Smart Contracts – How will Blockchain Technology Affect Contractual Practices?

Unlike conventional contracts established through speech, written words, or actions, smart contracts are algorithmic, self-executing and self-enforcing computer programs. In this article, we analyze smart contracts from the perspective of digital platforms and the Finnish contract law. We examine how well the formation mechanisms of the general principles of contract law can be applied to the new technological framework of smart contracts. In addition, the adoptability of smart contracts as a part of our current legislation is evaluated on the basis of this analysis. We find that instead of a clearly defined single use case, smart contracts can be applied in a multitude of different ways, with highly varying goals and circumstances. We conclude that at least in some cases, smart contracts can create legally binding rights and obligations to their parties. The mechanism best suited for describing the formation of a smart contract seems to be analogous to a vending machine where the declaration of intent is implicitly expressed by performing contractual obligations. Contracts have not been formerly percieved as a technical boundary resource in the sense that platform ecosystems could foster broader network effects by opening their technical contracting interfaces to third parties. Smart contracts are an example of the new kinds of technology-enabled contracting practices to which companies and public policy makers should start preparing well ahead of time. However, due to the relative immaturity of the smart contract technology, the number of current real-world applications is still very limited. The evolution of digital platforms requires an approach with a combination of technological, economic and legal perspectives.