United Kingdom: Smart Contracts Definition and Legality

There is currently no legal framework in the UK specifically tailored for blockchain technologies and smart contracts. That said, Article 9 of the Electronic Commerce Directive (which applies on both a B2B and B2C basis) requires EU member states to ensure that their legal systems allow contracts to be concluded by electronic means. Many consider this to already be satisfied by existing English common law, which holds that four key elements are required for the formation of a legally binding contract:

  • The parties should have reached an agreement—this typically requires there to be an offer and a corresponding acceptance
  • Consideration
  • Intention to create legal relations
  • Certainty/completeness of terms

Email messages have even been assumed by English courts to be capable of constituting contracts, so it would be surprising if English courts were to ever draw distinctions between smart contracts and email communications. Even if contracts are made electronically, rather than mechanically, according to past court cases that does not alter the application of basic legal principles. Whether a particular smart contract gives rise to a legally binding contractual arrangement under English law may turn in part on the type of smart contract in question and the factual matrix within which it operates.


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