The Consideration Myth About Smart Contracts

Abstract

Smart contracts and the blockchain have generated considerable excitement and concern (in equal measure) throughout the commercial world. These technologies promise to revolutionise commercial transactions by making them faster, cheaper, more transparent and more secure. Opponents, however, have warned of the issues that arise through the use of these technologies. One major concern is that smart contracts will not be compatible with existing laws. Some commentators have suggested that these contracts lack consideration and are prima facie unenforceable. This paper bluntly dismisses this suggestion. Such a ‘myth’ has been constructed upon misconceptions of the nature of smart contracts and the legal obligations they contain and enforce. It will be argued that smart contracts do not, as a class, lack consideration.