Instituto de Estudios Políticos y Derecho Público "Dr. Humberto J. La Roche"
de la Facultad de Ciencias Jurídicas y Políticas de la Universidad del Zulia
Maracaibo, Venezuela
Esta publicación cientíca en formato digital es continuidad de la revista impresa
ISSN-Versión Impresa 0798-1406 / ISSN-Versión on line 2542-3185Depósito legal pp
197402ZU34
ppi 201502ZU4645
Vol.39 N° 70
2021
ISSN 0798- 1406 ~ De si to le gal pp 198502ZU132
Cues tio nes Po lí ti cas
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Cues tio nes Po lí ti cas apa re ce dos ve ces al año y pu bli ca tra ba jos ori gi na les con
avan ces o re sul ta dos de in ves ti ga ción en las áreas de Cien cia Po lí ti ca y De re cho Pú bli-
co, los cua les son so me ti dos a la con si de ra ción de ár bi tros ca li fi ca dos.
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Vol. 39, Nº 70 (2021), 844-861
IEPDP-Facultad de Ciencias Jurídicas y Políticas - LUZ
Recibido el 22/06/2021 Aceptado el 28/08/2021
Smart contracts in the context of
digitalization: the legal realities
of world experience
DOI: https://doi.org/10.46398/cuestpol.3970.51
Olga Klepikova *
Oleksandr Harahonych **
Iryna Antoshyna ***
Abstract
The development of digital technologies is forcing lawyers
to analyze phenomena that have recently looked fantastic. This
means that a phenomenon like smart contracts has ceased to be a
theoretical idea of improving commodity monetary transactions
and now needs a legal justication. In this article, we have
analyzed smart contracts in terms of their belonging to digital
technologies and the legal eld, that is, how they can be equated
with legal agreements, if they are their analogues, what application can it
nd given the legislation in the eld of civil (contractual) law. The purpose
of our study was to establish a link between smart contacts and their legal
regulation, with the feature of smart contract implementation perspectives.
The methodology used are systemic and formal-legal methods, as well
as methods of analysis and synthesis. The results found highlight that a
smart contract is a computer code that is entered into a blockchain network
to execute a transaction, the usual expression of which is an agreement
between the parties. From a legal point of view, smart contracts are only a
part of ordinary agreements (contracts) under the practice of international
and national law.
Keywords: smart contracts; digitization; digital technologies; blockchain;
digital assets.
* Doctor of Legal Sciences, Associate Professor of Department of Economic Law and Procedure of Institute of
Law, Taras Shevchenko National University of Kyiv, Ukraine. ORCID ID: https://orcid.org/0000-0001-5166-
215X. Email: klepikova@ukr.net
** Doctor of Legal Sciences, Associate Professor, Associate Professor of the Department of Economic Law and
Economic Process, Institute of Law, Taras Shevchenko National University of Kyiv, Kyiv, Ukraine. ORCID ID:
https://orcid.org/0000-0002-8984-2399. Email: o.harahonych@gmail.com
*** Candidate of Juridical Sciences, Associate Professor of the Department of General Theoretical Jurisprudence
of National University «Odesa Law Academy», Ukraine. ORCID ID: https://orcid.org/0000-0002-5950-9907.
Email: irinavivalmarine@gmail.com
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Contratos inteligentes en el contexto de la
digitalización: las realidades legales de la experiencia
mundial
Resumen
El desarrollo de las tecnologías digitales está obligando a los abogados
a analizar fenómenos que recientemente se han visto fantásticos. Esto
signica que un fenómeno como los contratos inteligentes ha dejado de
ser una idea teórica de mejorar las transacciones monetarias de productos
básicos y ahora necesita una justicación legal. En este artículo, hemos
analizado los contratos inteligentes en términos de su pertenencia a las
tecnologías digitales y al campo legal, es decir, cómo se pueden equiparar
a los acuerdos legales, si son sus análogos, qué aplicación puede encontrar
dada la legislación en el campo del derecho civil (contractual). El
propósito de nuestro estudio fue establecer un vínculo entre los contactos
inteligentes y su regulación legal, con la característica de perspectivas
de implementación de contratos inteligentes. La metodología utilizada
son métodos sistémicos y formal-legales, así como métodos de análisis y
síntesis. Los resultados encontrados destacan que un contrato inteligente
es un código de computadora que se ingresa en una red blockchain para
ejecutar una transacción, cuya expresión habitual es un acuerdo entre las
partes. Desde un punto de vista legal, los contratos inteligentes son solo una
parte de los acuerdos ordinarios (contratos) bajo la práctica del derecho
internacional y nacional.
