Harsimar Dhanoa, ‘Making Mistakes with Machines’

ABSTRACT
As adoption of machine-executed smart contracts increases, so too does the risk that the machines underlying these agreements will deviate from the intentions of the contracting parties. While contract law allows a narrow opportunity for setting aside of a contract under the doctrine of mistake, the application of this doctrine is muddied when the machines entirely operate within the confines of their programming. This paper highlights two notable instances of such deviation, the flash crash of 2010 and the 2016 attack on the blockchain project, the DAO, before focusing on the first case to address the doctrine of mistake in the context of these smart contracts: the Singaporean case of B2C2 Ltd v Quoine Pte Ltd. While the Singapore International Commercial Court and the Court of Appeal of Singapore, the country’s highest court, reached the correct solution, this paper argues that the Singaporean courts incorrectly limited themselves to only considering the knowledge and intentions of the programmer behind the smart contracts. Further, the paper suggests that a threshold inquiry offered by the American Restatement (2d) on Contracts may help to establish when a party using a smart contract has assumed the risks associated with its execution.

Dhanoa, Harsimar, Making Mistakes with Machines, 37 Santa Clara High Technology Law Journal 97 (2021).

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