Q&As

Is a smart contract enforceable where it has been executed automatically?

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Published on LexisPSL on 05/04/2017

The following TMT Q&A provides comprehensive and up to date legal information covering:

  • Is a smart contract enforceable where it has been executed automatically?
  • What is a smart contract and how might it be used?
  • Electronic contracts
  • Can smart contracts be legally binding?
  • Other key legal considerations
  • Practical Solutions

Is a smart contract enforceable where it has been executed automatically?

What is a smart contract and how might it be used?

Smart contracts are computerised transaction protocols that execute the terms of a contract automatically, without the requirement of third party involvement. In other words, smart contracts are coded instructions which execute on the occurrence of an event (or events) and self-monitor the terms of the contract.

A smart contract consists of the following elements:

  1. two or more parties

  2. the transfer of value from one to another, and

  3. implementation of the contract without human involvement (once the smart contract has been coded)

See: Law firms, artificial intelligence and smart contracts: (2016) 3 JIBFL 164 for more information.

Smart contracts use blockchain technology to record and execute transactions. The term ‘blockchain’ was defined in a 2016 report by the government as:

'a type of database that takes a number of records and puts them in a block (rather like collating them on to a single sheet of paper). Each block is then ‘chained’ to the next block, using a cryptographic signature. This allows block chains to be used like a ledger, which can be shared and corroborated by anyone with the appropriate permissions'

See Distributed Ledger Technology: beyond block chain, Government Office for Science, 19 January 2016.

The commercial analysis in Blockchain and the law—an uncharted landscape notes that the utility of

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