Back to the Basics | Post #7
- FIO Legal Solutions
- 4 days ago
- 2 min read
Author: Luiza Rey
Are smart contracts legally enforceable — or just code that runs? Blockchain technology gave us smart contracts — self-executing agreements that can transfer assets, release payments, or enforce conditions automatically.
They promise a future without middlemen, delays, or friction.
But one question remains: can they hold up in court?
The legal challenge
For a smart contract to be enforceable, it still has to meet the same rules as any traditional contract:
Offer and acceptance — both sides must clearly agree.
Consideration — something of value must be exchanged.
Intent — parties must mean to create a binding agreement.
Capacity & legality — the parties and purpose must be lawful.
Simple? Not always. When code executes automatically or parties are anonymous, it can be unclear whether real legal intent ever existed — or which country’s law even applies.
Real example
A DeFi startup in Singapore launched a lending protocol using smart contracts. Months later, an exploit drained user funds.
The team argued that users “accepted the risk” by interacting with the contract. Several investors disagreed — they claimed they never consented to the hidden vulnerabilities buried in the code. The dispute went to court.
The ruling (drawing from B2C2 Ltd v. Quoine Pte Ltd, 2020) reaffirmed that even smart contracts must comply with traditional contract principles — including fairness and informed consent.
Automation doesn’t cancel accountability.
Legal trends to watch
UK Jurisdiction Taskforce (2019) — confirmed that smart contracts can be binding under English law.
U.S. E-SIGN & UETA Acts — give digital contracts legal recognition.
Civil law systems (EU/LatAm) — still developing clarity around consent, jurisdiction, and liability.
The practical takeaway
Smart contracts automate performance — not legal understanding. They work best when paired with:
Clear off-chain agreements describing the terms in plain language.
Defined jurisdiction and dispute resolution method.
Regular legal audits before deployment. Because “trustless” systems still need trust in the legal system behind them.
📚 Extra Reading:
By Luiza Castro Rey
