Contracts Formed by Software: When Things Go Wrong

Oxford Business Law Blog, 2019

3 Pages Posted: 16 Dec 2019 Last revised: 2 Jul 2020

See all articles by Vincent Ooi

Vincent Ooi

Singapore Management University - School of Law; Singapore Management University - Centre for AI & Data Governance

Date Written: November 11, 2019

Abstract

The use of software in contract formation is likely to become increasingly pervasive in light of the digital economy. Consequently, software can also be expected to exhibit greater autonomy and take on increasingly complex transactions and contract negotiations. It is important that a legally coherent, fair, certain and economically justified approach be taken to regulate such contracts.

A ‘contracting problem’ arises when software is used to autonomously enter into contracts without human input. The formation of a valid contract requires, inter alia, an agreement between two or more parties, where each party exhibits an objective intention to be legally bound (the ‘Objective Theory of Contract’). As software develops to become more sophisticated, in some cases, it may act autonomously in forming contracts, requiring little to no human input. The contracting parties may well be unaware of the specific terms of each contract formed by the software they are using. Under the Objective Theory of Contract, no objective intention to be bound can be inferred and thus, theoretically, no binding contract will be created (the ‘contracting problem’).

Keywords: Contract Law, Law and Technology

Suggested Citation

Ooi, Vincent, Contracts Formed by Software: When Things Go Wrong (November 11, 2019). Oxford Business Law Blog, 2019, Available at SSRN: https://ssrn.com/abstract=3495213

Vincent Ooi (Contact Author)

Singapore Management University - School of Law ( email )

55 Armenian Street
Singapore, 179943
Singapore

HOME PAGE: http://vincentooi.com

Singapore Management University - Centre for AI & Data Governance ( email )

55 Armenian Street
Singapore
Singapore

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