Cayman Islands: Can Smart Contracts be Nullified?

In the Cayman Islands, smart contracts are treated the same way as traditional contracts in electronic form.

According to Section 15. Of the Electronic Transactions Law:

“If a change or error occurs in the transmission of an electronic record - If the originator and the addressee have agreed to use an information security procedure in respect of the electronic record and one of them has conformed to the procedure, but the other has not, and the nonconforming person would have detected the change or error had he also conformed, the conforming person may avoid the effect of the changed or erroneous electronic record; If an individual is either the originator or the addressee of an electronic record, he may avoid the effect of the electronic record if the error was made by the individual in dealing with the electronic agent of another person of another person if the electronic agent did not provide and opportunity for the prevention or correction of the error, and at the time the individual learns the error, the individual: i) promptly notifies the other person of the error and that he did not intend to be bound by the electronic record received by the other person; ii) takes reasonable steps, including steps that conform to the other person’s reasonable instructions, to return to the other person, or, if instructed by the other person, to destroy the consideration received, if any, as a result of the erroneous electronic record; and iii) has not used or received any benefit or value from the consideration, if any, received from the other person; and c) if neither paragraph (a) nor paragraph (b) applies, the change or error shall have the effect provided by any other law and any contract between the originator and the addressee.”

In cases, related to smart contracts, the Grand Court of the Cayman Islands, Financial Services Division, may grant the following final remedies:

  • Damages.
  • Injunctions.
  • An order requiring specific performance of a contract. An order rescinding a contract on grounds such as:
  • Misrepresentation;
  • Mistake;
  • duress; or
  • undue influence.

Rectification of a written contract to create what the court regards as the true bargain made by the parties. An order for restitution of property where the court finds that a party has been unjustly enriched. A declaration as to the parties’ rights relating to the matter in issue. An order requiring a party to provide an account of profits improperly made from a breach of trust or fiduciary duty.

In breach of trust claims, an order allowing the claimant to follow, trace and recover from the trustees or a third party property that has been applied or transferred in breach of trust. In addition to compensatory damages, the court has the jurisdiction to award:

Aggravated damages, usually if the defendant is shown to have acted deliberately or out of malice towards the claimant. Exemplary or punitive damages, in three sets of circumstances: cases of oppressive, arbitrary or unconstitutional conduct by government agents; where the defendant’s actions were calculated to make a profit; or where permitted by statute (currently no such statute exists).

For more information please check Section Who bears final responsibility/liability in case something goes wrong? The party using the smart contract? The party that wrote the smart contract? Or the blockchain platform?


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