Is It Time For Ireland To “Get Smart” About Smart Contracts? – Corporate/Commercial Law

Bizar Male


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Observations on the UK Law Commission’s Call for Evidence on
Smart Contracts

Introduction

In November 2019, the UK Jurisdiction Taskforce
(“UKJT”), a subsidiary of the UK’s LawTech Delivery
Panel, published a Legal Statement on the Status of Cryptoassets
and Smart Contracts (the “Legal Statement”). In our
previous article entitled “UK Jurisdiction Taskforce Publishes
Legal Statement on Status of Cryptoassets and Smart
Contracts—Observations from Ireland”, we discussed the
Legal Statement with reference both to its statements and its
potential implications for those in Ireland with an interest in its
subject matter. 1 Following the publication of
the Legal Statement, the UK Government asked the Law Commission of
England and Wales (the “Law Commission”) to undertake a
scoping study into the law on smart contracts. On 17 December 2020,
the Law Commission published a call for evidence on smart contracts
as a first step in this scoping study (the “Call for
Evidence”). The Call for Evidence is currently seeking views
about, and evidence of, the ways in which smart contracts are used
and the extent to which existing English law can accommodate smart
contracts.

In this article, we discuss the Call for Evidence with reference
both to its statements and its potential implications for those in
Ireland with an interest in its subject matter. To ensure that
Ireland remains a competitive choice for legal services and dispute
resolution post-Brexit, there is a compelling case for reviewing
the current legal framework in Ireland to ensure that it
facilitates the use of smart contracts, including matters of
creation and enforcement.

Scope of Call for Evidence

The Call for Evidence covers the following topics:

  1. what is a smart contract?;

  2. formation of smart contracts;

  3. interpretation of smart contracts;

  4. remedies and smart contracts;

  5. consumers and smart contracts; and

  6. jurisdiction.

What Is a Smart Contract?

A smart contract was first described in 1996 as a
“computerised transaction protocol that executes the terms of
a contract”.2 For the purposes of its Call for
Evidence, the Law Commission defines a smart contract as “a
legally binding contract in which some or all of the contractual
obligations are recorded in or performed automatically by a
computer program deployed on a distributed
ledger.”3 Smart contracts can be used to
record and perform the obligations of a legally binding contract
and are known as smart legal 
contracts. A distinguishing feature of a smart
contract is that some or all of the contractual obligations can be
performed automatically. The world is already accustomed to
automatic contracts, for example, automatic bank transfers and
purchasing products when engaging in online shopping. However, as
these transactions still require some human interaction (e.g.
delivery of goods) or include third parties (e.g. a bank), they do
not amount to “smart” contracts.

Types of Smart Contracts

The Call for Evidence identifies three types of smart
contracts:

  1. a natural language contract where the contractual obligations
    are performed automatically by a piece of code. The code itself
    does not contain any of the contractual terms;

  2. a hybrid contract consisting of code and natural language;
    and

  3. a contract consisting solely of code. The Law Commission’s
    initial view is that this type of contract is likely to present the
    most challenges from a legal perspective, in terms of determining
    whether and when a smart contract is formed, and how that smart
    contract can, or should, be interpreted.

Distributed Ledger Technology (“DLT”)

DLT is being promoted as a way to deploy smart contracts and
involves contractual obligations being expressed in computer code
and performed by computers in a network. A DLT system is comprised
of a digital database (ledger) which is shared among a network of
computers (nodes). The most famous example of a DLT system is
Bitcoin. The distinguishing feature of DLT compared to other shared
databases is that the ledger is not maintained by a central
administrator. Instead, the ledger is maintained collectively by
the nodes and no individual node has the power to add data to the
ledger. Nodes can propose new data entries, but entries will only
be added to the ledger when all nodes reach a consensus that the
entry should be recorded. This is known as the “consensus
mechanism”. The mechanism is designed so that once data is
added to the ledger, the possibility of amending such data lies
somewhere between being extremely difficult and impossible to do,
depending on the architecture of the particular DLT facilitating
the smart contract. A smart contract is triggered by addressing a
transaction to it, which is then executed automatically in a
prescribed manner on every node in the network, according to the
data included in the triggering transaction.

