What Does the CISG Have to Say about Smart Contracts? A Legal Analysis

By Duke, Anna | Chicago Journal of International Law, Summer 2019 | Go to article overview

What Does the CISG Have to Say about Smart Contracts? A Legal Analysis


Duke, Anna, Chicago Journal of International Law


I. Introduction

A smart contract is a set of computer code that "automatically executes all or parts of an agreement and is stored on a blockchain1-based platform."2 In addition, it lies on a spectrum between an agreement that is entirely in code and the mere automated performance of a traditional paper contract.3 Because smart contracts are designed to reduce transaction costs by making it difficult and costly for parties to breach an agreement,4 interest in smart contracts is on the rise as more businesses seek to use smart contracts for boosting efficiency in international trade.5 In addition, an increasing number of experts are writing about the promise of smart contracts to reduce transaction costs in international trade.6 According to Ramesh Gopinath, the IBM Vice President of Blockchain Solutions, the current supply chain system is inefficient as it relies on the physical movement of a huge number of paper documents "for shipping transactions."7 This system is "very vulnerable to fraud, human error and inadvertent delays."8 Wolfgang Lehmacher, the Head of Supply chain and Transport Industries at the World Economic Forum, sees blockchain and smart contracts as the solution to these transaction costs because of the potential of the technology to make payments and collaboration between traders easier and more transparent.9 Emmanuelle Ganne, former counselor to the World Trade Organization (WTO) Director1 General, published a full report in a WTO publication on the power of blockchain and smart contracts to revolutionize international trade.10

Of course, a lot of the talk about the benefits of blockchain and cross-border smart contracts may just be hype created by an increasing number of startups in the blockchain industry. As one industry insider noted, all the promising benefits of smart contracts for international trade will take time "because the existing financial infrastructure has been in place for decades and because it is hard to get competing institutions to cooperate."11 But the legal and business industries have responded to the hype in hopes of benefitting from its promise. For example, IBM and Maersk have made joint investments to deliver blockchain to the shopping industry (although they are currently struggling to sign up carriers as the unprecedented nature of the blockchain venture leaves many businesses hesitant).12 In addition, LegalZoom has partnered with a blockchain company to use smart contracts to compose its legal documents, ranging from wills and trusts to trademarks and copyrights.13

However, the use of smart contracts for business agreements has raised important questions concerning their legal validity that currently do not have a direct answer in available case law or in relevant international legal texts. There are many different types of smart contracts, which lie on a spectrum of possibilities.14 On one end of the spectrum is a smart contract that has a code that includes all of the terms of a contract, and a "running program referring to that code is a complete contract undergoing performance."15 On the other end is a smart contract that simply digitizes simple performances such as payment and operates together with the terms of an associated traditional paper contract. Given the broad range of possibilities for what a smart contract can be, questions arise as to exactly when along the spectrum a smart contract becomes legally binding.16 This question often turns on the applicable law determining the issue and the factual circumstances of the case.

I focus on the U.S. legal context for smart contracts in international trade. Although it does not directly address the formation of smart contracts in international trade, the U.N. Convention on Contracts for the International Sale of Goods (CISG or the Convention) generally governs the formation of many international contracts for goods by international traders whose countries have also adopted the Convention.17 The Model Law on Electronic Commerce (MLEC), which governs electronic communications in international trade, also applies to smart contracts and was adopted by the U. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

What Does the CISG Have to Say about Smart Contracts? A Legal Analysis
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.