EVALUATION OF CERTAIN PROBLEMS THAT MAY ARISE WITH SMART CONTRACTS FROM A LEGAL PERSPECTIVE

Year 2021, , 20 - 22, 31.12.2021

Ebru Sensoz Malkoc Zehra Badak Selvi Nazli Guvenc

https://doi.org/10.17261/Pressacademia.2021.1479

Abstract

Purpose- The smart contract and blockchain concepts are being discussed in various disciplines as well as law with a rapid increase. However,
in legal sense, the application of such concepts are far more advanced than the legal regulations on those topics not to mention the academic
studies. Although there are a few distinguished monographies and a number of papers focusing the legal aspect, the applicability especially
in certain circumstance – in which contractual law studies or defines as fundamental elements – are still vague. Therefore, this paper
distinguishes itself by focusing on the purpose of studying some of the possible legal effects and results of smart contracts in commercial life
as well as in finance.
Methodology- The study employs academic and theoretical analysis of the smart contracts concept from the point of legal theory, by making
a thorough examination of diverse national and international papers, monographies and other studies.
Findings- As a result of this study it is revealed that smart contracts are already useful “tools” for commercial transactions especially for
synallagmatic contracts with long terms, in finance and insurance sectors. Secondly , these types of contracts are going to be used more
often in a broader sense. Thirdly, besides their advantages, such tools should be considered as a “contract” in legal sense, whether they are
on-chain or off-chain or hybrid. Finally, since these are contracts, not a plain software, they are subject to the rules, theories, discussions and
conditions of the relevant legal systems, specifically law of obligation. Therefore they should be subject to various legal regulations such as
the provisions of standardized terms of contract, unfair terms and conditions, consumer law principles, finance law, insurance law, business
law as well as banking law whenever applicable. Thus, the so called advantages of blockchain system, such as unanimity, decentralization,
transparency and automation will be considered to be inapplicable from a legal perspective. In addition, if such contract contains a foreign
element, the applicable local law should be determined according to the conflict of laws principles. Sometimes more than one local may be
applicable to one single contract.
Conclusion- As a result of this study it is concluded that smart contracts are already a practical part of commercial transactions in especially
finance and insurance sectors, and are going to be used more often within further commercial areas. However it is also observed that smart
contracts will have shortcomings on some of its pormises such as confidentiality, reliability and sustainability. In addition, smart contract
concept should be considered as a legal contract therefore it will always be under the scope of relevant legal regulations.

Keywords

Smart contracts, legal characteristics of smart contracts, blockchain, smart contracts and finance

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