Formation of Smart Contracts

  As noted by the UKJT in its Legal
Statement, English law does not normally require contracts to be in
any particular form. In our previous article,4 we
confirmed that this is also true in Irish law. The general rule in
Ireland is that a contract does not have to be in writing before it
can be enforced.5 For example, in Pernod
Richard & Comrie plc v FII (Fyffes) plc
, an oral agreement
for a multi-million-pound takeover was enforced. The decision was
subsequently upheld on appeal by the Irish Supreme
Court.6

In its Call for Evidence, the Law Commission agrees with the
Legal Statement and states that the requirements for formation of
smart contracts are the same as normal contracts, namely that:

  1. agreement has, objectively, been reached between the parties as
    to terms that are sufficiently certain;

  2. the parties intended, objectively, that they would be legally
    bound by their agreement; and

  3. unless the contract is made by deed, each party to it must give
    something of benefit (consideration) because a gratuitous promise
    in return for nothing is not generally enforceable.

Offer and Acceptance

  A legally binding contract must comprise
an offer based on specified terms and an acceptance of those terms.
There will be agreement if A offers terms to B, and B accepts those
terms by words or conduct. Agreement is generally found in, or
evidenced by, a written document bearing signatures of A and B but,
as explained above, writing or signature is not a necessary
precondition to the enforceability of a contract. Some negotiations
between the parties (e.g. email, instructions to coders or oral
conversations) concerning natural language will most likely precede
smart contracts. This is similar to a traditional contract scenario
where the words and conduct of the parties lead to the offer and
acceptance of a contract.

Where there is no natural language communication between parties
who have entered into a smart contract, offer and acceptance may be
more difficult to determine. For example, A might deploy a piece of
code on a distributed ledger and B might interact with that piece
of code, causing the code to execute a transaction. Perhaps no
natural language documents or communications were exchanged and the
parties’ interactions may have consisted exclusively of
transactions on a DLT mediated by the computer program. In this
case, does the deployment of the code amount to an offer, or is
this merely an invitation to treat?

In the English case of Thornton v Shoe Lane Parking
Ltd
,7 the defendant installed a machine in his
car park that would automatically grant entry to the car park when
a customer inserted money into the machine. It was held that the
defendant, in holding out the machine as being ready to receive
money, was making an offer to customers to use the car park in
exchange for payment. The Call for Evidence argues that the same
reasoning could apply to a smart contract, i.e. a person who
deploys a computer program which will automatically transfer an
asset upon receiving payment could amount to an offer and the
payment of money could amount to acceptance.8

Consideration

In general, each party to a contract must give something of
benefit (known as “consideration”). The “smart”
nature of the contract, being the embedding of terms of the
contract in a networked system that executes and enforces
performance using various techniques such as the consensus
mechanism discussed above, does not preclude A and B from giving
each other something of benefit and therefore the issue of
consideration is unlikely to present challenges in a smart contract
context.

Intention to Create Legal Relations

Where a smart contract includes a natural language component, it
is unlikely that there would be difficulty in proving that the
parties intended to create legal relations. This is because, in the
case of an express agreement made in a
commercial context, an intention to create legal relations is
presumed. However, difficulties could arise if the agreement is
made as a result of an interaction on a distributed ledger where
the agreement is inferred  from the parties’
conduct. Would the presumption that the parties intended to create
legal relations apply? If it is generally understood by the users
of the DLT system that interactions on the ledger do not attract
legally enforceable obligations, then this might be a factor
weighing against finding an intention to create legal relations in
this scenario.

Contractual Formalities

The general rule is that contracts do not need to be in any
particular form. However, some statutes require certain contracts
to be made “in writing” and/or “signed”.
Requirements that a contract be “in writing” or
“evidenced in writing” are very rare in English law and
indeed Irish law. However, they do exist.9 If the
terms of a smart contract are set out in a natural language
document, then the smart contract would likely satisfy an “in
writing” requirement. However, where contractual terms are
recorded in code, satisfaction of an “in writing”
requirement may depend on whether or not the code is in a form that
can be read by a natural person. Code is initially drafted in
high-level programming language known as “source code”.
Source code uses both words and symbols and can be read by coders.
Source code is then compiled into machine-readable “object
code” which is impossible to read, even by a coder. If the
terms of a smart contract are contained
in source code, it is arguable that those terms
can be read by a natural person and the smart contract containing
such source code would satisfy an “in writing”
requirement. However, if the terms of the smart contract reside
in object code, it may be difficult to argue
that the contract is “in writing” because object code
cannot be read by a natural person.