Palabras clave: contratos inteligentes; digitalización; tecnologías
digitales; blockchain; activos digitales.
Introduction
In modern conditions, along with digitalization, there is a need to
consider how it aects various areas of human life. One of them, and not
the last, is jurisprudence. The use of such technology as blockchain and
cryptocurrency circulation promotes the emergence of new forms of
commodity-money exchange, which increases the speed, eciency, and
convenience of such operations.
But the legal status of these processes is not always dened at the
legislative level. In addition, there are questions of a purely theoretical
nature, for example, regarding the nature of smart-contracts, which are of
particular interest to researchers in the eld of contract law.
Are smart-contracts analogous to regular deals?
846
Olga Klepikova, Oleksandr Harahonych y Iryna Antoshyna
Smart contracts in the context of digitalization: the legal realities of world experience
How can this technology be applied in real life?
Will it be available to ordinary citizens?
What does a lawyer need to know to master smart-contracts?
And aren’t they just one type of performance guarantee and not a
separate type (or form) of contract? These issues are relevant to legal
science, so, in this article, we tried to understand what are smart-contracts
as a form of legal interaction from a technical and legal point of view, what
are their advantages, disadvantages, and prospects.
The purpose of our study is to analyze what are smart contracts as a
form of legal interaction from a technical and legal point of view, what are
their advantages, disadvantages, and prospects for application.
1. Theoretical Framework or Literature Review
Both domestic and foreign scientists were interested in the problem of
legal support and practical application of smart contracts. Thus, Clack et
al., (2016) dene smart-contracts as automated and eective agreements
that can be executed on their own or with the addition of a human input
factor. Their enforceability is guaranteed by the automation or legal status
of the parties to the agreement. In their article, the authors consider how it
is possible to standardize smart-contracts from a legal point of view.
Moreover, Kolvart et al., (2016) believe that smart-contracts are not
legal contracts but can become so if they meet the criteria that apply to
contracts under contract law. From this point of view, smart-contracts are
technical means, namely software code, which can be packed with certain
contractual terms, but not always - the legal contract as a whole. In their
publication, the authors also analyzed how smart-contracts are related to
the smart-property phenomenon and what legal framework can be applied
to smart-contracting.
Furthermore, Raskin (2017), in his study, proposes to divide smart-
contracts into weak and strong. This means that weak agreements can be
invalidated or amended by a court. Strong smart-contracts mean that the
court cannot inuence their execution, because it does not make sense,
because they are concluded and executed at one time, so the result coincides
with the conclusion of the agreement. In this case, the court cannot do
anything and cannot inuence the situation in any way, because everything
has already happened. The author notes that special smart regulation
requires strong smart-contracts because there is a need to protect the
rights and interests of individuals and legal entities when concluding such
agreements. The author also investigated what place can be allocated for
smart-contracts in the contract law system.
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The nature and the potential of smart contract were described by
Levi and Lipton (2018). They stated that smart contracts” is a term used
to describe computer code that automatically executes all or parts of an
agreement and is stored on a blockchain-based platform. Finally, Zheng
(2020), in their article, demonstrated the advantages of smart-contracts
over conventional contracts. In addition, they analyzed the interaction of
blockchain and smart-contracts, showed in simple words, what is a smart-
contract, what is its scope and prospects for its implementation in everyday
life. For example, for the world of nance and the Internet of Things,
smart-contracts can signicantly improve transactions and speed up work
processes. It also compares blockchain platforms, analyzes the challenges
and obstacles in the implementation of smart-contracts in everyday life.
Many scholars have paid attention to contractual obligations (Perezhniak
et al., 2021; Voloshyna et al., 2019), but the topic of smart contracts is still
little studied.
2. Methodology
We applied the system method to show the place of smart-contracts,
rstly, in the information technology system (their connection with the
blockchain), and secondly, to show their role in legal regulation, and more
precisely – the perspective they have about contract law, business, etc. In
this sense, we have considered smart-contracts as a new element in the
interaction of the parties to the contractual process, its disadvantages,
and advantages as a phenomenon of a more extensive system, in
particular, information technology and contract law. It is advisable to start
considering smart-contracts from the point of view of them as part of the
digital technology system, which we did in the rst half of the study. In the
second half of the publication, you can nd the legal implications of the
implementation of smart-contracts as legal agreements.
