Wrapped and Stacked: ‘Smart Contracts’ and the Interaction of Natural and Formal Language

2018 ◽  
Vol 14 (4) ◽  
pp. 307-343 ◽  
Author(s):  
J.G. Allen
Keyword(s):  
Speech Acts ◽  
Formal Language ◽  
Contract Law ◽  
Complex Nature ◽  
Smart Contracts ◽  
Human Beings ◽  
Legal Rules ◽  
Contract Formation ◽  
Smart Contract ◽  
Legal Entities

Abstract This article explores ‘smart contracts’ from first principles: What they are, whether they are properly called ‘contracts’, and what issues they raise for national contract law. A ‘smart’ contract purports to record contractual promises in language which is both intelligible to human beings and (ultimately) executable by machines. The formalisation of contracting language that this entails is, I argue, the most important aspect for lawyers—just as important as the automation of contractual performance. Rather than taking a doctrinal approach focused on the presence of traditional indicia of contract formation, I examine the nature of contracts as legal entities created by words and documents. In most cases, smart contracts will be ‘wrapped in paper’ and nested in a national legal system. Borrowing from the idiom of computer science, I introduce the term ‘contract stack’ to highlight the complex nature of contracts as legal entities incorporating different ‘layers’, including speech acts by the parties in both natural and formal languages as well as mandatory legal rules. It is the interactions within this contract stack that will be most important to the development of contract law doctrines appropriate to smart contracts. To illustrate my points, I explore a few issues that smart contracts might raise for English contract law. I touch on the questions of illegality, jurisdiction, and evidence, but my focus in this paper is on exploring issues in contract law proper. This contribution should be helpful not only to lawyers attempting to understand smart contracts, but to those involved in coding smart contracts—and writing the languages used to code them.

scholarly journals THE CONCEPT OF SMART CONTRACTS FROM THE LEGAL PERSPECTIVE

2019 ◽  
Vol 34 (3) ◽  
Author(s):  
Karolina Kasprzyk
Keyword(s):  
Contract Law ◽  
Regulatory Framework ◽  
Legal Issues ◽  
Comparative Perspective ◽  
Smart Contracts ◽  
Legal Definition ◽  
Smart Contract ◽  
Legal Perspective ◽  
Definition Of

The purpose of article hereof is to introduce the significant characters of the smart contracts and certain ideas and proposals de lege ferenda on regulatory framework for smart contracts. Furthermore, present legislation with regard to the legal definition of the smart contract will be discussed from a comparative perspective. Particular note will be devoted to smart contracts in a relation to the contract law. Substantively, legal issues arising from the use of smart contracts, focussing upon actual and potential conflicts with established principles of contract law, will be introduced.

scholarly journals Regulation of the Smart Contract in (Romanian) Civil Law

2021 ◽  
Vol 8 (2) ◽  
pp. 95-111
Author(s):  
Raluca Onufreiciuc ◽  
Lorena-Elena Stănescu
Keyword(s):  
Civil Law ◽  
Computer Code ◽  
Computer Programs ◽  
Legal Regulation ◽  
Contract Law ◽  
Use Case ◽  
Smart Contracts ◽  
Crucial Question ◽  
Smart Contract ◽  
The Subject

The research aims to organize, examine, and analyze the provisions on smart contracts available in Romanian civil law. “Smart contracts” are not smart, and are not necessarily contracts, although they can be. As self-executing computer programs, smart contracts are operational on the blockchain and unlike traditional legal contracts, once the agreement has been concluded and the smart contract is set in motion, no party can intervene and it will be executed without interruption, modification, or breach. The crucial question in the final contract law topic is what happens when the smart contract's outcomes deviate from those required by law. To answer this issue, we must first understand that whether a smart contract becomes legally enforceable is determined by several circumstances, together with the unique use case, the type of smart contract employed, and the existing legislation. The paper addresses the subject of determining and regulating smart contracts under Romanian current laws. Particular emphasis is placed on two ambiguous definitions of smart contracts: as computer code and as a civil-law contract. The authors conclude that the concept of smart contracts requires more legal regulation, particularly in terms of managing their meaning and comprehension.

scholarly journals Blockchain technology as a regulatory technology: From code is law to law is code

First Monday ◽  
2016 ◽  
Author(s):  
Primavera De Filippi ◽  
Samer Hassan
Keyword(s):  
Digital Technology ◽  
Computer Code ◽  
The Internet ◽  
Smart Contracts ◽  
Legal Rules ◽  
Legal Code ◽  
Traditional Notion ◽  
Blockchain Technology ◽  
Smart Contract ◽  
Internet Users

“Code is law” refers to the idea that, with the advent of digital technology, code has progressively established itself as the predominant way to regulate the behavior of Internet users. Yet, while computer code can enforce rules more efficiently than legal code, it also comes with a series of limitations, mostly because it is difficult to transpose the ambiguity and flexibility of legal rules into a formalized language which can be interpreted by a machine. With the advent of blockchain technology and associated smart contracts, code is assuming an even stronger role in regulating people’s interactions over the Internet, as many contractual transactions get transposed into smart contract code. In this paper, we describe the shift from the traditional notion of “code is law” (i.e., code having the effect of law) to the new conception of “law is code” (i.e., law being defined as code).

