What are smart contracts?
Unlike a regular contract that is entered into on an individual basis, a “smart contract” is self-executing in nature. The terms of the agreement and the entering into it between buyer and seller in a smart contract are written into lines of code. Emerging technologies such as blockchain and other digital assets are being promoted as a way to create and develop these smart contracts.
What will the project involve?
In recognising the emergence of these technologies and the importance of ensuring that the jurisdiction of England and Wales remains a competitive choice for business, the Law Commission has agreed with the government to analyse the English legal framework as it currently applies to smart contracts. The analysis will focus on the following key areas:
- formation and enforceability;
- performance of the contract;
- remedies; and
- vitiating factors.
The Law Commission recognises that this analysis will likely give rise to questions surrounding smart contracts. Questions such as: "how will smart contracts be legally binding?", "how will smart contracts be interpreted?" and "what remedies are available if there is breach or the smart contract does not perform as agreed?" may need further work or reform. Further details can be found here.
In light of the impact of these new technologies and their fast-evolving nature, it will be interesting to observe how the Law Commission suggests reforms to English law to accommodate smart contracts and digital assets. We will continue to monitor the Law Commissions progress and will provide updates where possible.