We handled a formal legal method to demonstrate the structure and
content of a smart-contract from a legal point of view. For example, like
any legal contract, a smart-contract must be characterized by the following
parts such as the subject of the contract, the parties, the essential terms.
We detail this concept in the second half of the article on the legal features
of smart-contracts. In addition, the current legal framework that can be
implemented to smart-contracts, in particular, on the example of Ukrainian
legislation in the eld of civil law.
Methods of analysis and synthesis are utilized to dene concepts, their
main features, and characteristics, to characterize the studied phenomena,
such as blockchain, tools for concluding smart-contracts, cryptocurrency
exchange, etc. Synthesis is used to generalize and draw conclusions about
the results of the study.
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Smart contracts in the context of digitalization: the legal realities of world experience
3. Results and Discussion
3.1. Background of smart-contracts
The idea of smart-contracts was rst voiced by Nick Szabo in the 90s of the
20th century. The main thought was that the use of such contracts does not
require the trust of the parties, while the eciency of their implementation
is at a high level. In his work, Szabo (1996) compared smart-contracts with
a vending machine, which, receiving money, gives out the goods – thus a
simple operation of execution of the contract of sale. His next publication
extended the understanding of the execution of such contracts to various
types of property (Szabo, 1997). The execution of smart-contracts was
conditioned by digital technologies.
In today’s world, when we say smart-contract, the blockchain should be
mentioned. Blockchain is a decentralized database divided into sequences
blocks in which information is transmitted that is dicult to break, process,
and easily trace its origin (Nofer et al., 2017). Indeed, these technologies are
interactive, or rather: a smart-contract is software or source code involved
in a blockchain environment (Buterin, 2013). In the blockchain network,
smart-contracts work as follows. The output parameters are entered into
the blockchain, its algorithm processes this information, at the output,
we get a change in the status of the smart-contract or a new blockchain
transaction. Thus, smart-contracts are rst and foremost digital computing
technology.
The most widespread smart-contracts are based on the blockchain
Ethereum, which uses the programming language Solidity, which operates
on the basis of EVM (Ethereum Virtual Machine) (De Filippi et al., 2021).
On the Ethereum platform, smart-contracts work as follows. After entering
the blockchain, they are assigned an address. To use a smart-contract, the
parties make a transaction at this address - this is how the smart-contract
code is executed. The Ethereum blockchain is the environment, the network
in which this occurs (Buterin, 2013). Execution of a smart-contract is
carried out independently, decentralized, with a guarantee of performance
(Buterin, 2013; De Filippi and Mauro, 2014; Chen, 2017; Voshmgir, 2017).
However, it is remarked that writing software code for smart-contracts can
be extremely dicult, and its verication may require a special approach
(Bhargavan et al., 2016).
Compared to conventional contracts, smart-contracts have the following
advantages (Zheng, 2020):
1. Security. Reduction of risk, unauthorized interference of third
parties in the execution of the contract in the blockchain network.
2. Cost-eectiveness. The use of smart-contracts reduces administrative
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and other costs because the smart-contract is introduced and
executed in a decentralized manner.
3. Eciency. Smart-contracts can increase the eciency of business
processes. Because they have a standard form, the customer’s
agreement to receive the goods triggers the execution of a smart-
contract instantly, it happens quickly in the blockchain network.
Today, smart-contracts have not yet become widespread and are used
only among IT professionals, people, who are directly involved in blockchain
technology, cryptocurrency mining, etc. However, large corporations and
government agencies are interested in smart-contracts, as they can greatly
facilitate and standardize their work.
Smart-contracts are of particular interest to the world of nance, which
is interested in the application of innovative banking technologies, as well
as in securing valuable data (Hamledari and Fischer, 2021). At the same
time, smart-contracts penetrate other areas of human life. For example,
they are used in construction and infrastructure. The subjects of capital
construction contracts use smart-contracts to make payments and other
deductions to ensure the construction of mattering infrastructure facilities.
Other researchers conrm these ndings. In particular, the introduction of
smart-contracts should have a positive impact on the production and supply
chain, the competitiveness of the enterprise, according to the employees of
the construction sector (Badi et al., 2021).
The prospect of using smart-contracts is in the eld of online auctions
such as eBay. The use of software code can increase the credibility of
transactions, make them fast, improve their tracking. You can use smart-
contracts based on the Ethereum blockchain.
