Blockchain Papers

Michael D. Murray

No abstract is available for this record.

Brydon T. Wang, Mark Burdon

There is an increasing commercial imperative to automate various <br/>components of the construction contract administration process, including <br/>technologies such as sensors, common data environments, machine learning <br/>frameworks and smart contracts. These technologies of automation augment <br/>the role of the superintendent that administers construction contracts and <br/>impact how the superintendent exercises discretion in relation to legal <br/>obligations captured in the construction contract. This article analyses the <br/>discretionary aspects of a superintendent’s legal obligations as articulated in <br/>Australian standard form construction contracts. It argues that the exercise of <br/>superintendent discretion in a fair and reasonable manner signals <br/>trustworthiness to the construction industry and positions the superintendent <br/>as a trusted intermediary on the construction contract. Consequently, the <br/>augmentation of the trusted role of a superintendent requires a deeper <br/>understanding of how automation of contract administration processes can <br/>support the signalling of trustworthiness. To do so, this article adopts a <br/>conceptual framework of trustworthiness to examine how the exercise of <br/>superintendent discretion signals trustworthiness in three ways: ability, integrity <br/>and benevolence. The article concludes that care must be taken when <br/>deploying technologies of automation in the contract administration process in <br/>order to ensure that superintendent discretion is exercised fairly, reasonably, <br/>and in good faith

Lakshmana Kumar Ramasamy, Seifedine Kadry

A smart contract is a technology that allows the creation of a negotiation process capable of running independently, without human intervention. This chapter intends to frame the figure of the “smart contract” from a legal point of view. It shows that the smart contract is an advanced tool in the context of a contractual relationship. The possibility of making a smart contract “the contract” in a legal meaning opens up scenarios which have hitherto been unexplored for contract law. It is still difficult to determine to what extent current rules are adequate to govern this phenomenon. The chapter will therefore conclude with a review of the strengths and weaknesses of the smart contract technology and with some suggestions for a future smart contract law.

Benjamin Hayward, Lisa Spagnolo, Drossos Stamboulakis

No abstract is available for this record.

Eva Micheler

Abstract This chapter explores the English law as an example of a particular model for the analysis of intermediated securities. It analyzes the rights of investors through the lens of trust law rather than through bailment and highlights the advantages and disadvantages of the no-look-through model. It also reviews cases where individuals hold a relatively small number of securities through a financial service provider, including the Duomatic principle that gives license to the court to override the formal requirements for shareholder decisions contained in the Companies Act. The chapter demonstrates why the intermediated holding structure that has evolved across the world does not sit comfortably with English law. It cites the recent scoping study conducted by the UK Law Commission combined with the UK Government’s ambition to attract a global pool of investors, which suggests that the UK Government is motivated to address the problem with the English law.

Pietro Ortolani

No abstract is available for this record.

Tiffany M. Sillanpää

Since Friedrich Kessler wrote “Contracts of Adhesion-Some Thoughts About Freedom of Contract” in 1943, condemning narrow adherence to the principle of “freedom to contract” in the face of large scale enterprises’ growing preference for standard form contracts, Courts have balanced their desire to uphold contracts while protecting weaker parties from adhesion. Today, they face similar challenges with the rise of code-driven smart contracts and blockchain governance. Similar to Kessler’s world, where standard-form contracts were a tool for “excluding or controlling the ‘irrational factor’ in litigation” such as uncertain outcomes of judicial interpretation, automated smart contracts aim to put themselves outside the control of both contractual parties and the courts, thus removing any ability to breach or tamper with the original terms. Smart contract advocates contend that removing the judiciary as the governing body over contract law and imposing contractual performance via decentralized blockchain governance improves efficiency and certainty. But, how much can one really write a contract that completely circumvents the potential for legal intervention or judicial enforcement? Will smart contracts finally achieve the complete separation between private and public law that advocates of “freedom to contract” originally claimed, or does the common law legal system’s deep-rooted belief in the rule of law and due process prevent the judiciary from being excluded from contract enforcement regardless the medium? And is there a risk that, as smart contract sceptics posit, smart contract platforms and blockchain governance create a new feudal order with a “potentially illegitimate exercise of power” and “normatively suspect” wealth distributions? The short answer, as this paper will demonstrate, is that as long as smart contracts meet the traditional requirements of a contract, they cannot fall outside the establish legal system’s purview. The only thing a smart contract truly adds to traditional contracts is automated execution that is enforced by the blockchain’s consensus mechanism; this may provide some efficiency to the legal system by streamlining basic performance but it cannot be the only form of governance over smart contracts. While there may be procedural challenges to undoing or enforcing specific performance under smart contracts because of their decentralized features, any substantive problems that could occur within a smart contract are imminently addressable with and must be subjected to the principles and remedies found in traditional contract law. Finally, I will conclude with current developments in smart contracts which point to a potential for them to become an integral part of our legal system going forward. Overall, I will argue that smart contracts, if carefully drafted to consider potential pitfalls and the future needs of contracting parties to amend or enforce, can hold the potential to provide efficiencies and greater legal certainty to contracting parties. This is achieved, not through circumventing the legal system, but by working with it to automate simple performance enforcement and deferring more complex contractual breakdowns to the judiciary.

