The Law and Legality of Smart Contracts

Abstract

A new technology called “smart contracts” has emerged. What makes these legal agreements innovative is that their execution is made automatic through the use of computers. This Article examines smart contracts from a legal perspective. Specifically, this Article explains smart contracts’ operation and place in existing contract law. It introduces a distinction between strong and weak smart contracts, as defined by the costs of their revocation and modification. The article concludes that smart contracts are simply a new form of preemptive self-help that should not be discouraged by the legislatures or courts. While certain unconscionable examples of strong smart contracts may need to be policed, judges and policymakers should foster a climate that treats smart contracts as another form of more traditional agreements.

Keywords: smart contracts, self-help, blockchain, blockchains, bitcoin, technology, innovation

JEL Classification: K12, K42