However, code is, no matter the difficulty or impossibility of
being understood by natural persons, still “in writing”.
Therefore, a question which may arise is whether or not a statutory
“in writing” requirement is capable of being satisfied by
code if such code is simply “in writing”, regardless of
whether or not such writing is in fact understandable by a natural
person. The Legal Statement noted that the mere fact that a smart
contract is in electronic form does not mean that it cannot satisfy
a statutory “in writing” requirement. The Legal Statement
continued that the question may be whether there is something
intrinsic to computer code, as opposed to human language, that
should lead to a different conclusion. Time will tell.

What Does “In Writing” Mean?

According to Sch.1 to the Interpretation Act 1978 (the
“1978 Act”) in England and Wales, “writing” is
defined as including “typing, printing, lithography,
photography and other modes of representing or reproducing words in
a visible form, and expressions referring to writing are construed
accordingly.”10 The UKJT’s view is that,
to the extent the relevant code can be said to be representing or
reproducing words and be made visible on a screen or printout, it
is “likely to fulfil” a statutory “in writing”
requirement.11 According to Pt 1 of the Schedule to
the Interpretation Act 2005 (the “2005 Act”) in Ireland,
“writing” is defined more broadly than under the 1978 Act
and includes:

“printing, typewriting, lithography, photography, and other
modes of representing or reproducing words in visible form and any
information kept in a non-legible form, whether stored
electronically or otherwise, which is capable by any means of being
reproduced in a legible form”.12

It is arguable that the words “and any information kept in
a non-legible form, whether stored electronically or otherwise,
which is capable by any means of being reproduced in a legible
form” in  Pt 1 of the Schedule to the 2005 Act are more
capable of providing support for the proposition that code found
within smart contracts can satisfy a statutory “in
writing” requirement than the definition of
“writing” in Sch.1 to the 1978 Act. This is because code
is, to judges, lawyers and non-coders, in a non-legible form, but,
critically, is capable of being reproduced in a legible form for
comprehension by judges, lawyers and non-coders through the
assistance of extrinsic evidence, expert evidence or exceptions to
the parol evidence rule. It is arguable, therefore, that a
statutory “in writing” requirement can be more easily
satisfied by smart contracts composed partly or wholly of code
under Irish law than under English law.

Can a Smart Contract Be Signed?

If the terms of a smart contract are recorded in a natural
language document, the smart contract could be signed in the
ordinary way. Where a smart contract consists solely of code,
however, the parties may sign the contract electronically, for
example, by using a digital signature to authenticate code deployed
on a DLT system. In its Legal Statement, the UKJT stated that a
statutory signature requirement is “highly likely” to be
capable of being satisfied by using a private key, because an
electronic signature which is intended to authenticate a document
will generally satisfy a statutory signature requirement, and a
digital signature produced using public-key cryptography is a
particular type of electronic signature.13

Irish law already accommodates electronic signing. Section 12(1)
of the Electronic Commerce Act 2000 (the “2000
Act”)14 provides that if by law or otherwise a
person or public body is required or permitted to give information
in writing, then, subject to certain conditions in s.12(2), the
person or public body “may give the information in electronic
form, whether as an electronic communication or otherwise”.
Section 13(1) of the 2000 Act provides that if by law or otherwise
the signature of a person or public body is required or permitted,
then, subject to certain conditions in s.13(2), “an electronic
signature may be used”.

Interpretation of Smart Contracts

An important benefit of smart contracts over traditional
contracts is the lack of textual ambiguity, which may reduce the
need for lawyers to use anachronistic canons of construction and
other textual interpretation techniques. When interpreting a
contract, a judge asks himself or herself what the language would
have meant to a reasonable person, equipped with all the background
knowledge available to the parties at the time the contract was
made. Where a smart contract is written in natural language, this
will not cause any novel issues. However, where the terms of the
contract are written in code, a judge will need to consider how to
interpret a smart contract that he or she may be unable to read,
and what the smart contract would have meant to a reasonable
person, equipped with all the background knowledge available to the
parties at the time the smart contract was made. One approach to
interpreting a smart contract
contained exclusively in code may be to ask what
a computer would do upon receiving the coded instructions. In
theory, this should produce a definite answer, but the retention of
expert advisors and divergence of opinion on the make, model or
operating system of this computer may lead to varied results.

