Smart contracts and digital assets are becoming increasingly common in a variety of industries. Nevertheless, is the law ready for them? Following the publication of the Legal statement on the status of cryptoassets and smart contracts by the LawTech Delivery Panel, the Law Commission has launched two projects to analyse how English law can be reformed to accommodate these emerging technologies.
Smart contracts
English contract law has developed on the presumption that contracts are written by individuals in ordinary language. Smart contracts, on the other hand, are drafted by a computer code, without the need for human intervention. They can either be in natural language generated through computer code, a hybrid of coded terms and natural language or wholly written in code. These developments raise a number of questions and challenges for English contract law, particularly in relation to what circumstances a contract written in code would be considered legally binding and how they can be interpreted by courts.
The UK Government asked the Law Commission to undertake a study on smart contracts, which will focus on:
- Formation and enforceability;
- Interpretation;
- Performance of the contract;
- Remedies; and
- Vitiating factors