A Contract Law Approach for the Treatment of Smart Contracts’ ‘Bugs’

Abstract

This article attempts to derive some principles concerning the legal treatment of bugs in smart contracts, namely errors in the smart contract code which may result to some unwanted or unexpected outcome at the execution of the contract. Before dealing with this main issue, the article concludes that despite the practical issues that arise concerning the application of traditional contract law rules and principles, these rules remain relevant, and that a smart contract is typically (but not necessarily) a mere tool for the performance of the contract and not a legal contract itself. Therefore, typically, bugs in smart contracts should be examined under the doctrines of the breach of contract and/or the unfair enrichment and not as reasons for any potential invalidity of the contract. Only in (rather unlikely cases) where a smart contract could be indeed perceived as the body of the legal contract itself, printing errors in the code or other expressional mistakes concerning the semantics of the code (albeit not its function) could be perceived as potential reasons for the invalidity of the contract, according to the relevant rules of each jurisdiction. Nevertheless, even in these cases, interpretation of the contract with objective standards should not be ruled out, even when the contract is concluded by means of artificial intelligence (AI). The article examines also contributory negligence issues.