Abstract

This article explains the functioning of smart contracts and technology underlying blockchain. This contribution aims to compare smart contracts with traditional contracts and discuss their situation under the present contract law. It further discusses possible issues that may arise out of the application of smart contracts, for instance, coding errors and programming defects. It studies the possible application of smart contracts to specific fields, such as e-commerce and consumer transactions and possible disputes arising out of this application. It divides the smart contracts into categories based on their form and discusses legal issues in regard to their application.
Against the common perception that smart contracts will replace the judicial enforcement of traditional contracts, it argues that smart contracts will not replace the system but are rather another form of contracts to be governed by it. In fact, the interplay of smart contracts and contractual law creates possible legal issues as to their validity, recognition and enforcement. It provides possible solutions as to the legal issues arising out of the application of smart contracts under present contract law. The study concludes that a robust and ‘smart’ dispute resolution mechanism is required for dealing with disputes arising out of the application of new technology. Online or blockchain arbitration and other online dispute resolution mechanisms are argued to be better suited to dealing with such disputes.