Singapore: Can Smart Contracts be Nullified?
According to Part II, Section 16 of the Electronic Transactions Act,
- “(1) Where a natural person makes an input error in an electronic communication exchanged with the automated message system of another party and the automated message system does not provide the person with an opportunity to correct the error, that person, or the party on whose behalf that person was acting, has the right to withdraw the portion of the electronic communication in which the input error was made.”
- (2) This applies if the person “notifies the other party of the error as soon as possible after having learned of the error and indicates that he made an error in the electronic communication; and has not used or received any material benefit or value from the goods or services, if any, received from the other party.”
- Thus, electronic contracts can be nullified at least due to error. The immutable blockchain could be interpreted as an “automated message system (which) does not provide the person with an opportunity to correct the error”. The law gives the first party the right to withdraw his communication. Because it would not be possible to “withdraw the portion of the electronic communication in which the input error was made” on a blockchain, it is conjectured that likely if the conditions in (2) apply, then transfers will be made to return to the state that would have occurred had the error been redacted. Importantly this requires none of the funds transferred in the contract to have been used yet.
- It is unclear if this also extends to nullification of contracts due to reasons other than error. (The author’s conjecture is that the extension would probably also be valid).