Another option is to ask what a reasonable person with coding
knowledge would do. An expert coder could assist the court by
translating the code, similar to a language expert. However, it is
unlikely that simply translating the code would be sufficient to
assist a court. The coding expert would have to give his or her
reasoned opinion as to what the code actually means or instructs a
computer to do. Such an approach arguably shifts the role of
interpretation from the judge to the coding expert. Furthermore,
who, in law, is a reasonable person with coding knowledge? An
expert coder is unlikely to be a reasonable person with coding
knowledge.

In a hybrid contract containing natural language and code, there
may be discrepancies between the natural language and the coded
elements of the smart contract. Under traditional contract law, if
there is a conflict between two terms in a contract, the court will
look at the contract as a whole. Applying this interpretive
approach in a smart contract context, a judge may have to look at
the coded element and the natural language element of a smart
contract. Since a judge, being a natural person, understands
natural language, could there be a risk that the judge may be
naturally inclined to prefer the term contained in natural language
over the term contained in code? To avoid this scenario, the Law
Commission in its Call for Evidence suggests that contracting
parties could include an order of precedence15 in
smart contracts where, for example, the interpretation of natural
language will trump the interpretation of code in circumstances
where there is a conflict between natural language and coded
elements of a smart contract.

Even in situations where a smart contract is based entirely in
code, it is likely there will have been some negotiations between
the parties prior to entering into the smart contract. Ordinarily,
pre-contractual information is inadmissible in law due to what is
known as the parol evidence rule. However, the law allows
exceptions. One exception allows the admissibility of
pre-contractual information to resolve ambiguities in a contract or
to assist in interpreting a term of the contract. This exception
may allow admission of natural language information from
pre-contractual negotiations between parties to a smart contract in
order to assist a judge in interpreting the coded terms of a smart
contract.

Remedies and Smart Contracts

Society for Computers and Law Adjudication
Scheme

Contractual interpretation will likely be a key issue in any
litigation or dispute resolution proceedings involving a smart
contract. A court will likely require its own expert advisors, and
parties may retain their own experts to interpret technical terms.
Proceedings will likely be protracted, at least until a body of
precedent is developed rendering only the most novel issues
susceptible to contention. This will take time. One option
available to parties contemplating entering into smart contracts
may be to stipulate in such contracts that all disputes arising out
of or in connection with the smart contract are to be adjudicated
under the Society for Computers and Law’s Adjudication Scheme
(“SCL Adjudication Scheme”).16 Due to the
SCL Adjudication Scheme’s retention of a panel of expert
lawyers and computer experts, its cap on hourly adjudicators’
fees, its guarantee of a decision within three calendar months and
its preservation of the right to litigate or arbitrate a dispute
within six calendar months of the fifth working day after a
decision is delivered, the SCL Adjudication Scheme may soon become
the optimal method for resolving smart contract disputes. For more
information, please see our recent briefing on the SCL Adjudication
Scheme (
here).

Rectification

Under contract law, a court can “rectify” a contract
where it does not accurately reflect the parties’ agreement. In
relation to smart contracts, if the parties engage a coder to
translate certain elements of their agreement into code and this
code does not accurately reflect what was agreed, rectification
could be used to amend the contract.

Mistake

A contract can be rendered “void” (meaning it has no
effect from the beginning of the contract) if one or both of the
parties laboured under a mistake when entering into the contract.
For example, the parties may hold beliefs or assumptions about how
the code will execute their agreement. If these beliefs or
assumptions are mistaken, can a smart contract be void on grounds
of mistake? Where both  parties are mistaken
about a matter relevant to the execution of the code (known as a
“common mistake”), the common mistake will only render
the contract void if it makes performance of the contract or the
achievement of the purpose of the contract impossible.
Where one  party is mistaken about the execution
of the code (known as a “unilateral mistake”), the
unilateral mistake will only render the contract void if the
mistake relates to a term of the contract and the other party was
aware of the mistake at the time of contracting. A bar to the
availability of this remedy is that it will be particularly
difficult to prove a party’s knowledge of a mistake where a
smart contract is entered into by computer programs on behalf of
the parties.

