Ricardian Contracts are really a stepping stone to Smart Contracts. They are a way to link a contract to another system, typically an accounting system. Ian Grigg came up with the Ricardian Contracts some time ago. He first published about it in Financial Cryptography in 7 Layers in 1998. Ricardian Contracts were initially used for Ricardo (hence their name), a bond platform.
They are a melding of a traditional contract with a contract that can be read and executed by machines. A Ricardian Contract can be defined as a single document that:
- is a contract offered by an issuer of some item of value (think of a bond, coin, token, currency, etc.) to a holder of such item;
- for a valuable right held by the holder, to be managed by the issuer;
- can be read in plain language by humans (so like a normal contract);
- can be read by programs (and is parsable like a database);
- digitally signed;
- carries the keys and server information; and
- is allied with a unique and secure identifier.