Mutual Consent in the Age of Smart Contracts: A Mixed-Methods Analysis of Legal Challenges

Abstract

While smart contracts enhance efficiency and transparency, they raise legal and technical issues. Smart contracts do not involve face-to-face negotiation or discussion, which contributes to difficulty in confirming that both parties agreed to the terms. Moreover, while smart contracts that encode the intention of the parties show up on the blockchain as digital signatures or as preprogrammed actions, this begs the question as to precisely whether this reflects their intention and mutual consent in the first place. Furthermore, the execution of offer and acceptance in an automated manner poses a challenge to the traditional principles of contract law, as it may rely on adhesion contracts that limit the opportunities for negotiation. Moreover, the verification of legal capacity of the parties identified under a pseudonym is another challenge in a decentralized blockchain environment, especially for cross-border transactions that set varying legal standards. Through a mixed-methods approach of thematic analysis of interviews and literature review, the research responds to these challenges, across practical and theoretical domains. Proposed solutions include biometric identification, digital identity schemes, and AI-assisted consent verification. The study recommends aligning traditional legal principles with technological advancements and fostering international collaboration to create robust frameworks, ensuring fairness and enforceability in smart contracts. This study concludes that a twin-track approach—combining technological improvements with regulatory adjustments—is critical for ensuring the fairness, enforceability, and reliability of smart contracts.