Misrepresentation

A contract is “voidable” (meaning it is liable to be
set aside from the beginning of the contract) if one party is
induced to enter the contract by a misrepresentation made by the
other party. Similar to normal contracts, the entering into of
smart contracts will likely be preceded by a period of negotiation
between the parties. Existing Irish and English law will be capable
of determining whether a party to a smart contract made a
misrepresentation, by their words or conduct, which induced the
other party to enter the smart contract.

Restitution

The Law Commission anticipates that restitutionary remedies will
be particularly useful in the context of smart contracts. Some or
all of the terms of a smart contract are performed automatically by
code on a distributed ledger and there may be no mechanism for
parties to stop the execution of the code upon discovery of a
factor rendering the contract void or voidable. The code may
continue to execute (and perhaps fully execute) the contract
regardless of the fact that mistake or misrepresentation may have
arisen which, in a traditional contractual context, would provide
grounds for the cessation of contractual performance. If this were
to arise in a smart contract context, parties are likely to rely on
restitutionary remedies to recover benefits automatically
transferred by the code under the smart contract.

A smart contract rendered void on grounds of mistake is likely
to provide a foundation for a claim in unjust enrichment, leading
to the remedy of restitution. A smart contract rendered voidable on
grounds of misrepresentation may be set aside so long as the
parties can be restored to their pre-contractual positions. Irish
and English law does not require exact restoration. Indeed, it may
be impossible to exactly restore benefits transferred by code if
such transfers are immutably recorded on a distributed ledger.
Provided practical justice can be achieved between the
parties—for example, by valuing the benefits transferred by
the code in monetary terms and ordering one party to make
restitution to the other in monetary terms—practical justice
may be capable of achievement.

Damages

Damages are still an adequate remedy for breach of a smart
contract. The automatic nature of a smart contract means that a
breach of contract is likely to occur less frequently.
Notwithstanding the automatic nature of a smart contract, if a
defective piece of code fails to carry out the obligations of the
smart contract, the affected party may be able to claim
damages.

Specific Performance

The remedy of specific performance may be available if damages
are an inadequate remedy for breach of a smart contract. A court
could, for example, order a party to specifically perform the smart
contract according to the parties’ original specifications.

Frustration

Frustration is likely to be an important issue in a smart
contract context. The leading Irish authority on frustration is the
Supreme Court decision in Neville & Sons Ltd v
Guardian Builders Ltd
.17 The Supreme Court
held that frustration of a contract takes place when a supervening
event occurs without the default of either party and for which the
contract makes no sufficient provision. Such event must so
significantly change the nature of the outstanding contractual
rights and obligations from what the parties could reasonably have
contemplated at the time when the contract was entered into so that
a court is satisfied that it would be unjust to hold the parties to
the original terms. For example, if there is a system malfunction
that prevents performance of a smart contract, frustration may be
arguable. In this regard,  force majeure 
clauses will be of particular importance. Parties may wish to
include such clauses in the natural language component of their
smart contract so as to identify events that will affect
performance, the effect such events will have upon their contract,
and what is to occur if such events materialise.

Consumers and Smart Contracts

While existing consumer rights protections were not designed
with smart contracts in mind, there is no reason why they should
not operate in a smart contract context. However, it is worth
considering whether or not such protections are currently flexible
enough to protect consumers entering into smart contracts. The
European Communities (Unfair Terms in Consumer Contracts)
Regulations 1995 18 require standard contract
terms to be fair for Irish consumers. A term is unfair if it puts
the consumer at an unfair disadvantage or is harmful to the
consumer’s interests. Additionally, terms must be drafted in
plain, intelligible language. It may be particularly difficult for
smart contracts, consisting wholly or partly of code, to satisfy
this intelligibility requirement. Traders may need to include a
natural language element in their smart contracts with customers
that sets out the terms and conditions in full. Directive
2011/83/EU of the European Parliament and of the Council of
25 October 2011 on consumer rights (the “Consumer Rights
Directive”) applies to contracts concluded between a consumer
and a trader after 13 June 2014.19 The Consumer
Rights Directive gives consumers extra rights when they enter into
distance contracts (e.g. buying goods or services online) and
provides a 14-day cooling-off period where the consumer can cancel
the contract for any reason. This may be problematic in a smart
contract context because the code deploying the contract may be
automated and it may be difficult to cancel automated
performance.

