Smart contracts and blockchain: legal issues and implications for Indian contract law

Abstract

ABSTRACT The nature of contracts has seen transformation with advances in technology. The efficacy of contract law has been put to the test during this transition from paper-based traditional contracts to electronic contracts. A step forward in this changeover is the ‘smart contract’. Although the term ‘smart contract’ has been in use for two decades, there is as yet no consensus on its meaning. For this paper, we refer to smart contracts as those based on blockchain technology, which generates a decentralised tamper-evident ledger shared within a network of entities. The paper is a critical analysis of the efficacy and adequacy of the Indian Contract Act, 1872, and the Information Technology Act, 2000, in the context of smart contracts. It traces how accommodative Indian law has been to electronic contracts and extends this analysis to smart contracts. It probes smart contracts in the context of the general principles of contract formation, viz., meeting of the minds, offer, acceptance, consideration, capacity, performance, and enforceability. The legal and regulatory aspects of cryptocurrencies, which are often used as consideration, are examined in the Indian context. The paper also elucidates upon the synchronisation of law and technology.