Search

The aim of a contract is to provide legal certainty to the parties and to define the toolkit of remedies available in the event of a dispute. In modern business practice, the ultimate goal of a contract is to eliminate or reduce the possibility of legal liability; the issue of efficiency and effectiveness of contract implementation is not the primary goal. The impact of technology in the concept of contract creation, implementation and control has redefined the traditional approach which implies that contracts are written by "lawyers for lawyers". The contemporary practice bears witness of the correlation and intertwining of law and technology in a way that exceeds the scope and goes beyond the relationship between the regulator and the regulated object; in effect, technology becomes an organic element of law, its origin, application, control and development. A smart contract, as an example of the influence of technology in the field of regulating contractual relations, automatically activates the obligation, in accordance with the terms and conditions that the parties agreed upon and entered in the program code. Based on the Blockchain technology, a smart contract profoundly changes the paradigm of trust in a person with the paradigm of trust in a program code. The basic limitation of smart contracts is their capacity to convert complex legal concepts into the computational form readable by a program code. Thus, they cannot function in a pure form (entirely defined by a program code). The code needs to be complemented by text. The legal form that should bridge the gap between the smart contract and the traditional contract is the Ricardian agreement. The Ricardian contract uses the best from both worlds. On the one hand, the key terms of the contract are in software-readable program code format; on the other hand, more complex provisions that are not suitable for conversion into an algorithm are contained in additional instructions that are part of the Ricardian agreement. In terms of legal obligation, the Ricardian contract reflects exclusively and only the intention of the parties, without implying a legal obligation that could be formally established only by concluding the intended future agreement. As such, the Ricardian contract can play the role of a guide for the interpretation of the prospective agreement, which gives it a certain value in case of a dispute.

Blockchain technology becomes relevant in economic exchange as it lowers costs and contributes to cost-efficiency and effectiveness of economic transactions. The key quality of Blockchain lies in ensuring the authenticity of digital data: trust in the traditional legal relationship has been replaced by digital verification of data in blocks. As an important phenomenon, Blockchain calls for legal answers on the issues arising from its application. An example of this development is the legal regime of smart contracts. A smart contract is a transaction in which any rights and obligations of the contracting parties are programmed in a code. Being the result of Blockchain technology application, such a contract implies the need for trust between the contracting parties. As a legal phenomenon, Blockchain (smart contract) technology raises the issue of liability for performing contractual obligations. Smart contracts can minimize certain contract risks and additionally simplify contract execution. They are immediately put into effect, without the need for any further interaction between the parties. The essential components of smart contracts are the digitally verifiable data and the automatic performance of legally relevant actions based on digitally received and processed information. All of the enlisted issues are important for proper understanding of liability of Blockchain actors.