Smart Contracts and Contract Law
Smart contracts represent one of the most interesting and discussed applications areas of the Blockchain technology. A blockchain is a distributed ledger, which digitally records data in packages called “blocks”. Data in the blockchain are cryptographically hashed and replicated in a network of “nodes”, so that it is practically impossible to tamper them. Its distributed nature avoids the need of third party intermediaries, while its immutability guarantees the integrity of the information stored on it. Thanks to its characteristics of decentralization, immutability, security and transparency, it is changing the way in which people make transactions, which become cheaper, safer and faster. At the beginning it was developed in 2008 for the Bitcoin, a virtual currency, by Satoshi Nakamoto. Since then, more than 700 crypto-currencies have flourished over the years.
Nowadays, the blockchain allows to transfer every digital asset, so countless can be its fields of applications in the nearly future, including smart contracts. The term is misleading: smart contracts are neither smart – they are mere computer programs, which perform what they have been programmed for – nor necessarily contracts in a legal sense. In fact, they could not have a legal significance (e.g. a business process), or there could be other legal manifestations (e.g. a decision under public law). For this reason, it should be better distinguish between a smart contract code and a smart legal contract.
In its traditional definition by Nick Szabo in 1994, a smart contract is a “computerized transaction protocol that executes the terms of a contract”, so it is an agreement whose execution is automated. According to this definition, it seems that there is nothing new under the sun (think about, for example, to a vending machine). The purpose of the research will be to understand how Blockchain technology can innovate smart contracts that are recorded on it, and its legal implications on contract law. In particular, it has to be evaluated if a smart contract can be considered a contract for civil law, and its positive and negative effects, especially in terms of performance of the contract, civil responsibilities, or data protection.
Main contributor(s): Chantal Bomprezzi