Farshad Ghodoosi, ‘Digital Solidarity: Contracting in the Age of Smart Contracts’

Smart contracts refer to encoded agreements that are formed, validated, and enforced by computers. Digital or Smart contracting, broadly defined, includes automation of contract formation via artificial intelligence, automation of contract enforcement via blockchain technology, and contract digital interconnectedness with objects via the internet of things. As more businesses rely on these new technologies, they equally rely on the enforceability of smart contracts in law. There are two principal problems, however, with existing smart contracts: first, the enforceability of smart contracts remains ambiguous. Second, smart contracts are very limited in scope and capability barring more complex contracts from being executed via blockchain technology. Drawing from the existing literature on contracts and smart contracting, this Article proposes new approaches to address these two problems. It first suggests that smart contracts be analyzed through the lens of reliance-based contracting (similar to promissory estoppel or tort-based misrepresentation). Next, the Article reexamines the efforts to build blockchain-based dispute resolution mechanisms, analyzes the seismic shifts in contractual disputes, and offers new insights into its features including decentralized decision-making, network-based dispute resolution, and outside-of-judiciary enforcement of decisions. The dispute resolution development, I argue, will form the future of smart contracting and will allow more complex transactions to be digitized. It further argues for a mass-user dispute resolution mechanism (mob justice) that can enable us to climb out of the current morass of consumer arbitration. With this development, the human connection and recognition moves to the dispute phase of contracting. This marks a shift from traditional contractual solidarity to digital solidarity.

Ghodoosi, Farshad, Digital Solidarity: Contracting in the Age of Smart Contracts (September 7, 2019).

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