Jurisdiction

For contracts involving a dispute between EU parties, the
Brussels Recast Regulation and the Lugano Convention will apply.
Following Brexit, the UK no longer has the benefit of these regimes
and Ireland is the only common law jurisdiction in the EU. In April
2020, the UK applied to accede to the Lugano Convention, which
governs the enforcement of judgments between EU Member States and
countries in the European Free Trade Association. The EU has not
yet approved the UK’s application to accede to the Lugano
Convention. Moreover, the EU-UK Trade and Cooperation Agreement
does not deal with jurisdiction. It is therefore more important
than ever to be able to determine in which jurisdiction a contract
was concluded, entered into or performed, and whether the above
regimes apply in the event of a dispute.

Under the Brussels Recast Regulation, if an agreement does not
include a choice-of-law clause, the domicile of the defendant will
determine the jurisdiction. However, the pseudonymous nature of
some DLT systems may make it more common for parties to enter into
smart contracts without knowing the real identity of their
counterparty. This will pose difficulties for identifying the
proper party and the applicable jurisdiction regime.

The place of formation of a contract is sometimes used to
determine the applicable jurisdiction. A contract is usually formed
at the moment and in the place where acceptance of an offer is
communicated to the offeror by the offeree. In a smart contract
context where there  may be little or no natural language
interaction between the parties or where computer programs interact
autonomously, it may be difficult to identify exactly where and
when an offer was accepted.

Jurisdiction can also be based on factors connecting a
particular legal system to a dispute (e.g. the place of contractual
performance or the place where an asset is situated). Again, smart
contracts may pose challenges in identifying the geographical
location of performance because the obligations under a smart
contract may be performed on a distributed ledger rather than at a
real-world location.

Conclusion

Smart contracts have the potential to revolutionise the legal
services industry in Ireland. The UK Law Commission’s initial
research and discussions with stakeholders have identified the
following potential benefits and savings associated with the use of
smart contracts:

  1. increased efficiency and lower transaction costs
    Every participant will have an up-to-date copy of the
    ledger, access to real-time details of performance of the smart
    contract, and performance will occur without the need for human
    intervention. Moreover, smart contracts may provide security
    superior to traditional contract law and may reduce transaction
    costs associated with
    contracting.20 CommonAccord,21 an
    initiative to create global codes of legal transacting by codifying
    and automating legal documents, including contracts, has argued
    that inefficient legal document practices are responsible for a
    very large part of the cost of doing business.

  2. lower enforcement costs
    The code executes automatically and therefore the need to
    take enforcement action for non-performance should be rare.

  3. reduced risk of fraud
    The consensus mechanism and immutability of a distributed
    ledger mean that contracting parties can trust each other and
    transact in confidence.

While smart contracts can offer many benefits, it is essential
that Ireland begins to consider the risks posed by smart contracts
and how such risks can be resolved in an innovative way. In our
previous article22 discussing the UKJT’s Legal
Statement, we concluded by stating that a number of options
presented themselves to Ireland, in particular using the Legal
Statement as a kick-off point for achieving a degree of legal
certainty under Irish law.23 We proposed that a
consultation exercise, similar to that of the Legal Statement,
could be performed in Ireland which could then be presented to the
Law Reform Commission for the purposes of review from the
standpoint of Irish law and to consider whether any Irish
legislation, EU Directives or Regulations might be desirable in the
area of smart legal contracts.24 Unfortunately, one
year has passed and Ireland has still not reviewed the current
legal framework to ensure that Irish law facilitates the use of
smart contracts.

The UK is making strides to ensure that the use of smart
contracts is regulated in its jurisdictions. This can be seen by
the UKJT’s publication of the Legal Statement in November 2019
and the Law Commission’s Call for Evidence in December 2020.
While the Legal Statement has no legal standing, it will likely be
relied upon by the Law Commission as part of its scoping study
requested by the UK Government. The Law Commission is currently
carrying out the Call for Evidence and will publish the results of
the scoping study in late 2021. The Law Commission is also
intending to launch a consultation paper on digital assets in early
2021. Clearly, the UK can see the economic risks of failing to
adapt the law to digital change.