Fernanda de Araujo Meirelles Magalhães

No abstract is available for this record.

Mimi Zou

Abstract There has been burgeoning interest among legal scholars in recent years regarding the implications of blockchain technology for the law. Two thoughtful monographs that go beyond the hyped claims of enthusiasts and cynics are Primavera De Filippi and Aaron Wright’s Blockchain and the Law: The Rule of Code and Kevin Werbach’s Blockchain and the New Architecture of Trust. While the two books have different focal points, both contain a common Laurence-Lessig-inspired theme of ‘code as law’ in which decentralised blockchain networks are viewed as a regulatory ‘modality’ or ‘architecture’ with its own system of rules. However, as this article argues, blockchain is not outside the law or the existing legal system. Code necessarily interacts with other modes of regulation, namely the market, social norms and law, in constraining the operation of blockchain applications such as smart contracts. This argument also situates smart contracts in a relational analysis of real-world contracting practices.

Andrea Đurović

One of the major current topics and one of the major innovations in the contract law, as well as in insurance law is the invention of the smart contracts. The author is basing her research on use of smart contract in insurance law and what are the main legal issues arising from the use of smart contract. In her paper, the author points out that the implementation of the smart contract in insurance law will greatly affect all participants in insurance contract and a significant step forward in improving the level of protection of insurance users (consumers), although it takes time and readiness of European and domestic legislators to create a special regulatory framework so that smart contract can reach its potential.

Jhoel Chipana Catalán

El autor otorga una visión adecuada de smart contract. No obstante, no se detiene en definir este tipo contractual, pues advierte ciertas características que deberán tenerse en cuenta para afinar su funcionalidad, además de identificar las ventajas del arbitraje en la solución de controversias que nazcan en la ejecución de tales actos jurídicos, siempre que se logre un empalme adecuado con este sistema heterocompositivo.

Jia Wang, Lei Chen

China’s contract law is examined to determine if there are legal ambiguities with regard to formation, performance, and modification of smart contracts and the problems relating to the enforcement, remedies, and dispute resolution. It is important to Chinese law not to act prematurely to change existing legal frameworks in response to a still evolving technology (blockchain-based smart contracts). On the other hand, the regulatory framework for platform operators needs be adjusted carefully to incentivize them to diligently check and verify the information of vendors who conduct business on the platform.

Hetal Doshi

No abstract is available for this record.

Jonathan Rohr

Smart contracts are the new norm, yet state legislatures and courts have not developed set rules and answers to legal disputes that these contracts create. Is traditional contract law sufficient? Or should we create an entirely new legislative or common law scheme to deal with these disputes? The common law has proven to be successful in dealing with new technologies and contracts, particularly because of its flexibility. Although a major overhaul may be in the future, there are still solutions that we can find today with the current legal landscape given the state of contract law and its evolution over time. One particularly analogous body of case law is instructive: the law of the vending machine. In the end, thinking about smart contracts as vending machines may be fruitful for the future of this evolving area of the law.

Tatiana Cutts

“Smart contracts” are a way of using computers to make contracts unbreakable. Contracting parties do not need to trust one another to perform or rely upon intermediaries to enforce performance. Performance is guaranteed. This is supposed to be a victory for the ordinary person – a clever socio–economic application of cryptography that strips power from companies and governments and gives it to consumers. But it turns out that less trust does not mean more freedom, or better bargains. The law of contract supports valuable relationships both by enforcing duties and by allowing parties to escape the consequences of ill–formed contracts and oppressive terms. Smart contracts remove these safeguards. Consumers may be bound, inexorably and without recourse, to contracts that are wholly devoid of virtue. The lesson of smart contracting is clear and urgent: when we design the future of commerce, we should direct our resources towards building, not emaciating, relationships of trust.

