Is a ‘smart contract’ really a smart idea? Insights from a legal perspective

Abstract

Swift developments in the emerging field of blockchain technology have facilitated the birth of ‘smart contracts’: computerised transaction protocols which autonomously execute the terms of a contract. Smart contracts are disintermediated and generally transparent in nature, offering the promise of increased commercial efficiency, lower transaction and legal costs, and anonymous transacting. The business world is actively investigating the use of blockchain technology for various commercial purposes. Whilst questions surround the security and reliability of this technology, and the negative impact it may have upon traditional intermediaries, there are equally significant concerns that smart contracts will encounter considerable difficulty adapting to current legal frameworks regulating contracts across jurisdictions. This article considers the potential issues with legal and practical enforceability that arise from the use of smart contracts within both civil and common law jurisdictions.