The UK is taking the first steps to identify the legal issues
regarding smart contracts and is attempting to find solutions. This
is commendable. To remain a competitive choice for legal services
and the resolution of disputes post-Brexit, Ireland must now begin
reviewing its current legal framework to ensure that it facilitates
the use of smart contracts. As identified by the Law Commission,
there are questions about the circumstances in which a smart
contract will be legally binding, how smart contracts are to be
interpreted, how vitiating factors such as mistake can apply to
smart contracts, and the remedies available where a smart contract
does not perform as intended. It is time for Ireland to begin
examining the circumstances in which a smart contract will be
legally binding, how smart contracts are to be interpreted, how
vitiating factors such as mistake can apply to smart contracts, and
the remedies available where a smart contract does not perform as
intended.

Pursuant to s.4(2)(c) of the Law Reform Commission Act 1975, the
Attorney General may request the Law Reform Commission to exam
specific areas of law. To avoid being left behind, the Attorney
General should request the Law Reform Commission to commence a
scoping study analysing current Irish law as it applies to smart
contracts, identify areas where further work or reform may be
required, and provide options for reform. The nascent state of the
technology used in smart contracts means there are few, if any,
clear answers on the legal issues presented by smart contracts. But
in uncertainty there lies opportunity, and this opportunity is one
that should not be missed by Ireland as the only common law
jurisdiction in the EU. It is now time for Ireland’s lawyers
and technologists to come together and answer Ireland’s call
for evidence which, it is hoped, will be sooner rather than
later.

Footnotes

1 See Clark, Ryan and Grant, “UK Jurisdiction
Taskforce Publishes Legal Statement on Status of Cryptoassets and
Smart Contracts—Observations from Ireland” (2020) 27(1)
C.L.P. 3.

2 Szabo, “Smart Contracts” (1994), 
https://www.fon.hum.uva.nl/rob/Courses/InformationInSpeech/CDROM/Literature/LOTwinterschool2006/szabo.best.vwh.net/smart.contracts.html
 [accessed
21 January 2021].

3 Law Commission, “Smart Contracts: Summary of Call
for Evidence”, p.2, 
https://s3-eu-west-2.amazonaws.com/lawcom-prod-storage-11jsxou24uy7q/uploads/2020/12/Smart-Contracts-summary.pdf 

[accessed 21 January 2021].

4 Clark, Ryan and Grant (fn.1), p.4.

5 Paul A. McDermott, Contract Law, 1st edn
(Dublin: Butterworths (Ireland) Ltd, 2001, Reprinted 2004), p.189,
para.4.01.

6 Unreported, Supreme Court, 11 November
1988.

7 [1971] 2 Q.B. 163.

8 Law Commission, “Smart Contracts: Call for
Evidence”, p.28, para.3.9.

9 See section IV of the Statute of Frauds (1677) and
section II of the Statute of Frauds (Ireland) 1695.

10 http://www.legislation.gov.uk/ukpga/1978/30/schedule/1 [accessed
21 January 2021].

11 Legal Statement, p.38, para.164.

12
http://www.irishstatutebook.ie/eli/2005/act/23/schedule/enacted/en/html#sched-part1
 [accessed
21 January 2021].

13 Legal Statement, p.37, para.158.

14
http://www.irishstatutebook.ie/eli/2000/act/27/enacted/en/html
 [accessed
21 January 2021].

15 Law Commission, “Smart Contracts: Call for
Evidence”, p.60, para.4.34.

16 https://www.scl.org/adjudicationscheme [accessed
21 January 2021].

17 [1995] 1 I.L.R.M. 1.

18 S.I. No. 27 of 1995.

19 Consumer Rights Directive art.28(2).

20 De Filippi, “Legal Framework For Crypto-Ledger
Transactions”, 
https://wiki.p2pfoundation.net/Legal_Framework_For_Crypto-Ledger_Transactions 

[accessed 21 January 2021].

21 http://www.commonaccord.org/.

22 Clark, Ryan and Grant (fn.1).

23 Clark, Ryan and Grant (fn.1), p.8.

24 Clark, Ryan and Grant (fn.1), p.8.

This article contains a general summary of developments and
is not a complete or definitive statement of the law. Specific
legal advice should be obtained where appropriate.

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