Thank you to OpenLaw for reviewing this article and giving great insights into the intersection of smart contracts and the current legal system.
Smart contracts can revolutionize the way companies and individuals interact with one another by offering ways to digitize paper contracts and automate business logic using reliable and tamperproof decentralized infrastructure.
However, while smart contracts offer immense business benefits, are they legally binding in a court of law? To answer this question, we explore the construction of current legal agreements and how they may evolve into smart contracts. Outlining the technicals of this transformation will serve as the foundation for addressing their legal status and other nuanced discussions about the future of smart contract development.Understanding the Current Landscape of Legal Agreements
According to Cornell Law School, a contract is “an agreement between private parties creating mutual obligations enforceable by law. The basic elements of a legally enforceable contract (in most jurisdictions) are: mutual assent (agreement without duress/force); expressed by a valid offer and acceptance (signatures of all parties); adequate consideration (exchanges of value); capacity (of age & sane of mind); and legality (legal activity).”
Legal contracts are predominantly written documents based on various standard industry templates with customization as needed. Companies typically don’t draft up new contracts for each standard transaction. Instead, they use trusted industry templates and add in their modifications or create a set of customized agreements that becomes the basis for a particular type of business relationship.
Most written legal documents today are either stored as paper contracts in file cabinets or as digital PDFs on computer hard drives. Written contracts require a physically written signature by all parties to be legally enforceable. Digital co...