Ukraine: Who Bears Final Responsibility and Liability

The term “smart contract” has not been described in Ukrainian legal system yet. However, basing on other laws, related to contracts, we can draw assumptions on the execution and sides’ responsibilities, as well as role of an intermediary.

According to The law of Ukraine No. 675-VIII, “On E-Commerce” of 03.09.2015, Article 7.2-7.4 :

“The seller (contractor, supplier) during the electronic transaction is obliged to ensure full compliance of the subject of the electronic contract agreed by the parties, quantitative and qualitative characteristics.

3. If the seller (contractor, supplier) offers the other side of the electronic agreement to provide him with information about the payment instruments for payment of the cost of goods, works, services, he is obliged to protect such information in accordance with the laws of Ukraine “On information protection in information and telecommunication systems” and “On payment systems and retelling of the funds in Ukraine.”

4. The seller (contractor, supplier) has the right to demand from the other party only such information, without which the conclusion and performance of obligations under the electronic contract is impossible.”

Also, according to the Article 9.4:

“The service provider of intermediate nature in the information sphere is not a party to an electronic transaction, the subject of which are the goods, works or services than other services of intermediate nature in the information sphere (registration of domain names or IP-addresses, assignment of other network identifiers, recording of the time of sending/receiving an electronic message, providing access to the Internet and other information and telecommunications systems, and the like), and is not responsible for the content of the transmitted or received information and for the harm caused by the use of the results of such services., provided that it does not initiate the transmission of such information, does not select its recipient and cannot change its content.”

Article 11.9

“The place of conclusion of the electronic contract is the location of the legal entity or the place of actual residence of an individual who is a seller (contractor, supplier) of goods, works and services.”

We can add that, in case if one side did not fulfill its obligations, the penalties that are included in the contract may be applied, and even a standard lawsuit against the side can be formed. According to some Ukranian lawyers, even though the smart contract includes automatic execution, in fact, the only one side, which provides and is responsible for the transaction/execution, has power to control that automatic execution.

Therefore, that side has more responsibility for meeting the requirements, stated in smart contract. The blockchain platform is a technical solution for the smart contract (checking the deal progress, stages, completion), which tracks the both sides’ actions.

Also, Article 216 of the Civil Code states that an invalid deal (transaction) does not create legal consequences, that is, its parties have neither rights nor obligations. If the participants of the transaction have already made some actions before the transaction is recognized as invalid (transfer of goods, pay money, etc.), then all received on the invalid transaction must be returned to the other party or reimbursed with money.


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