J.G. Allen

Abstract This article explores ‘smart contracts’ from first principles: What they are, whether they are properly called ‘contracts’, and what issues they raise for national contract law. A ‘smart’ contract purports to record contractual promises in language which is both intelligible to human beings and (ultimately) executable by machines. The formalisation of contracting language that this entails is, I argue, the most important aspect for lawyers—just as important as the automation of contractual performance. Rather than taking a doctrinal approach focused on the presence of traditional indicia of contract formation, I examine the nature of contracts as legal entities created by words and documents. In most cases, smart contracts will be ‘wrapped in paper’ and nested in a national legal system. Borrowing from the idiom of computer science, I introduce the term ‘contract stack’ to highlight the complex nature of contracts as legal entities incorporating different ‘layers’, including speech acts by the parties in both natural and formal languages as well as mandatory legal rules. It is the interactions within this contract stack that will be most important to the development of contract law doctrines appropriate to smart contracts. To illustrate my points, I explore a few issues that smart contracts might raise for English contract law. I touch on the questions of illegality, jurisdiction, and evidence, but my focus in this paper is on exploring issues in contract law proper. This contribution should be helpful not only to lawyers attempting to understand smart contracts, but to those involved in coding smart contracts—and writing the languages used to code them.

Edmund Schuster

No abstract is available for this record.

Jeffrey M. Lipshaw

“Smart contracts” are a hot topic. Presently, smart contracts are mostly evidence of property, like cryptocurrencies or mortgages, created and/or transferred using blockchain technology. This is an exploration of the theoretical possibilities of artificial intelligence in a far broader range of complex and heretofore negotiated transactions that occur over time. My goal is to understand what it means to make a contract smarter, i.e. to delegate more and more of the creation, performance, and disposition of legally binding transactions to machine thinking. Moreover, I want to do so from the perspective of one who is neither a true believer in the purported technological singularity to come nor a digital Luddite.

David Fox

Abstract This chapter focuses on the characterisation and treatment of cryptocurrencies in the common law of property, using Bitcoin as the main example. It first examines how a crypto-coin might be viewed as an object of property, and more specifically whether it could make a suitable object for any regime of property rights at all, before discussing the fungibility, specificity, scarcity and exclusivity of cryptocurrencies in the context of property law. It then considers whether crypto-coins fall into either of the two conventionally recognised categories of personal property: choses in possession or choses in action. It also explores the applicability of rules of derivative transfer of title to crypto-coin transactions, and how the standard rules of following and tracing may be used for the identification and tracing of cryptocurrencies through mixtures. Finally, it looks at remedies available at common law and in equity for enforcing titles to cryptocurrencies.

Eric Tjong Tjin Tai

Abstract: A classic legal problem is whether breach of contract may give rise to a remedy. Under common law this is discussed under the doctrine of excuses. Its civil lawequivalent is the attributability of causes of non-performance of an obligation, and its converse, force majeure. Despite the variety of approaches in various jurisdictions, the general outlines are roughly equivalent as far as translation into smart contracts is concerned: the main issue is what is the cause of non-performance and whether this cause can be attributed. Smart contracts can deal with the general outline of this structure, but may in practice only approximate the refinement that contract law offers. Themain problems are: determining the actual cause of the non-performance by means of automated oracles or the smart contract on its own (without relying on human judgment), dealing with multiple causality and impediments due to the creditor, determining attributability of the cause of non-performance. Smart contracts may offer no more than an approximation of the detailed rules of contract law, by hard-and-fast rules. This may suffice for certain categories of contracts, but may need additional effort to obtain a closer approximation of contract law rules where larger interests are concerned. The related doctrine of withholding performance is similarly difficult to realize appropriately in smart contracts. As regards hardship or unforeseen circumstances, it is best to disallow this in smart contracts,which leaves open the questionwhether partiesmight go to court for relief. The reliance on oracles furthermore opens a weakness to the automatic performance of smart contracts, due to possible liability of oracles for perceived incorrect assessment.