3.2. What is а smart-contract?
A smart-contract is a program code used in a blockchain environment,
or source code, from which the program code of a smart-contract for a
blockchain was collected (De Filippi et al., 2021). If its necessary conditions
are met, the smart-contract code is executed by the miners of the basic
blockchain network. Execution of a smart-contract is initiated through a
blockchain transaction and results in a change in its status.
Smart-contracts are often confused with other technologies. For example,
smart-contracts are not a script that runs in a blockchain environment and
can be modied at the request of the script author. The smart-contract is
executed by the blockchain technology itself and all changes made to it
can be tracked and noticed. It is also noteworthy that the parties agree to
transfer the execution of the smart-contract to the trust of the blockchain,
and not to the program itself (De Filippi and Hassan, 2018).
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Olga Klepikova, Oleksandr Harahonych y Iryna Antoshyna
Smart contracts in the context of digitalization: the legal realities of world experience
Smart-contracts are also not quite similar to classic contracts because
they are written in legal language that can be applied in everyday life.
In contrast, smart-contracts are a technical, or even mathematical,
representation of ordinary contracts because the language in which they are
written is programmatic or source code that is strictly formalized and has
a mathematically balanced structure. In this aspect, smart-contracts look
stricter than regular contracts. They do not have the exibility of linguistic
techniques that can be contained in a regular contract (Levy, 2017). In this
regard, Sklaro (2017) emphasizes that some terms of regular contracts
(such as bona de obligations) cannot be reected to the same extent in
smart-contracts, as the latter are expressed in other language means. Such
inexibility of smart-contracts is, at the same time, their advantage because
the parties can be sure that no discrepancies can be allowed (De Filippi at
al., 2021).
The limits of the application of smart-contracts also have their own
characteristics (Egberts, 2017; Mik, 2017). For example, if a smart-
contract requires the involvement of a third party, such as the state, or
certain administrative procedures such as a certicate of ownership, land
registration in the land cadaster, obtaining licenses, certicates, etc., smart-
contracts cannot guarantee the success of transactions involving a third party
that is not part of the actual blockchain technology (e.g., administrative, or
institutional power) in which the smart-contract is executed. For example,
a smart-contract can be used to secure the transfer of ownership of land,
but only the fact of such transfer or payment (for example, in the form of a
sale or gift agreement). Simultaneously, the smart-contract cannot cover all
stages of this process that require the legalization of the status of the new
owner as a property owner. In this sense, Hulicki (2017) draws an analogy
with the vending machine: it implements the contract of sale only of specic
objects of the material world contained in it.
Accordingly, a blockchain-based smart-contract also implements
a contract through transactions in the blockchain network. Another
disadvantage is that once a smart-contract is launched, its execution is not
so easy to stop if something similar has not been programmed in it from the
beginning (De Filippi et al., 2021). From this point of view, the termination
of a classical contract looks easier. Again, this is a manifestation of a special
language in which smart-contracts are written (programming language).
Other disadvantages of smart-contracts related to their implementation in
everyday life, for example, the formation of the appropriate sta of qualied
IT specialists in blockchain technology, programmers, the creation of
appropriate logistics infrastructure, etc. (Osmolovskaya, 2018).
Misconception is to believe smart-contract is always a self-executing
program (Zhou et al., 2019). For example, if the third party tasked with
monitoring the implementation of the smart-contract, as well as maintaining
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the necessary third-party data on related transactions (e.g., registration of
ownership, obtaining a license, etc.), does not keep the necessary data as a
third party, the use of the smart-contract may not happen. Such a third party,
whose participation is required in the implementation of a smart-contract,
is called “oracle” (Egberts, 2017; Guadamuz, 2019; Mühlberger, 2020). Not
only a theoretical problem is the situation in which blockchain miners can
agree among themselves to interfere in the work of the network, and thus
interrupt the normal execution of the smart-contract. Reijers (2018) cite the
example of the decentralized investment fund The DAO, which was created
using a smart-contract in the blockchain network Ethereum in 2016. This
fund managed to raise $ 150 million in less than a month. However, taking
advantage of the lack of software code for the smart-contract on which the
fund was based, the attackers managed to take advantage of this and extract
more than $ 60 million from the fund (De Filippi et al., 2021).
3.3. Smart-contract as a legal agreement
Smart-contracts are a topic of discussion in the legal environment
(Ferreira, 2021). This is since in the current legislation of many countries
there are obstacles to the introduction of this technology in everyday life.
