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Most people would have dealt with a contract in one way or another during their life. Their popularity stems from their legal enforceability. Indeed, a contract builds trust that a transaction will be conducted in a manner agreed upon by the two parties. A contract allows the wronged party to seek compensation if the other breaks the terms of the contract. Alternatively, they can ask the court to enforce the terms of the contract. However, technology means you can now create a new type of contract called a smart contract. But are smart contracts enforceable? This article will explain what a smart contract is and how it can make dealing with contracts much more accessible.

What Is a Smart Contract?

Smart contracts are a type of contract that utilise technology to make transactions happen. For example, they utilise the blockchain to execute orders depending on the terms of a contract. Following the delivery of one side of the contract, a smart contract will automatically ensure the other side is delivered. You can have as many steps as you want on a smart contract. Indeed, a smart contract will limit disputes because both sides always get what they want out of the contract. Furthermore, the blockchain records each step of the contract. Therefore, each party can track back and see what has unfolded. 

Benefits of a Smart Contract


The main benefit of a smart contract is that they are unchangeable. Once the programmer has developed the contract, it must stay that way, and blockchain technology enforces this. This is a benefit as it will lower disputes between parties as it is common for disputes to arise due to contractual alterations.

Clear Terms

Another benefit of a smart contract is that the terms of the contract are clear. Anybody can access the code and see what will trigger each step to play out. This means that there is less likely to be ambiguity in the contract. It also means it is harder for people to hide contractual terms in it. 

Automatically Executed

The reason why smart contracts are becoming more popular is that they automatically execute the terms of the contract. This means that there is no need for either party to carry out the contract terms themselves. There is also little room for fraud as the performance of the contract is guaranteed. 

Things to Note 

You Need a Programmer

The main issue with smart contracts is that you need a programmer to code the smart contract. The programmer needs to be experienced in blockchain technology and has the skills to make sure the smart contract runs smoothly. This can be expensive but is often worth it in the long run.

Issues Around Services

Smart contracts are not 100% foolproof as some things cannot be tracked or measured. For example, a contract related to services will struggle to be executed as a smart contract, as there can sometimes be no way for the smart contract to know when one side has performed its obligation under the contract.

You Cannot Modify a Smart Contract

Another thing to note is that you cannot modify the contract once it forms. This can be disadvantageous in certain situations where the circumstances may change. If you are in a situation where things may change, you may not want to create a smart contract.

Key Takeaways

Contracts are the bedrock of transactions between individuals and businesses. They allow parties to carry out their contractual agreements and courts to provide remedies if someone does not live up to their side of the bargain. Smart contracts are a solution to fraud. This type of contract uses blockchain technology to ensure the proper execution of a contract without fraud. However, a smart contract is unchangeable following creation. You should also consider hiring a programmer to make smart contracts your main form of agreement.

If you need any legal assistance with smart contracts, LegalVision’s experienced contract lawyers can help. Call us today on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

Are smart contract legally enforceable?

As long as a smart contract meets all the requirements of a binding contract, they are legally enforceable.

Can anyone create a smart contract?

If you can code and are familiar with blockchain technology, then you can create a smart contract. However, it may be best to hire a programmer.

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