One of the most debated issues in the Fintech community in recent time, has been whether ‘smart contracts’ qualify as legal contracts in law; with some arguing that smart contracts are mere codes incapable of satisfying the salient elements of a legal contract. Are codes capable of being written as contracts? Do the smart contracts in themselves contain the required elements of a contract to qualify as legal contracts? Are the smart contracts really smart? These analyses are the focus of this paper.
In arriving at these determinations, the paper examines the propositions and experiments on the smart contract, to come to a determination whether this new form of contracting can be situated within the existing legal frameworks for traditional natural language legal contracts. In achieving this research objective, this paper: (i) provides an introduction on the reliance on the court system as a trusted third party for the enforcement of contractual obligations and the development of the blockchain technology as an alternative to the court system, (ii) briefly describes the blockchain technology as a digital payment system, (iii) examines the other possible uses of the blockchain technology outside of its use as a digital payment platform, with a focus on the smart contract use, (iv) explains the smart contract concept (v)analyses the elements of the traditional legal contract vis-à-vis the smart contract, to ascertain whether or not same is a legal contract strictly so called, and (vi) identifies the possible practical challenges which may impede the deployment of the smart contract as an alternative to the natural language legal contracts.
Alabi, Folake, Taking Contracting Digital: Examination of the Smart Contracts Experiment (August 9, 2017).