However, according to Ferreira (2021), they can be overcome and, therefore,
allow contract law to evolve into a more technological and innovative legal
phenomenon, and allow ordinary participants in legal proceedings to enjoy
all its benets such as speed, security, and convenience.
Like other agreements, a smart-contract can be broken down into
components and standard terms. Its signatories are the parties to the
agreement. The contract is signed with an electronic signature. The subject
of the contract is its content. Its conditions are written as a mathematical
algorithm. A smart-contract is not only a contract but also a guarantee
of its fulllment. Among the features of smart-contracts: autonomy,
decentralization, condentiality, security of execution and data, resource
savings, convenience, accuracy, and standardization.
Smart-contracts are a digital software (mathematical algorithm)
variant of classic contracts. At a time when classical written contracts
are characterized by exibility and variability due to the use of ordinary
language in which they are written (thus multiplying the variability of
their use and execution), smart-contracts are not exible because they are
designed to accurately perform the task, for example, purchase and sale,
transfer of the object for rent, etc.
The use of smart-contracts is promising for performing legally simple
transactions such as purchase and sale, other types of transfer of ownership
to individuals or legal entities in cases where it is necessary to provide a
secure transaction for a signicant amount of money. That is, in a situation
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Smart contracts in the context of digitalization: the legal realities of world experience
where under a regular contract, the transaction still has a large number of
risks due to the variability of the usual language of the contract and further
potentially exhausting and costly litigation, it will be easier to enter into an
agreement and execute it in the form of a smart-contract. In this sense, the
prospect of using smart-contracts can be found in such areas as:
1. buying and selling real estate, vehicles.
2. supply of goods and raw materials.
3. intellectual property.
4. credit, loan;
5. rent.
6. Leasing.
7. nancing.
8. Insurance.
9. Franchising.
10. corporate relations.
11. tenders, and;
12. IoT (Internet of Things).
Previously, it was considered that to enter into an agreement in the
form of a smart contract you need to be an experienced programmer in
the eld of IT-technologies, specically blockchain and cryptocurrency.
Therefore, the ideal option for legal professionals is to have both legal and
the above technical skills. Also, to conclude a smart-contract will most
likely have to involve an IT specialist (Myronets and Sukhanov, 2020).
However, in practice, it is enough to trust the blockchain platform and
the instructions that it oers when concluding a smart-contract to make a
transaction. In this sense, the role of intermediaries and even lawyers in the
future in concluding smart-contracts is questioned, as their participation is
no longer necessary (Boyko, 2018).
In the coming years, the number of smart contracts concluded in
sports may increase many times over. Smart contracts are concluded
using blockchain technology, respectively, the human factor is completely
excluded (Kharytonov et al., 2020). In this regard, such contracts are
protected cryptographically, and to violate such a contract in connection
with any manipulation of the text or signatures, it is almost impossible.
Smart contracts will be the main innovative breakthrough in sports in the
near future (Kharytonov et al., 2021; Tkalych et al., 2020; Kolomoiets et
al., 2021).
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It is worth noting that the following proposals were made to improve the
legal regulation of smart contracts. For example, the proposal to supplement
Art. 636-1 of the Civil Code of Ukraine (Law No. 435-IV, 2003) content,
according to which the smart contract is concluded in electronic form, takes
eect from the compilation of the code and its placement in the blockchain
network, and the identication of the parties is their electronic digital
signatures, plus standard protocols for smart contracts (Veres, 2020).
Opinions were also expressed on amendments to the Laws of Ukraine “On
Electronic Commerce”, “On Electronic Trust Services” (Pryamitsyn and
Kovalik, 2021).
From the point of view of the Civil Code of Ukraine (Law No. 435-IV,
2003) (paragraph 1 of Article 202), a smart contract is a transaction, i.e.,
an action aimed at acquiring, changing, or terminating civil rights and
obligations (Boyko, 2018). There is a point of view according to which such
transactions concern small households. From a legal point of view, it is
optimal to use smart contracts in the sphere of insurance, for the corporate
acquisition of property, to pay for the delivery of goods or services.
Promisingly use smart contracts for the exchange of stocks, bonds, options,
as well as for micronance services. It is noteworthy that the currency
used to pay for smart contracts is often digital. However, in Ukraine, for
example, the regulatory framework for the use of cryptocurrency has not yet
been developed, as the concept of cryptocurrency is already found in court
decisions (usually in criminal cases of misappropriation of digital assets).
