Nature of Smart Contracts

What are the legal risks associated with Smart Contracts?


  • "In adverse situations where the contract goes unfulfilled, the traditional option would be to enforce it by going to court or via arbitration. However, due to the high levels of grey areas in the execution of smart contracts, it may cause the plaintiff to incur cost and time spent in legal proceedings. It is almost impossible to code every possible “if-then” scenario into the smart contract and therefore it may not align well with real-world business settings and legal dispute resolution methods."

    "What happens when a smart contract fails? In particular, what happens when the code executes correctly (from a software point of view) but produces an outcome that is different from what the parties intended (a contract is, after all, defined by what the parties intended)? Indeed, there is a Singapore decision which involved cryptocurrency trading and the doctrine of mistake in contract law, and is best illustrated in the decision of Quoine Pte Ltd v B2C2 Ltd, which has been extensively commented on by academics."

    Source: Law Gazette, last revised on January 2021