scholarly journals Legal Issues of Smart Contracts in Contract Law

2021 ◽  
Vol 14 (11) ◽  
pp. 1626-1634
Author(s):  
Elizaveta V. Zainutdinova ◽  
Keyword(s):  
Contract Law ◽  
Legal Issues ◽  
Data Type ◽  
Smart Contracts ◽  
Smart Contract ◽  
Written Form ◽  
And Performance

The research is carried out on some legal issues of smart contracts and their place in Russian and other countries’ contract law. By means of contract law such issues are analysed: 1) conclusion and performance of smart contracts’ obligations; 2) practical issues arising due to smart contracts’ use; 3) contract law provisions that might be applied to smart contracts; 4) issues that are not covered by the legislation but need to be addressed. A smart contract is considered to be a contract with the specific type of performance of obligations (automated performance). Smart contract is a contract concluded with an exchange of data (type of a written form). Smart contracts are performed with the help of automated performance and previously expressed consent of parties. It is proved that smart contracts could be modified and terminated giving a mechanism for that as well as provides for measures of defence and responsibility that could be applied for obligations out of smart contracts. As the result, provisions of smart contracts that reflect smart contracts’ place and peculiarities in contract law are formulated

Regulating smart contracts: An efficient integration approach

2021 ◽  
Vol 15 (3) ◽  
pp. 397-404
Author(s):  
Alireza Alikhani ◽  
Hamid Reza Hamidi
Keyword(s):  
Smart Contracts ◽  
Legal Rules ◽  
Blockchain Technology ◽  
Distributed Ledger ◽  
Smart Contract ◽  
Integration Approach ◽  
Efficient Integration ◽  
Legal Costs ◽  
Software Code ◽  
Illegal Activities

A smart contract is a digital protocol (software code) that enables automated monitoring and executing contract’s provisions without the need for intermediaries. Blockchain technology allows implementing smart contracts through a distributed ledger, but has no reliable way of enforcing legal rules. For example, in networks such as Bitcoin, it is possible to engage in illegal activities such as money laundering and dealing in weapons. In addition, it is impossible to enforce and audit legal costs such as taxes and duties. This research has devised a plan that allows official institutions to enforce the rules and audits efficiently during automatic execution process of smart contracts. This article discusses five important challenges in applying legal rules to Blockchain: the accreditation to the contracting parties’ and the goods’ nature, collecting legal costs, enforcing territorial laws and auditing. We present “Hyper Smart Contract”, a method for regulating Blockchain-based smart contracts and assess the limitations of the current generation of smart contracts on Ethereum to ensure a proper implementation of this plan. The performance of proposed method evaluated on a motivation application.

Relational Contracts

2018 ◽  
Author(s):  
Melvin A. Eisenberg
Keyword(s):  
Contract Theory ◽  
Contract Law ◽  
Dynamic Processes ◽  
Relational Contracts ◽  
Legal Rules ◽  
Relational Contract ◽  
Contractual Relationship ◽  
Dynamic Relationship ◽  
Contract Formation ◽  
The Stranger

Chapter 54 concerns relational contracts. Classical contract law was implicitly based on a paradigm consisting of a bargain made between strangers transacting on a perfect market, and focused on the static instant of contract formation, rather than dynamic processes such as the evolution of a contractual relationship. Relational-contract theory rejects the stranger-in-a-perfect-market paradigm and the static conception of contract law. Instead, it is based on a paradigm of a contractual transaction between actors who are in an ongoing and dynamic relationship. The identification of relational contracts as an economic and sociological entity is desirable. However, a theory of relational contracts requires the formulation of a body of legal rules applicable to, and only to, relational contracts. This is a place to which relational-contract theory has not gone and cannot go.

scholarly journals Smart contracts as an innovation in insurance law

2020 ◽  
Vol 58 (3) ◽  
pp. 305-317
Author(s):  
Andrea Đurović
Keyword(s):  
Contract Law ◽  
Regulatory Framework ◽  
Legal Issues ◽  
Insurance Contract ◽  
Smart Contracts ◽  
Insurance Law ◽  
Smart Contract ◽  
Significant Step

One of the major current topics and one of the major innovations in the contract law, as well as in insurance law is the invention of the smart contracts. The author is basing her research on use of smart contract in insurance law and what are the main legal issues arising from the use of smart contract. In her paper, the author points out that the implementation of the smart contract in insurance law will greatly affect all participants in insurance contract and a significant step forward in improving the level of protection of insurance users (consumers), although it takes time and readiness of European and domestic legislators to create a special regulatory framework so that smart contract can reach its potential.

scholarly journals Smart Contracts in the New Era of Contract Law

2020 ◽  
Vol 1 (4) ◽  
pp. 8-24
Author(s):  
Alexandros A. Papantoniou
Keyword(s):  
Theoretical Basis ◽  
Contract Law ◽  
Smart Contracts ◽  
New Era ◽  
Novel Technologies ◽  
Blockchain Technology ◽  
Smart Contract