Kelvin Fatt Kin Low, Ernie G. S. Teo

The hype over bitcoins has been compared to the tulip mania in 17th century Netherlands and it has spawned a host of similar cryptocurrencies. As it has gained in popularity, the law has approached the subject warily, mostly from a regulatory perspective. However, no comprehensive consideration of the fundamental nature of a bitcoin owner’s private law relation to his/her/its bitcoins has been properly conducted. Whether or not bitcoins or other cryptocurrencies achieve mainstream adoption or remain of interest to only a niche audience, this question will inevitably have to be properly addressed. This paper proposes to consider if bitcoins might be recognised as the subject of property rights by Commonwealth courts and if so, what such rights ought to entail. It will begin with a careful consideration of the controversial question of the scope of the law of property before considering bitcoin’s place within the law of property (if any). What is the meaning of property in the common law? What fundamental differences exist between tangible and intangible property? If ownership of bitcoins is worthy of protection, what shape should it take? It suggests that the common law adopts a more expansive view of property than civilian systems and that it is thus able to accommodate bitcoins and other cryptocurrencies within its law of property. However, owing to their unusual nature, legal rights to them must take on a unique and unorthodox form. The code underlying Bitcoin also poses particular challenges to the law which this paper also addresses.

Daniel Hellwig, Goran Karlic, Arnd Huchzermeier

This chapter looks beyond the novelty of self-executing ‘smart contracts’ in blockchain networks and explores developments against the background fact that commercial parties have, for centuries, used documentary credit to simulate autonomous performance. Blockchain-based smart contracts and documentary credit share three core functionalities which are essential to any effective autonomous performance, analogue or digital—they both (i) act through internalized media of exchange; (ii) operate as closed systems; and (iii) provide means of securing sufficient resources to guarantee contractual performance. Using these three functionalities as a framework, this chapter conducts a comparative analysis of mechanisms for effecting autonomous contractual performance in a commercial setting. From this comparison, a few hypotheses are drawn regarding the potential areas where smart contract technology is more likely to find fruitful application. In particular, the chapter considers potential limitations to applying smart contracts to scenarios beyond digital asset transfers, how dispute resolution mechanisms should be designed to complement (rather impair) the autonomous nature of contractual performance under smart contracts, and potential capital cost implications which might arise in some cases when parties seek to replace human intermediaries with smart contracts.

Samir D. Parikh

Bankruptcy proceedings tend to involve civil disputes where nothing more than money is at stake. In such instances, the application of the preponderance-of-the-evidence standard of proof offers the greatest utility and is aligned with the comparatively minimal importance society places on purely monetary disputes. However, bankruptcy courts are not viewed as typical civil courts. Rather, many view these courts as “courts of equity” and this perception serves as a crutch which many bankruptcy judges use in advocating the application of the clear-and-convincing standard of proof to customary civil disputes. These actions distort the accepted risk allocation schemes implicit in standards of proof; the consequence of which often is inequitable results. A lack of direction by the Supreme Court is a key factor in this process failure. The Court has addressed the application of standards of proof infrequently and, when it has, the holding has been narrowly tailored. In 1990, the Court issued a ruling in Grogan v. Garner, 498 U.S. 279 (1991), that appeared to provide guidance. Unfortunately, as of late, the ruling has been misinterpreted by a number of courts and has led to additional confusion on an issue that was already elusive. In my article, I propose a new, comprehensive normative approach to determine which standard of proof is applicable in disputes involving debtors in possession under the Bankruptcy Code. My approach is based on a coextensive reading of applicable Supreme Court precedent that honors the narrow basis on which many of these rulings are made. I urge use of an approach that will engender greater uniformity on this fundamental issue. Further, I analyze some key forms of relief available under the Bankruptcy Code in which courts have advocated the application of the clear-and-convincing standard of proof but failed to provide any explanation for this action. By applying my approach, I evaluate bankruptcy case law and isolate instances where bankruptcy courts impermissibly distort accepted risk allocation schemes. Finally, I attempt to show that some unexplained applications of the clear-and-convincing standard of proof are justified.

Claire A. Hill

Complex business contracts are notoriously difficult to write and read. Certainly, when litigation arises, courts scarcely have an easy time interpreting them. Indeed, contracts don't look at all as though they are written to tell a court what the parties want. Why can't smart, well-motivated lawyers do a better job? My article argues that they rationally don't try. I argue for a view of contracting in which parties aren't principally trying to set forth an agreement for a court to enforce. Rather, by leaving inartful language and ambiguity in the agreement, parties are bonding themselves not to seek precipitous recourse to litigation. The agreement entered into provides each party with grounds to bring a lawsuit if it so desires. Thus, if one party sues, the other party will virtually always have grounds to countersue. The complex transacting community has a norm against litigation in any event; bonding encourages and bolsters this norm, as well as norms of appropriate conduct throughout the contracting relationship. The contracting process, and the contract that results, thus serves importantly to create the parties' relationship and to set the stage for dispute-resolution consistent with preserving the relationship, as well as to keep available the backstop of enforcement if needed.