it harder for parties to falsify the terms of a contract to carry out fraud. Smart contracts also make it possible for certain terms of a contract to be automated without the need for human action.
Unlike smart contracts, Ricardian contracts can be legally enforceable. Ricardian contracts can carry out the same functions as smart contracts but not in all cases. This brings to light several questions such as whether or not Ricardian contracts will replace smart contracts.
In the 90s, computer scientist, Ian Grigg proposed the concept of Ricardian contracts. He named the system after Ricardo, a system for trading financial securities.
Parties that enter into a Ricardian contract enter into it by applying their cryptographic signatures. After they enter their signatures, the contract is recorded on a blockchain and assigned a hash. The hash makes it possible for the document to present the single version of the truth.
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