For a contract to be legally binding, it must meet the essential conditions
that normally apply to it. According to item 1 of Art. 638 of the Civil Code
of Ukraine (Law No. 435-IV, 2003), the contract is concluded if the parties
have duly agreed on all material terms. The real intentions of individuals
are expressed in the form of a contract and its essential terms. If it is not
proven in court that the smart contract reects the real intentions of the
parties, such an agreement will likely be declared invalid. Accordingly, the
contract in the form of a smart contract must meet the conditions specied
in Art. 203 of the Civil Code (Law No. 435-IV, 2003) on the requirements
for the validity of the transaction. For example, contracts for the transfer of
ownership or lease of real estate, land are characterized by stages that must
be complied with by law for such a transfer to take place (e.g., notarization,
registration of ownership, etc.).
The transfer of such objects to ownership does not in itself entail legal
consequences and changes in legal status. For smart contracts, this means
that their architecture must be complicated by additional variables. If
this does not happen, then from the point of view of legal technique, such
transactions will be incomplete, as they do not reect the full intentions of
the parties and do not fully complete the necessary “cycle” of procedures for
the transaction. This means that conventional contracts with less eort can
854
Olga Klepikova, Oleksandr Harahonych y Iryna Antoshyna
Smart contracts in the context of digitalization: the legal realities of world experience
describe a larger range of variability. In this sense, the ability to cover more
consequences and “branches”, “scenarios”, conditions are the advantage of
classic contracts over smart contracts (Boyko, 2018). Accordingly, from a
legal point of view, smart contracts can be considered, which are only part
of a broader set of agreements that require additional action, for example,
by third parties (notarization, state registration) as a type of security under
paragraph 2. Art. 546 of the Civil code of Ukraine (Law No. 435-IV, 2003),
as it guarantees a particular transaction within the limits of the classical
contract.
Foreign law conrms that for a smart contract to be legally binding, it
must meet the requirements of the law on the conclusion of agreements.
For example, Section 9(1) of the Estonian Law of Obligations Act (ELOA)
(Law 81/487/2001, 2001) states that only an agreement concluded based
on a proposal of one party and the consent of the counterparty, or by
other means of a declaration of such mutual consent by both parties to the
emergence of mutual rights and obligations. The United Nations Convention
on Contracts for the International Sale of Goods (United Nations, 1980)
(CISG) provides similar considerations for the conclusion of contracts (Art.
14-24). This is in line with the regulation of contracts under UNIDROIT
(INTERNATIONAL INSTITUTE FOR UNIFICATION OF PRIVATE LAW,
2010) Principles of International Commercial Contracts (PICC) (Art 2.1.1),
Principles of European Contract Law (TRANS-LEX, 2002) (Art. 2:101), and
Draft Common Frame of Reference (TRANS-LEX, 2009) (Art. II 4:101)
(Kolvart et al., 2016).
The traditional view of concluding a contract in many countries implies
that the oer to enter into a contract comes from the oeror and is accepted
by the acceptor. At the same time, the bidder reveals in a suciently clear
form that he seeks to become a party to the obligation on the proposed
terms. If the original terms are not accepted by the acceptor, he may oer
to enter into a contract on modied terms. This will mean that the parties
have exchanged places, and the conclusion of an amended contract is a
counter-oer (counter-proposal), i.e., a new contract is already implied,
because its terms are dierent. But this is a traditional view, where there
is a bidder, acceptor, oer, its acceptance, respectively, the formation
of obligations under the conditions specied in the contract. The
development of e-commerce oers new forms of contracting, which have
their characteristics, and this should be taken into account, including using
the available legal framework in the eld of contract law. But which of its
provisions apply to smart contracts?
For example, Article 2: 103 of the PECL provides that the parties may
agree on other conditions necessary for the conclusion of the contract, such
as a xed price or the terms of the contract. In this case, they agree on the
essential terms of the contract. In this case, the formation of additional
855
CUESTIONES POLÍTICAS
Vol. 39 Nº 70 (2021): 844-861
conditions is a counter-oer from one party to another. According to PICC
Article 2.1.13, a party to an agreement may insist on the acceptance of all
the details of the agreement, and until the time it insists that the agreement
cannot be concluded before all or a specic part has been agreed upon, it
is justied. The party to the contract has the right to insist on the approval
of all terms of the contract (Kolvart et al., 2016). With regard to smart
contracts, this means that if they are part of a broader agreement but are
not specically mentioned in it, they may not have legal force, as the parties
have not agreed in sucient and clear form on their use. For example, if the
parties have agreed on a contract for the supply of goods, stipulated terms,
subject of the contract and price, and the party pays for these goods in a
non-contractual way – through a blockchain platform using cryptocurrency,
such a smart contract cannot have legal force. Simultaneously, if the parties
directly in the contract provided for such a possibility of payment as the
main or alternative, then the smart contract is legally binding as part of the
contract.
