With distributed ledger technology (such as blockchain), there is growing interest in automating routine commercial transactions. But how will these smart contracts be interpreted under existing commercial contract laws?
Although there is no federal contracts law for private commercial transactions in the United States, there is a widely adopted core of standardized state laws that provides the framework for interpreting the existence, validity, scope, breach, and remedies for contracts for the sale of goods.
How Smart Contracts Work
A smart contract (or smart agent) is a self-executing program that uses distributed ledger technology to store rules for a defined transaction, verify the request, and execute the agreed terms.
For example, imagine the SellUrBikeEZ service is formed to facilitate local sales of bicycles between private parties. Sarah Seller registers a bike on the system, describes the bike, sets a $200 sale price, and leaves the bike in a SellUrBikeEZ locker with a coded lock. SellUrBikeEZ applies a smart contract that says: “If a buyer chooses this item, transfer <sale price> from their payment account to the seller and send the locker code to the buyer.” Bonnie Buyer reviews the description and clicks the “buy” button on the SellUrBikeEZ website.
Does a Valid Contract Exist?
In general, a contract requires a meeting of the minds, an exchange of value, parties who are able to enter into a contract, and a legal purpose.
By posting the bike on SellUrBikeEZ with a sale price, Sarah made an offer of sale. By clicking “buy”, Bonnie has accepted the offer, has transferred payment, and has received delivery (the code to unlock the SellUrBikeEZ locker where the bike is stored).
How could this fail to be a valid contract? Minors and persons who have been legally adjudged to be incompetent are not (Read more...)
This is a Security Bloggers Network syndicated blog post authored by Amy Grant. Read the original post at: The State of Security