A smart contract is a legally binding contract that automatically executes some or all of its obligations via a computer program. In this blog, we look at smart contracts and consider how they fit into Irish law.
After the publication of a legal statement on crypto assets and smart contracts by the UK Jurisdiction Taskforce, the UK Government requested that the Law Commission of England and Wales carried out a scoping study into smart contracts and the law. The Law Commission recently issued a call for evidence about smart contracts and how they can be accommodated by English law.
Being such a near neighbour of the UK, it’s important for Ireland to also consider this matter. In this blog, we look at smart contracts and consider how they fit into Irish law.
What are smart contracts?
A smart contract is a legally binding contract that automatically executes some or all of its obligations via a computer program. There are generally considered to be three types of smart contract:
• Contracts in natural language where obligations are executed via code
• Hybrid contracts consisting of both natural language and code
• Contracts in code only
Smart contracts and the law
As in English law, Irish law does not require a particular format for contracts. Whilst certain requirements must exist regarding offer, acceptance and consideration, a contract in Ireland does not necessarily need to be written down to be legally enforceable.
A verbal agreement is likely before a smart contract is established. This could help with verifying acceptance of the contract. With smart contracts that include some level of natural language, it should also be straightforward to prove that the parties intended to establish the contract. However, it is much harder to confirm agreement of a smart contract without natural language communication.
With regard to signing smart contracts, natural language contracts could be signed in the usual way. The UK Jurisdiction Taskforce acknowledged that smart contracts written in code could be signed electronically. Since 2000, Irish law has accommodated the use of electronic signatures, so signing smart contracts of any type should not pose an issue.
Issues around interpretation
A benefit of smart contracts is a lack of ambiguity compared to traditional contracts. In a dispute involving a natural language smart contract, less interpretation would be required. However, that’s not the case for contracts in code only. Coding experts will likely be required to decipher the code’s meaning. With hybrid contracts, there’s also the risk of discrepancies between code and natural language, which could be challenging to make a judgement on.
Smart contracts and Ireland
It is worth keeping in mind that smart contracts can bring many potential benefits. By automatically executing obligations, transaction and enforcement costs can be reduced. Automation also leads to streamlining and increased efficiency. Mechanisms within smart contracts also reduce the risk of fraud.
Whilst there are clear benefits, there are clearly risks attached too. Ireland needs to be mindful of this when considering the position of smart contracts. As of yet, no review has been formally carried out in Ireland to scope how the law can accommodate smart contracts.
A Norwich Pharmacal Order is a legal order that is used to compel an innocent third party to disclose information about another party who is involved in some form of malfeasance. Norwich Pharmacal Orders are becoming a common legal tactic to stifle online trolls on social media, as well as trace anonymous individuals onlineText Link
If you are a VASP in Ireland, you will need to register with the Central Bank for AML/CFT purposes. If you are a firm that is not established in Ireland, or you are not conducting business as a VASP before the 2021 Act was brought in, then you must be registered with the Central Bank before any services commence. As part of the regulation of VASPs with the Central Bank of Ireland, individuals holding pre-approval controlled functions within a VASP must be approved under the latest fitness and probity regime of the Central Bank.Text Link
Digital inheritance is a new term that is becoming more widespread across the globe in relation to the transfer of digital assets in a broad sense. There is a completely new "digital asset" that has been created in terms of cryptocurrencies and therefore with that, inheritance queries follow.Text Link
Ireland has slowly but surely established itself as an alluring destination for businesses in the Fintech sector. From a solid regulatory framework to an advanced financial services ecosystem, Ireland’s financial technology sector is booming right now and is home to a surprising number of reputable domestic and international payment institutions. Let's take a closer look at the reasons behind this below.Text Link