In Brief:
- The Commission confirmed that the existing law of England and Wales provides an ideal platform for business and innovation.
- The Commission said that the current law is sufficiently robust and adaptable for the use of smart contracts.
- The Law Commission encourages parties in smart contracts to explain risks as well as clauses relating to the performance of the code.
The Law Commission stated yesterday that the existing law of England and Wales can be applied to smart legal contracts.
As per the statement, “smart contracts built using distributed ledger technology are allowed within England’s and Wales’ current legal framework”.
According to the commission, “no extensive changes” to the existing legal framework are required to enforce smart contracts. But in some situations, a minor modification of common law might be necessary.
The statement, thus affirms that, the jurisdiction of England and Wales, in itself provides an ideal platform for business and innovation. Thus, describing the current legal framework as “sufficiently robust and adaptable”, the Commission says that it is capable of facilitating and supporting the use of smart legal contracts.
The Law Commission explained that only “an incremental development of the common law” is required for existing frameworks.
Nevertheless, it has also encouraged parties in smart contracts to explain risks as well as clauses relating to “the performance of the code” and any other necessary terms.
The Law Commission thus, states that “it encourages the market to anticipate and cater for potential uncertainties in the legal treatment of smart legal contracts by encouraging parties to include express terms aimed at addressing them.”
The Commission has also asked to set out clearly the relationship between any natural language and components that are coded.
The Commission concluded that the market is expected to develop customary practices and model clauses which can be further used by the parties to simplify the process of negotiating and drafting their smart legal contracts.