This essay examines whether smart contract innovation is capable of displacing the orthodox adherence to traditional contracts. This examination is underpinned by an analysis of the legality of smart contracts, through which it is exemplified that smart contracts ought to be considered legally binding instruments. The essay proceeds to explore the superiority of smart contracting on a technical and theoretical basis. The advantages generated through smart contract automaticity and enforceability present a concrete basis for undermining reliance on traditional contracts. Blockchain Technology also enhances the benefits of smart contracts by acting as a smart contract enabler through guaranteed performance and enforceability. Nevertheless, such novel technologies inevitably suffer from several shortcomings. This essay considers examples which illustrate the inflexibility of smart contracting. Apart from being susceptible to hacking and code exploitation, smart contracting is unable to deal with ambiguities and potential modifications. Overall, this suggests that the advantages of smart contract practice are currently confined to some specified limited scenarios. Smart contracts perform a different function to traditional contracting by merely guaranteeing technical enforceability as opposed to legal enforceability. This essay thus concludes that, for the time being, it is best to regard smart contracting as a supplement to traditional contracts rather than an outright displacement.

scholarly journals Freedom to (Smart) Contract

2020 ◽  
pp. 38-50
Author(s):  
Tiffany M. Sillanpää
Keyword(s):  
Legal System ◽  
Large Scale ◽  
Due Process ◽  
Standard Form ◽  
Contract Law ◽  
Complete Separation ◽  
Smart Contracts ◽  
Legal Intervention ◽  
Smart Contract ◽  
Private And Public

Since Friedrich Kessler wrote “Contracts of Adhesion-Some Thoughts About Freedom of Contract” in 1943, condemning narrow adherence to the principle of “freedom to contract” in the face of large scale enterprises’ growing preference for standard form contracts, Courts have balanced their desire to uphold contracts while protecting weaker parties from adhesion. Today, they face similar challenges with the rise of code-driven smart contracts and blockchain governance. Similar to Kessler’s world, where standard-form contracts were a tool for “excluding or controlling the ‘irrational factor’ in litigation” such as uncertain outcomes of judicial interpretation, automated smart contracts aim to put themselves outside the control of both contractual parties and the courts, thus removing any ability to breach or tamper with the original terms. Smart contract advocates contend that removing the judiciary as the governing body over contract law and imposing contractual performance via decentralized blockchain governance improves efficiency and certainty. But, how much can one really write a contract that completely circumvents the potential for legal intervention or judicial enforcement? Will smart contracts finally achieve the complete separation between private and public law that advocates of “freedom to contract” originally claimed, or does the common law legal system’s deep-rooted belief in the rule of law and due process prevent the judiciary from being excluded from contract enforcement regardless the medium? And is there a risk that, as smart contract sceptics posit, smart contract platforms and blockchain governance create a new feudal order with a “potentially illegitimate exercise of power” and “normatively suspect” wealth distributions? The short answer, as this paper will demonstrate, is that as long as smart contracts meet the traditional requirements of a contract, they cannot fall outside the establish legal system’s purview. The only thing a smart contract truly adds to traditional contracts is automated execution that is enforced by the blockchain’s consensus mechanism; this may provide some efficiency to the legal system by streamlining basic performance but it cannot be the only form of governance over smart contracts. While there may be procedural challenges to undoing or enforcing specific performance under smart contracts because of their decentralized features, any substantive problems that could occur within a smart contract are imminently addressable with and must be subjected to the principles and remedies found in traditional contract law. Finally, I will conclude with current developments in smart contracts which point to a potential for them to become an integral part of our legal system going forward. Overall, I will argue that smart contracts, if carefully drafted to consider potential pitfalls and the future needs of contracting parties to amend or enforce, can hold the potential to provide efficiencies and greater legal certainty to contracting parties. This is achieved, not through circumventing the legal system, but by working with it to automate simple performance enforcement and deferring more complex contractual breakdowns to the judiciary.

scholarly journals SMART CONTRACTS FOR THE DIGITAL ECONOMY: THE NEW NORMALITY

2020 ◽  
pp. 129-138
Author(s):  
В.В. Мусатов ◽  
А.В. Попова
Keyword(s):  
Russian Federation ◽  
Contract Law ◽  
Digital Economy ◽  
Smart Contracts ◽  
Computing Technology ◽  
Smart Contract ◽  
Foreign Countries ◽  
The Russian Federation ◽  
Legal Consequences

Человеку по своей природе свойственно все упрощать и оптимизировать процесс своей работы. Изобретение компьютера и вычислительной техники позволили людям упростить и облегчить математические вычисления. Очередь оцифровывания добралась и до договорного права. В настоящей статье автор на основе гражданского законодательства Российской Федерации и зарубежных стран проводит анализ возможности применения смарт-контракта и юридические последствия его использования. It is human by nature to simplify and optimize the process of his work. The invention of the computer and computing technology allowed humans to simplify and facilitate mathematical calculations. The line of digitization has also reached contract law. In this article, the author analyzes the possibility of using a smart contract and the legal consequences of its use based on the civil legislation of the Russian Federation and foreign countries.

Sign in / Sign up

Export Citation Format

Share Document