Contracts Ex Machina

70 Pages Posted: 21 Mar 2017 Last revised: 3 Nov 2018

See all articles by Kevin Werbach

Kevin Werbach

University of Pennsylvania, The Wharton School, Legal Studies & Business Ethics Department

Nicolas Cornell

University of Michigan Law School

Date Written: March 18, 2017

Abstract

Smart contracts are self-executing digital transactions using decentralized cryptographic mechanisms for enforcement. They were theorized more than twenty years ago, but the recent development of Bitcoin and blockchain technologies has rekindled excitement about their potential among technologists and industry. Startup companies and major enterprises alike are now developing smart contract solutions for an array of markets, purporting to offer a digital bypass around traditional contract law. For legal scholars, smart contracts pose a significant question: Can smart contracts offer a superior solution to the problem that contract law addresses? In this article, we aim to understand both the potential and the limitations of smart contracts. We conclude that smart contracts offer novel possibilities, may significantly alter the commercial world, and will demand new legal responses. But smart contracts will not displace contract law. Understanding why not brings into focus the essential role of contract law as a remedial institution. In this way, smart contracts actually can illuminate the role of contract law more than they can obviate it.

Keywords: smart contracts, bitcoin, blockchain, contracts, contract law, private law theory

JEL Classification: K12

Suggested Citation

Werbach, Kevin and Cornell, Nicolas, Contracts Ex Machina (March 18, 2017). 67 Duke Law Journal 313 (2017). Available at SSRN: https://ssrn.com/abstract=2936294

Kevin Werbach (Contact Author)

University of Pennsylvania, The Wharton School, Legal Studies & Business Ethics Department ( email )

3730 Walnut Street
Suite 600
Philadelphia, PA 19104-6365
United States
215-898-1222 (Phone)

Nicolas Cornell

University of Michigan Law School ( email )

625 South State Street
Ann Arbor, MI 48109-1215
United States

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