ELOA, PICC, PECL, and DCFR are quite exible in dening the
conditions that must be specied in the contract for it to take legal eect
and certainty. In fact, they do not contain such references, except that the
contract (more precisely, the oer) must be suciently dened. This means
that for a contract to be executed in a manner suciently legally binding,
its interpretation may be applied under the legal eld (legislation) in which
it was concluded (Kolvart et al., 2016). In the sense of smart contracts, this
does not mean their automatic invalidity but rather serves as a guarantee
that if the terms of such an agreement meet the legal requirements for
transactions, such a smart contract can be equated to a legally binding
contract.
The intentions of the parties in concluding the contract can be determined
objectively by their actions and deeds. This is important in interpreting the
contract. Nevertheless, the clarity and clarity of the terms set out in the
contract contribute to the easy interpretation and legality, the certainty of
the contract.
It should be perceived that the provisions of the DCFR and PICC may
apply to contracts that use an automated contracting process. If the parties
have agreed to enter into an agreement on a digital platform without
a physical presence at the time of conclusion, this does not preclude the
legality of the agreement.
Following the requirements of Article 2.1.1 of the PICC and Article II
4: 101 DCFR, the idea of intent, which can be determined by the actions,
deeds, conduct of the parties, is necessary for the interpretation of contracts,
the time of which cannot be determined unambiguously. Accordingly, if the
conduct of the parties is sucient to demonstrate consent, the contract may
be considered concluded even despite the impossibility to determine the
time of its conclusion (Kolvart et al., 2016).
856
Olga Klepikova, Oleksandr Harahonych y Iryna Antoshyna
Smart contracts in the context of digitalization: the legal realities of world experience
Further, we note that following Art. 2.101 (2) PECL and Art. 1.2 The
PICC agreement may not be concluded or conrmed in writing. This means
that it can be concluded and later conrmed by any means, such as e-mail,
witnesses, Skype conversations, and so on.
A critical caveat is that data security may be compromised due to the
development of cryptographic tools in the future (Mosca, 2018; Denning,
2019). This means that what is now a strength of smart contracts and
blockchain, namely data security, contract enforcement, and liability, may
be hit by the development of quantum computers, which benet from more
ecient cryptographic solutions. Hence, quantum computers are more
likely to be able to crack modern encrypted codes and cryptographic tools
than any ordinary or even advanced computer can at present (Mosca, 2016).
According to Mosca, the main cryptographic security tools with a probability
of 1 to 7 chances will be broken by 2026 and with a 50% probability – by
2031. Thus, increased security of smart contracts and blockchain may be a
temporary phenomenon.
It is now dicult to say whether there are programs designed specically
for lawyers that allow you to create or translate ordinary paper contracts
into a smart contract format. In the long run, the creation of software and
hardware that will allow users to compile computer code to create the
programs they need conveniently and aordably can inuence the spread
of smart contracts in the lives of ordinary citizens without much eort spent
on computer programming languages (Boyko, 2018). Thus, smart contracts
can become tools of everyday life, rather than a futuristic exotic for legal
professionals of the classic (paper) model.
Conclusions
The study conrmed that a smart contract is a computer code applied in
a blockchain environment. Its advantages at the moment are convenience,
safety, speed. At the same time, smart contracts can be considered from a
legal point of view as part of a normal contract in the sense of a performance
guarantee. In order for a smart contract to be legally equivalent to a
regular contract, which is legally binding, it must meet the criteria set out
in civil law, in particular, the rules for concluding agreements (validity of
transactions). Analysis of the practice of domestic and foreign legislation in
this aspect shows that smart contracts have the prospect of application in
various spheres of life, but for this, they should comply with the law, which
is not always optimal for smart contracts. It follows that the adoption of
laws and regulations specically related to smart contracts is still ahead, as
well as testing their endurance with new technologies, in particular in the
eld of quantum cryptography.
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