Smart Contracts Explained
In this video, CIGI Senior Fellow Marsha Simone Cadogan explains how smart contracts function and how the courts determine if smart contracts are legally enforceable.
Smart contracts are agreements entered into through blockchain systems such as Ethereum, where the terms of the contract are written into the system using computer code. When certain conditions are met, the contract self-executes the terms based on the code without human intervention.
Smart contracts can be used to track the sale and delivery of items, to simplify supply-chain logistics and to provide services. They reduce costs and save time by removing intermediaries and enable cross-border transactions.
Because a smart contract can be used for many types of transactions, there can be serious financial impacts if disputes between parties arise. As Marsha explains in this video, there is legal precedent in common law jurisdictions for smart contracts to be viewed as legally binding.
With the digitization of all aspects of commerce and society, we can anticipate smart contracts to play an increasing role in the legal system.
You can read Marsha Simone Cadogan’s paper, “Enforcing Smart Legal Contracts: Prospects and Challenges,” here: https://www.cigionline.org/publicatio...
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